Tomorrow the Federal Circuit will hear oral argument in Sanford Health Plan v. United States, a case presenting the question of whether health insurance companies may recover cost-sharing payments identified in the Affordable Care Act but never funded by Congress. Here is our argument preview.
The United States lost at the Court of Federal Claims and appealed to the Federal Circuit. The United States identifies the following as the issues presented:
- “Whether the insurers’ statutory claims fail because Congress did not intend for insurers to receive damages as compensation for cost-sharing payments that Congress declined to fund.”
- “Whether the insurers’ contract claims fail because insurers do not have implied-in-fact contracts for cost-sharing payments.”
In its opening brief, the government summarizes the relevant aspects of the Affordable Care Act. In an effort to reduce the cost of health insurance borne directly by insureds, “[s]ection 1402 of the Act requires insurers to reduce cost sharing for eligible insureds,” that is, “deductible, coinsurance, and copayments that shift costs to the insured,” the government explains. “Anticipating that insurers would otherwise pass along those cost-sharing expenses to consumers in the form of higher premiums,” moreover, “section 1402 further provided that the Department of Health & Human Services (HHS) ‘shall make periodic and timely payments to the issuer equal to the value of the reductions.’” The problem, however, is that “Congress did not provide a permanent appropriation for those payments” and instead “deferred the issue of funding to the regular annual appropriations process” and, later, “Congress declined to fund the section 1402 payments.”
According to the government, “[i]n enacting section 1402, Congress did not give insurers a right to damages in the event that future Congresses made the policy choice not to fund cost-sharing payments (or to fund them only in part).” This is so, “because insurers can recoup their cost-sharing expenses by raising premiums—as insurers in fact have done” and “nothing in the ACA or any subsequent legislation suggests that Congress intended to authorize double recoveries for insurers.” Anyway, says the government, “section 1402 is not an unqualified directive to HHS to make payment” because “the Anti-Deficiency Act . . . prohibits an agency from making payment without an appropriation.” Moreover, the government points out that the Federal Circuit recently rejected the alternative argument “that section 1402 gave insurers implied-in-fact contracts for cost-sharing payment.”
The plaintiffs, Sanford Health Plan and Montana Health CO-OP, defend the judgment by arguing that this case is governed by the Federal Circuit’s decision in Moda Health Plan, Inc. v. United States (recently argued at the Supreme Court in conjunction with two other cases). “Like the nearly identical ACA provision examined in Moda,” they argue, “Section 1402 is ‘unambiguously mandatory,’ and obligates the United States to make the required reimbursements.” Moreover, quoting Moda, they contend that “Congress’ failure to appropriate funds to meet its obligation under Section 1402 cannot negate the obligation to make payments under that Section because ‘it has long been the law that the government may incur a debt independent of an appropriation to satisfy that debt.’” And they point to Moda‘s rejection of the argument based on the Anti-Deficiency Act, explaining that “while the failure to appropriate money to an agency to pay an obligation absolutely bars the agency from making such payments, it does not negate the underlying payment obligation.”
In its reply brief, the government maintains that the ACA “left it to future Congresses to determine whether and to what extent to fund [the relevant] payments” and that “Congress understood that if future Congresses chose not to provide cost-sharing funding, insurers would raise premiums to recoup their cost-sharing expenses.” Moreover, the government contends, “the impact of higher premiums on consumers would be mitigated by the increased tax credits permanently funded under the ACA.” In response to the insurance companies’ argument, the government says they “fundamentally misunderstand the legislative process” because the “essence of the annual appropriations process is that it is discretionary.” Consistent with its opening brief, the government argues that “Congress did not, as plaintiffs urge, create a scheme under which insurers would cover unpaid costs by raising premiums and also recover those costs in a damages suit.”
We are providing coverage of this case because it attracted two amicus briefs. Both support the insurance companies. One, filed by Common Ground Healthcare Cooperative, argues that the government’s position fails because it “does not reflect the basic way in which premiums are set,” which involves “tak[ing] into account anticipated costs and, by law, rais[ing] premiums ahead of time to account for any such costs that may not be reimbursed or subsidized.” But “[u]nder the Government’s interpretation of the statute, [health insurance] issuers could never be comfortable in advance that they will receive reimbursements.” (Notably, the government responded to this argument in its reply brief, highlighting that the plaintiffs raised their premiums on the assumption of no cost-sharing payments in 2018.) The other, filed by Blue Cross Blue Shield and other health insurance companies, among other things contends that the government “argues for a radical revision of the law governing the Tucker Act and asserts an unprecedented interpretation of the Anti-Deficiency Act.”
This case obviously has significant monetary implications for the insurance companies and the government. The government, for example, in its reply brief points out that the plaintiff in the consolidated case of Community Health Choice, Inc. v. United States won an award of “more than $60 million” as damages for 2018 alone. But the underlying judgments—and the Federal Circuit’s decision in this case—will, one way or the other, be impacted significantly by the Supreme Court’s resolution of Maine, Moda, and Land of Lincoln. And so any decision by the Federal Circuit in this case, while important, will pail in importance when compared to the Supreme Court’s resolution of those cases. We’ll continue keep track of those cases, and this one, and report on developments.