Donald Trump ran a campaign that pledged to get rid of Obamacare.
But his administration will have to either defend the controversial law in federal court or fork over tens of millions of dollars to angry insurers.
Several insurers took the Obama administration to court in the fall to force the administration to pay out money they say was promised to them. Those lawsuits won’t likely be resolved by the time Trump takes office on Jan. 20, meaning he will have to settle them or fight for a law he wants to repeal.
“It’s awkward,” said Douglas Holtz-Eakin, former head of the Congressional Budget Office and president of the center-right think tank American Action Forum. “This is why maybe there will be some attempts to solve this legislatively in the repeal process.”
Congress is hoping to begin work on repealing Obamacare as early as next week. A repeal bill could bypass a filibuster through a procedural move called reconciliation in the Senate and would pass easily in the House.
Two lawsuits are seeking nearly $30 million from the federal government. Both of the lawsuits are from taxpayer-funded consumer oriented and operated plans: New Mexico Health Connections and Minuteman Health, which serves Massachusetts and New Hampshire.
Minuteman Health wants $5.5 million, and New Mexico Health Connections demanded $23 million to cover the 2014 and 2015 payments made under Obamacare’s risk corridor program.
In addition, eight insurers including New Mexico Health Connections filed claims against the federal government seeking money for the risk corridor program in the Court of Federal Claims. A decision is pending on whether the insurers can file a class-action claim.
The risk corridors program was supposed to work like this: insurers with low profits would receive money from the government, which would get the money from insurers with more profits.
The idea was promoted by the Obama administration as a way to ensure predictability for insurers that had no idea who was going to sign up for Obamacare in 2014. However, it didn’t work out like that.
Too many insurers requested payments from the federal government and not enough paid in to the program to cover the payments in 2014. The result was a major shortfall, with $2.87 billion in requested payments for 2014 but insurers receiving $362 million.
The money collected for 2015 was expected to help pay down the balance from 2014.
Now Trump must decide how he wants to handle the two lawsuits.
The Obama administration has considered settling the claims and lawsuits, but that met stiff resistance from Republicans who believe a settlement was a way to bail out insurers.
“I would assume that the Trump administration’s position is that we are not going to pay out any more than we have to,” said Timothy Jost, an Obamacare supporter and law professor at Washington & Lee University. “There’s no sign they would have any interest in settling them.”
Minuteman Health is expected to file an amended complaint to its lawsuit in January to reflect new payment rules released by the Obama administration last month.
New Mexico asked for a delay until March 1 to see what happens with the federal claims.
Jost and Holtz-Eakin said they doubted that repealing Obamacare, which likely won’t go into effect for a few years until a GOP replacement is approved, would affect the lawsuits.
“I think the suits are relative to the law at the time,” Holtz-Eakin said.
He added that any repeal bill could include language that would retroactively affect the lawsuits, but it is also possible that Congress would appropriate the risk corridor funding the insurers requested.
Prior spending bills included riders that made the risk corridor program budget neutral, meaning the administration could only pay out what it took in. It is not clear if future spending bills will include a similar rider, as collections for 2016 risk corridor payments will start next year.
Critics have called the co-op program one of the biggest failures of the healthcare law, as the administration created 23 co-ops to spur competition on Obamacare’s marketplaces. However, a lack of federal funding and higher-than-expected costs caused all but six to collapse.
The collapses parallel other insurer issues with Obamacare, as Aetna and UnitedHealth bolted from most of the states in which they offer plans due to mounting losses.
The Centers for Medicare and Medicaid Services did release new federal regulations earlier this month that outlined payments for the risk corridor program.
It also laid out ways to help insurers become more stable, such as eliminating some special enrollment periods that let people sign up for Obamacare year-round.
