With billions at stake, a federal judge just nullified the GOP's most cynical attack on Obamacare

Moda Health, a small Oregon health insurer, just won a $214-million judgment against the federal government. Normally that wouldn’t be worth reporting, except that in awarding Moda the money, the federal judge in the case dismantled the most cynical attack on the Affordable Care Act that congressional Republicans had devised.

The issue was the Affordable Care Act’s risk corridor program, which was devised to shelter insurers from unexpected losses in covering Affordable Care Act customers from 2014 through 2016. To encourage insurers to enter an entirely novel market, the program aimed to balance risks by taking funds from insurers that turned out to be unexpectedly profitable and use the money to cushion others’ losses. The model was provisionally written into Medicare’s prescription drug program, Part D, which went into effect in 2006 and worked well to attract insurers. 

Initially, economists expected the Affordable Care Act version to be in the black overall — the Congressional Budget Office forecast that the government would collect $16 billion from successful insurers and pay out only $8 billion to struggling companies over the program’s three years. But if it turned out that there wasn’t enough, the Department of Health and Human Services was authorized to pay out funds from general government revenues.

Although Medicare Part D had been a Republican program, this time around the GOP railed against the same risk corridor arrangement as a “bailout” of insurers. They inserted a provision in a 2014 spending bill forbidding Health and Human Services from using any money other than what came from profitable insurers. As it happened, the program ran deeply in the red. The accumulated losses for 2014 and 2015 alone are up to $8.3 billion; some estimates place the total owed over the three years at nearly $15 billion.

Because it’s hamstrung to pay the full claims, Health and Human Services has paid out only 12.6% of all claims for 2014, and nothing so far for 2015 or 2016. Moda’s lawsuit claimed that it’s due $214 million. It argued that the government essentially promised that the money would be paid, and that promise can’t be nullified just because Congress decided to tamper with where the money came from.

Judge Thomas C. Wheeler of the U.S. Court of Federal Claims agreed with Moda on every point. “There is no genuine dispute that the Government is liable to Moda,” he ruled in a decision issued Thursday. “The Government made a promise in the risk corridor program that it has yet to fulfill.” He directed the government “to fulfill that promise. After all, to say to [Moda], 'The joke is on you. You shouldn't have trusted us,' is hardly worthy of our great Government.”

Wheeler also told the government where to find the money: in its Judgment Fund, which pays plaintiffs who win claims against the government in his court.

A ruling like Wheeler’s was long expected by many legal experts. As Nicholas Bagley of the University of Michigan observed following the ruling: “It was only a matter of time before a court entered a money judgment against the United States.” Two other lawsuits are pending in the Court of Federal Claims. One brought initially by two Oregon health insurance co-ops has been certified as a class action. Another, brought by the Illinois insurer Land of Lincoln, was dismissed in November, but is already under appeal.

That said, even if the insurers eventually get paid, the GOP attack on the risk corridor program, and by extension on the Affordable Care Act in general, did a lot of damage. In a survey for the New England Journal of Medicine in November, Bagley wrote that the GOP measure “hit particularly hard” at new co-op health plans, which were thinly capitalized but supported by Affordable Care Act loans. Deprived of full risk-corridor payments, “by the end of summer 2016, just seven of 23 co-ops were still in business. As the co-ops collapsed, almost a million people were forced to look elsewhere for coverage.” That contributed to “a sharp reduction in competition on the [Obamacare] exchanges.” 

That underscores the cynicism of the Republican attack. GOP politicians such as House Speaker Paul Ryan (R-Wis.) talk continually about a lack of competition on the Affordable Care Act exchanges as though that’s a structural flaw in Obamacare. They don’t admit that much of that lack of competition is their own handiwork. 

One remarkable feature of this attack is that, even though it helped destroy some low-income insurers and harmed their customers, Republicans in Congress jostled with each other to take credit for it.

Sen. Marco Rubio (R- Fla.) made his championing of the provision a linchpin of his presidential campaign, claiming that his role in the measure saved billions for the American taxpayer. His bragging ticked off the GOP politicos who actually had sneaked the measure into law. Among them was a certain Sen. Jeff Sessions (R-Ala.), then the ranking Republican on the Senate Budget Committee, who, as Donald Trump’s newly-minted attorney general, now will have to decide whether to appeal Wheeler’s ruling to a higher court. When Sessions issued a statement listing the measure’s supporters, the Washington Post reported, he “pointedly” left Rubio out.

The risk corridor claimants aren’t out of the woods yet. The Moda judgment could be appealed. Moreover, although Judge Wheeler noted that payment from the Judgment Fund is a “path Congress has left open,” Congress also could block that path, simply by enacting a law barring it as a source of risk corridor claims, even with a court order. That measure would have to be signed by President Trump, but as Bagley commented, Trump hasn’t been above stiffing partners in his own business ventures. Why would he stop now? 

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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