The Supreme Court will hear one hour of oral argument tomorrow in three cases challenging the Federal Circuit’s holding that various health insurance companies cannot obtain damages under the Tucker Act for subsidies that were identified in the Affordable Care Act but that Congress later declined to appropriate. The three cases are Maine Community Health Options v. United States, Moda Health Plan Inc. v. United States, and Land of Lincoln Mutual Health Insurance Company v. United States.
In its opening brief, Maine Community Health Options explains that the petitioners, all insurance companies, “relied on the unequivocal statutory direction in Section 1342 of the Affordable Care Act that the government ‘shall pay’ insurers the full amount due under the statutory formula.” The Federal Circuit, however, “cited three subsequent appropriation riders barring agency access to certain appropriations to make those payments, ruling that the riders ‘suspended’ the government’s duty to pay.”
According to Maine Community Health Options, “[t]he plain language of the relevant statutory provisions controls the disposition of this case.” It argues that “[t]he payment obligations [are] unequivocal, enforceable under the Tucker Act, 28 U.S.C. §1491(a), and, upon final determination and judgment, payable from the standing appropriation known as the Judgment Fund.” Moreover, says Maine, “[n]othing in the appropriation riders negated that obligation.” For support, Maine cites the “‘cardinal rule’ that implied repeals are greatly disfavored” and “the longstanding presumption against retroactivity.”
One of the two other petitioners, Land of Lincoln Mutual Health Insurance Company, tells a similar story in its opening brief. It explains that the Affordable Care Act “presented Land of Lincoln and other health insurers with a straightforward offer: if they would agree to provide ‘Qualified Health Plans’ through the ACA exchanges, the Government under Section 1342 ‘shall pay’ risk-corridor payments covering statutorily specified portions of insurer losses during the first three years of operation.” Land of Lincoln “accepted the offer,” and “[y]et the government reneged, paying Land of Lincoln only 12.6% of the money owed for 2014 and nothing for 2015 and 2016.”
As for its arguments, Land of Lincoln contends that “[t]he appropriations riders did not extinguish the Government’s legal obligation to make risk-corridor payments” but instead “merely restricted the availability of certain specified funding sources.” According to Lincoln, “Congress may extinguish a money-mandating statutory obligation only through express language or by clear implication and only by prospectively amending the statutory formula or prospectively revoking the substantive right.” And, it argues, “[t]he Federal Circuit rested its decision on legislative history rather than text.”
The third petitioner, Moda Health Plan, presents a similar story and similar arguments in its opening brief. Moda maintains that “[t]he government cannot be allowed to promise boldly, inducing massive reliance by private parties that directly benefits the government, and then renege obscurely via implications drawn from legislative history and GAO correspondence.” Moda goes on to argue that “the decision below endorsed that stratagem and upheld a $12 billion bait-and-switch.” Moda, like the other petitioners, relies upon statutory arguments related to the Affordable Care Act. Moda, however, also relies upon the Constitution, as in when it argues that “it is far from clear that the Due Process and Takings Clauses would allow the government to lure private parties into expensive undertakings with clear promises, only to renege after private parties have relied to their detriment and incurred actual losses.”
The United States filed one common response brief in all three cases. In it, the government argues that the Federal Circuit “correctly concluded that petitioners cannot obtain damages in these suits under the Tucker Act for amounts of risk-corridors subsidies that Congress declined to appropriate.” As for why, the government explains that, when “[r]ead together with [various other] statutes, Section 1342 did not impose an unqualified obligation to make ‘payments out’ pursuant to the statutory formula.” Rather, the Department of Health and Human Services “was required and empowered to make payments only to the extent Congress appropriated funds to do so—and Congress was free to decide whether and to what extent to fund those subsidies.” In short, the government argues, Congress decided to “appropriate ‘payments in’ as a funding source for ‘payments out,’” in other words “ensuring that the risk-corridors program would be self-funded.” And, as a result, the government argues, “HHS’s compliance with Congress’s funding limitations is not a breach of a statutory duty.” And the petitioners are wrong, the government explains, because their “position rests on mischaracterizing Section 1342 as a statutory promise to insurers that imposed obligations on the government equivalent to a contract.” Anyway, says the government, “[e]ven if Section 1342 alone could properly be read to impose an unqualified obligation on HHS to make full ‘payments out’ according to the statutory formula, Congress’s enactment of appropriations legislation barring HHS from using the only source of funds other than ‘payments in’ eliminated that obligation.” The government also argues that the Federal Circuit “correctly rejected [the] alternative theory that Section 1342 or HHS’s actions gave rise to an implied-in-fact contract that entitled insurers to ‘payments out’ irrespective of appropriations.”
