Photo: Joe Raedle/Getty Images

A federal appeals court today shot down insurance companies’ claim that the federal government owes them about $12 billion from an Affordable Care Act program.

The intrigue: Insurers lost billions of dollars when Congress put the brakes on a program that had been designed to help stabilize the ACA in its early years. Those losses contributed to driving some new insurers out of business — but that’s just the way it is, the court said today.

The details: The ACA included a “risk corridors” program to help insurers adjust to a new and hard-to-predict market.

  • Insurers whose early ACA experience turned out better than they had expected would pay into a fund, and that fund would then pay out to insurers whose experience was worse than they expected.
  • As people actually started signing up for coverage, more insurers were eligible to take money out of the program than to pay into it. Initially, the government had been making up the difference on its own. But then Congress said the program couldn’t pay out more than it took in from insurers.
  • Insurers sued, saying the government was reneging on a debt it owed them. There’s a lot of money at stake — the shortfall is now at roughly $12 billion, according to court documents.

The latest: The Court of Appeals for the Federal Circuit ruled today that Congress intended to limit risk corridors payments, and the Obama administration acted appropriately when it carried out those commands, so insurers cannot collect.

The impact: This has gone on long enough that insurers have mostly made up the difference through higher premiums. But the inability to collect from the program was a contributing factor to the deaths of several new insurance co-ops, also established under Obamacare.

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