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The “Risk Corridors” Litigation: How Risky Should It Be to Do Business With the U.S. Government?

First published by The Federalist Society, July 18, 2019

In this podcast, V&E partner Jason Levine joins The Federalist Society for a teleforum conference call on “risk corridors” litigation.

Three consolidated cases now pending before the U.S. Supreme Court have the potential to re-set the relationship between the federal government and its private partners. In the “risk corridors” litigation, health insurers that participated in marketplaces established by the Affordable Care Act (“ACA”) did so based on statutory assurances that they would be reimbursed for certain losses due to the riskier subscriber populations newly mandated by law. This was the “risk corridors” program, which lasted from 2014-16.  After the insurers began issuing policies on the marketplaces, however, Congress passed appropriations riders that were aimed at blocking the Department of Health & Human Services from making the required risk reimbursement payments. As a result, insurers collectively lost $12 billion during the three-year risk corridors period that was supposed to be, but never was, reimbursed.

Multiple lawsuits in the U.S. Court of Federal Claims resulted in mixed decisions, and the U.S. Court of Appeals for the Federal Circuit ruled that the Government was not bound to abide by the ACA’s “risk corridors” framework, but instead was free to de-fund it despite the insurers’ reliance.  The Supreme Court has granted certiorari, and is poised to decide the extent to which the Government has latitude – as one cert. petition put it – to “promise boldly and renege obscurely.” The legal, monetary, and public policy implications of the litigation are substantial, and potentially transformative for government contractors. Listen to the podcast here.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.