All three petitioners filed reply briefs. In its reply brief, Maine Community Health Options argues the government abandoned one argument and that its “two remaining theories . . . are inconsistent with the text of the statutes as written; inconsistent with basic appropriation law; and inconsistent with bedrock canons of statutory interpretation.” Land of Lincoln argues in its last brief that “[t]his case merely enforces the plain language of Congress’s own handiwork in the Tucker Act for breaches of Congress’s money-mandating commitments.” And Moda argues that “[t]he canon against implied repeals, the presumption against retroactivity, and the plain text all point in the same direction here: Congress’ restriction on the use of specific funds to satisfy an obligation does not make the obligation go away.” It concludes that “[n]o other rule comports with due process, basic fairness, or government accountability.”
The case attracted ten amicus briefs after the Court agreed to hear it. Nine of the ten briefs support the petitioners:
- America’s Health Insurance Plans
- Chamber of Commerce of the United States of America
- Highmark Inc., et al.
- Blue Cross Blue Shield Association
- National Association of Insurance Commissioners
- 24 States and the District of Columbia
- Association for Community Affiliated Plans
- Wisconsin Physicians Service Insurance Corporation; WPS Health Plan, Inc.
- Economists and Professors M. Kate Bundorf, et al.
Only one amicus brief supports the position of the United States:
What the briefs don’t highlight is that this case represents the latest battle in the ongoing war over the Affordable Care Act, a war the Supreme Court first visited in National Federation of Independent Business v. Sebelius. In that case, you may remember, the Court narrowly held that the ACA’s individual mandate requiring health insurance represented a constitutionally valid exercise of Congress’s taxing power. While that case resulted from an attack on the constitutionality of the ACA, tomorrow’s case is more like a side skirmish; no one is arguing that the ACA is unconstitutional. The Court, however, is likely to revisit that type of attack soon. After Sebelius, Congress eliminated the tax penalty associated with the individual mandate, and a district judge subsequently concluded that the entire ACA is unconstitutional without it. The Fifth Circuit may rule any day on the issue, and if affirmed the case would no doubt be heard by the Supreme Court.
Besides recognizing that this case represents one battle in the war over the Affordable Care Act, it may also be helpful to recognize where this case fits in the history of the Supreme Court’s review of Federal Circuit cases. This case resembles another case the Supreme Court decided after granting a writ of certiorari to the Federal Circuit, United States v. Winstar. In that case, the Court held the federal government responsible for massive losses suffered by private parties. In particular, the Court tackled the question of “the enforceability of contracts between the Government and participants in a regulated industry, to accord them particular regulatory treatment in exchange for their assumption of liabilities that threatened to produce claims against the Government as insurer.” The Court found for the “participants in the regulated industry”—the private parties that assumed the liabilities in question. In Justice Souter’s plurality opinion announcing the Court’s holding, he explained that “[a]lthough Congress subsequently changed the relevant law, and thereby barred the Government from specifically honoring its agreements, we hold that the terms assigning the risk of regulatory change to the Government are enforceable, and that the Government is therefore liable in damages for breach.” Tomorrow’s case differs in the particulars, of course, but the overarching issue is similar, at least according to the petitioners: whether the federal government is responsible for inducing private parties to suffer massive losses.