Maine and Alaska insurance companies bring 'bait and switch' complaint to Supreme Court Justices

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WASHINGTON (Gray DC) -- Billions of dollars are on the table at the Supreme Court Tuesday for Alaska and Maine health insurance companies. Moda Health Plan and Maine Community Health Options argue the government is going back on a deal made under the Affordable Care Act (ACA) when it became law. The government says that deal was subject to change.

Health insurance companies are looking to be paid billions to help cover losses under the Affordable Care Act. (Source: Gray DC)

"The insurance companies in many ways sort of relied on these payments coming through," said Katie Keith, a health insurance legal expert at Georgetown University.

The legal team for the companies began arguments saying they are victims of a "bait and switch". Keith says that is because when the ACA became law in 2010 it included incentives for companies like Maine Community and Moda to sell insurance in the new, unknown marketplace. The government said the Department of Health and Human Services would cover financial losses. The losses came, but the money did not. A Congressional funding decision nixed the payment agreement, sending the companies into a tailspin and forcing Moda to stop selling insurance to Alaskans.

"The Chief Justice said were the insurance companies seduced into doing this and should they have been more cautious?" said Keith.

Chief Justice Roberts questioned whether companies would agree to join the risky market if they knew the rug could be pulled out from under them. Other justices noted going back on a promise like this sends a message to other private businesses.

"The Chamber of Commerce would probably say that's bad for business to not be able to take the federal government at its word," said Keith.

The deputy US solicitor general was firm in his arguments, saying the government cannot be forced to pay out this money.

"The Department of Justice is sort of saying we're trying to protect Congress' power of the purse," said Keith.

Edwin Kneedler appealing to the justices that the Affordable Care Act did not bind the government in a contract with insurance companies. The government argues some laws intentionally leave out contractual language because they are subject to funding changes.

"They say there's nothing to breach, the insurance companies aren't entitled to this money and they should not really have ever thought that they were," said Keith.

The court has until the end of June to make a decision.

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