United States: Court Rules That Federal Government Must Make Cost Sharing Reduction Payments To Insurers

Last Updated: September 13 2018
Article by Xavier G. Hardy

ACA plans scored a major victory last week when a federal court held that health plans participating on the ACA exchanges are entitled to unpaid cost sharing reduction (CSR) payments from the federal government. The case – Montana Health CO-OP v. United States – is the first decision opining on the federal government's obligation to make CSR payments.1 However, this is but one of several significant legal rulings handed down this year in the perpetual battle between CO-OP plans and the federal government over the latter's administration of the ACA. For example, federal courts in Massachusetts and New Mexico ruled on the legality of government's method for calculating risk adjustment payments in January and February, and in June, a federal appellate court ruled on the government's obligation to make payments under the ACA's risk corridor program. While these decisions address different ACA programs and have unique facts, each case essentially boils down to a question over the government's obligation to administer the ACA as it was statutorily conceived.

The CSR Litigation

The ACA implemented two reforms to ensure the affordability of plans offered on the exchanges: advanced premium tax credits and CSR payments. While the premium tax credits subsidized the insurance premiums for exchange enrollees with household incomes between 100% and 400% of the federal poverty line, CSR payments reduced the copayment, coinsurance, and deductible obligations of individuals between 100% and 250% of the poverty line. Plans are required to reduce the cost-sharing obligations for qualified enrollees and notify HHS of the reductions. In turn, the statute requires HHS to make periodic payments to such plans "equal to the value of the reductions."

The Appropriations Clause requires a "valid appropriation" to have both a directive to pay and a source of funds. While the statutory language authorizing the CSR payments directed HHS to make CSR payments to plans, it lacked the designated source of funds from which the CSR payments can be made. In an attempt to avoid an Appropriation's Clause violation, the Obama Administration included language in its 2014 budget authorizing HHS to use funds from the permanent appropriation for premium tax credits, reasoning (and later arguing in court) that the statutory language authorizing the premium tax credits was broad enough to allow payments from that fund to finance the CSR payments as well. In 2015, the House of Representatives successfully brought suit arguing that the use of premium tax credit funds to carry out the CSR payments violated the Appropriations Clause.2 The court's injunction against the payment of CSRs was stayed while the case was on appeal,3 and in October 2017, the Trump Administration announced plans to stop CSR payments.4 Shortly thereafter, Montana Health and several other ACA plans filed lawsuits in the Court of Federal Claims arguing that the government was obligated to continue making CSR payments.

If this whole sequence of events seems familiar, it is because the same issue was the catalyst for the risk corridor litigation. In both cases, the lack of a funding source was probably the unintentional result of the ACA's chaotic drafting process. The death of Senator Ted Kennedy and the unexpected election of Republican Senator Scott Brown resulted in the Democrats losing their so called supermajority in the Senate. At the time, the Senate had already passed its version of the ACA, and to avoid having to make the Senate vote on the bill again, the House of Representatives had to adopt the Senate's draft of the bill without any changes. As such, minor technical errors in the bill, such as the lack of a source of funds, were included in the enacted legislation, and the general partisanship and gridlock in Congress made it impossible for lawmakers to subsequently correct these errors in a technical corrections bill.

Montana Health CO-OP v. United States

In Montana Health, the Plaintiffs argued that Section 1402 of the ACA clearly mandated that the federal government make CSR payments, notwithstanding the fact that Congress never appropriated money specifically for the payments. Because of the Obama Administration's decision to use the premium tax credit fund to finance the CSR payments, Congress never actually appropriated any money for the CSR payments directly. The government countered that Congress never intended to impose such an obligation because the ACA never included a permanent appropriation for the CSRs. If Congress had intended the CSRs to be an obligation, the government argued, then the ACA would have included a statutorily created permanent funding source similar to the one used for the premium tax credits.

The court's ruling in favor of the Plaintiff CO-OP relied heavily on the recent appellate ruling in the risk corridor case, Moda Health Plan, Inc. v. United States, reasoning that there was no authority for the government's contention that a statutory obligation cannot exist absent budget authority. As such, the court reasoned, the lack of appropriated funds was irrelevant to whether such an obligation could be enforced by the court. The court in Moda also had to review whether subsequent appropriation riders evidenced Congress's intent to impose a new payment methodology for the risk corridor program. In this case, however, there were no such subsequent Congressional actions at issue. In Montana Health, the court also rejected ancillary arguments made by the government, such as the fact that plans could mitigate the damage of the lack of CSR payments by increasing their premiums.

The Montana Health decision is significant because many plans—including Montana Health—had already set their premium rates when the CSR payments were suspended last fall. Therefore, the ruling is an important step towards properly compensating plans for the shortfall in CSR payments that they were unable to mitigate by increasing premiums for the current plan year. The battle over the CSR payments is far from over, however. The government is expected to appeal the decision, and there are several other pending lawsuits involving the CSR payments that are working their way through the court system.

Footnotes

[1] Montana Health CO-OP v. Unites States, No. 18-143C (Fed. Cl. Sept. 4, 2018).

[2] U.S. House of Representatives v. Burwell, 130 F. Supp. 3d 53, 57 (D.D.C. 2015) (Buwell I).

[3] U.S. House of Representatives v. Burwell, 676 F. App'x 1 (Mem.) (D.C. Cir. 2016) (Burwell III)

[4] Letter from Att'y Gen. Sessions to Sec'y Mnuchin & Acting Sec'y Wright (Oct. 11, 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions