Featured / Supreme Court Activity

This morning the Supreme Court rendered its decision in Maine Community Health Options v. United StatesModa Health Plan Inc. v. United States, and Land of Lincoln Mutual Health Insurance Company v. United States. The Court concluded that the Affordable Care Act established a money-mandating obligation, that Congress did not repeal this obligation, and that, as a result, insurance companies may sue the federal government for damages in the Court of Federal Claims under the Tucker Act. As a result, the Court reversed the Federal Circuit and remanded the cases for further proceedings.

Justice Sotomayor authored the Court’s opinion. She began by describing the background of these cases, including the so-called Risk Corridors program that Congress created in the Affordable Care Act. The Risk Corridors program Congress created would reimburse insurance companies for losses incurred in providing insurance consistent with the Act. She noted that in the three years of the program the government tallied deficits of about $2.5 billion, $5.5 billion, and $2.95 billion, which represented the insurance companies’ losses Congress had indicated the government would reimburse. In each year, however, Congress passed appropriations riders restricting use of appropriated funds so that they would not be used as Risk Corridors payments to insurance companies. The petitioners in the three cases sued the federal government in the Court of Federal Claims, relying on the Tucker Act as the basis for recovery of unpaid reimbursements. The Federal Circuit held for the government on the basis that the appropriations riders impliedly repealed or suspended the government’s obligations under the Affordable Care Act. The Supreme Court reversed.

Justice Sotomayor divided her analysis into three parts.

First, she concluded that the Risk Corridors program “created a Government obligation to pay insurers.” As relevant here, she explained that the Affordable Care Act “imposed a legal duty of the United States that could mature into a legal liability through the insurers’ actions—namely, their participating in the healthcare exchanges.” Furthermore, neither the Appropriations Clause nor the Anti-Deficiency Act qualified that obligation by making payments contingent on appropriations by Congress. In short, “the plain terms of the Risk Corridors provision created an obligation neither contingent on nor limited by the availability of appropriations or other funds. “

Second, she concluded that Congress did not impliedly repeal the obligation through its appropriations riders. This is where the Court’s analysis differed from that of the Federal Circuit. Relying on Supreme Court precedent, Justice Sotomayor explained that Congress merely appropriated a less amount than that required to satisfy the government’s obligation, without expressly or by clear implication modifying it. She also explained that neither of two possible exceptions applied here. In particular, Congress did not completely revoke or suspend the underlying obligation before the government began incurring it. Nor did Congress reform the statutory payment formulas in ways that were irreconcilable with the original methods. Finally, the Court found “unpersuasive the only pieces of legislative history that the Federal Circuit cited.”

Third, Justice Sotomayor explained that the Tucker Act allows the insurance companies to sue for damages in the Court of Federal Claims. The Court applied what it called a “fair interpretation” test, where a statute creates a right capable of grounding a claim within the waiver of sovereign immunity if, but only if, it can fairly be interpreted as mandating compensation by the federal government for the damage sustained, and both the obligation-creating statute itself does not provide detailed remedies and the Administrative Procedure Act does not provide an “avenue for relief.” Here, the Court found that “[t]he Risk Corridors statute is fairly interpreted as mandating compensation for damages, and neither exception to the Tucker Act applies.” As to the interpretive issue, the Court found significant that the Affordable Care Act uses “shall pay” language.

Summing up the Court’s holding, Justice Sotomayor explained:

“In establishing the temporary Risk Corridors program, Congress created a rare money-mandating obligation requiring the Federal Government to make payments under [the Affordable Care Act’s] formula. And by failing to appropriate enough sums for payments already owed, Congress did simply that and no more: The appropriation bills neither repealed nor discharged [the Affordable Care Act’s] unique obligation. Lacking other statutory paths to relief, and absent [an applicable exception], petitioners may seek to collect payment through a damages action in the Court of Federal Claims.”

As a result of the Court’s analysis, it did not reach “alternative arguments for recovery based on an implied-in-fact contract theory or under the Takings Clause.”

Only Justice Alito dissented. He did not quarrel with the “thrust of the analysis” in most of the majority’s opinion. His disagreement related only to the Court’s conclusion that “it is proper to infer a private right of action” in these circumstances under the Affordable Care Act. Justice Alito highlighted the tension between “what the Court now calls the ‘money-mandating’ test” to allow for recovery under the Tucker Act and the Court’s “recent decisions regarding the recognition of private rights of action.” Indeed, he indicated he was “unwilling to endorse the Court’s holding in these cases without understanding how the ‘money-mandating’ test on which the Court relies fits into [the Court’s] general approach to the recognition of implied rights of action.” He dissented because he would not decide the case without supplemental briefing on this point with re-argument during the Court’s next term.