A pending court decision could force the Trump administration to pump billions of dollars into Obamacare insurers, even as the president threatens to let the health care law “implode.”

Health insurers have filed nearly two dozen lawsuits claiming the government owes them payments from a program meant to blunt their losses in the Obamacare marketplaces. That raises the prospect that the Trump administration will have to bankroll a program the GOP has pilloried as an insurer bailout.


Insurers are owed more than $8 billion in payments, and the tab is likely to grow. Insurers say spending restrictions Republicans forced on the “risk corridors” program during the Obama administration, aside from being illegal, are partly to blame for severe turbulence in some Obamacare marketplaces.

“[The Obama administration] repeatedly assured us it was there and it would be a clear obligation of the government,” said Tom Policelli, CEO of Minuteman Health, which is among the insurers suing the government over the shortfall. “Even the federal government is subject to the rules.”

The fiscal hit to the feds could be huge if the insurers win. And it would be one more embarrassing setback for Republicans, who likely saw their best shot at dismantling Obamacare slip away in the Senate’s failed repeal vote early Friday morning. President Donald Trump, meanwhile, has threatened to pull billions in funding from a separate Obamacare subsidy program he's labeled a "bailout" for insurers.

The courts have so far split on whether the government must pay risk corridor funding since the first lawsuits were filed last year. In November, Land of Lincoln Health, a now-defunct nonprofit startup in Illinois, lost its case in the Court of Federal Claims seeking more than $70 million. But in April, Oregon-based Moda Health was awarded more than $200 million.

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Both cases have been appealed and will be considered together by the same three-judge panel in Washington. Legal briefs in the combined cases are expected to be finished in September, but it’s not clear when a decision will come.

The decision could set a precedent that other judges will rely on when deciding similar lawsuits still winding through the system.

“The legal issue that all of them would be raising would be identical,” said Nicholas Bagley, a professor at the University of Michigan Law School who has written extensively about the lawsuits. “Has a promise been made, and has the federal government reneged on that promise?”

If insurers do prevail, more are expected to seek federal payments through the courts. They would likely file similar lawsuits or join a class action brought by Health Republic Insurance of Oregon, a now-shuttered nonprofit that said federal underpayments contributed to its collapse in 2015. The issue could ultimately wind up before the Supreme Court, which has already twice saved Obamacare from potentially fatal legal challenges.

“The one thing I know you don’t do is leave money on the table,” Bagley said. “It’s a question of how, not whether.”

The risk corridor program was one of three established by Obamacare to protect insurers entering the fledgling marketplaces under new rules requiring them to accept patients regardless of medical condition. Insurers making more money than expected in the markets were required to pay into the program, while those with big losses would receive payments.

Many companies badly underestimated the cost of these new customers, who turned out to be sicker than expected. They racked up at least $10 billion in losses in the first two years, according to McKinsey. That meant far fewer insurers paid into the risk corridors program than qualified for payments. In 2014, the first year of the Obamacare marketplaces, insurers received just 12.9 percent of the nearly $3 billion they sought from the program.

The insurers say the federal government has an obligation to use taxpayer dollars to provide payments they’re owed. But Republican lawmakers, who contend such payments would amount to a bailout, have blocked the federal government from filling the shortfall.

“We’re going to follow the law, and the law says you’re not supposed to spend taxpayer money to bail out these companies,” Sen. Marco Rubio, who led GOP opposition to risk corridors funding, said during a Facebook Live event last month.

The Obama administration fought the lawsuits but also discussed potential settlements with insurers, a prospect that made Republican lawmakers irate. Any talk of settlements ceased when Trump took office, meaning the courts will almost certainly settle the dispute.

The program’s funding restraints forced many insurers to raise premiums higher than expected in the Obamacare marketplaces. The shortfall has been especially tough on small insurers and Obamacare co-ops, nonprofit health insurers seeded with federal loans to compete with legacy providers. Many were counting on the risk corridor funding and didn’t have the resources to absorb the financial blow when the money didn’t come through. About two-thirds of the 23 Obamacare co-ops have shut down.

“The whole system was to attract insurers like my client, Land of Lincoln, to participate in the first place,” said Daniel Albers, an attorney representing the failed co-op. “The Republicans want to say it’s a bailout. It’s not a bailout.”

Legal experts who support Obamacare say the health care law doesn’t explicitly prevent the government from making payments to insurers. Instead, they say the statute only provides the formula for determining which insurers pay into the program and which ones get paid.

“Nowhere does it say they have to balance out,” said Tim Jost, emeritus professor at the Washington and Lee University School of Law.

At least one observer is betting that insurers will ultimately receive risk corridor payments they’re owed. Juris Capital this month agreed to pay $10.5 million to the estate of HealthyCT, a defunct nonprofit insurer. In return, it will receive up to $31 million if HealthyCT wins its lawsuit.