EB Flash: Supreme Court Rules Decisively in Favor of Insurers
In Maine Community Health Options v. United States, 590 U.S. ___, slip opinion (decided April 27, 2020), the Supreme Court held that health insurers that offered plans through health benefit exchanges are entitled to compensation for their losses under the "Risk Corridors" program of the Affordable Care Act (ACA). The affected insurers claimed that they had lost hundreds of millions of dollars under the exchanges for which they were owed reimbursement by the Federal Government under § 1342 of the ACA. Reversing the decision of the Court of Appeals for the Federal Circuit, Justice Sotomayor, writing for the majority with only Justice Alito dissenting, held that the "insurers who claim losses under the Risk Corridors program [ ] have a right to payment under §1342 and a damages remedy for the unpaid amounts." Slip op. at 2.
As part of the ACA, Congress created Risk Corridors in order to balance the potential risk insurers faced by offering health insurance on the exchanges. Under § 1342, the profits and losses by insurers were to be shared and re-allocated so that insurers incurring losses would be reimbursed for participating in the exchange during the first three years of the exchange. Under this system, profitable plans would owe the government money and unprofitable plans would receive payments from the government. The Centers for Medicare and Medicaid Services was tasked with administering the program.
In the first year of the program, 2014, the profitable plans owed the government just $362 million while the government owed unprofitable plans $2.87 billion. At the end of 2014, Congress included a rider to the appropriations bill stating that "[n]one of the funds made available by this Act … or transferred from other accounts funded by this Act to the 'Centers for Medicare and Medicaid Services—Program Management' account, may be used for payments under [§ 1342]." Id. at 5-6.
During the second year of the program, the government deficit under the program reached $5.5 billion. In the final year of the program, the government deficit under the program was $3.95 billion. At the end of 2015 and 2016, Congress included the same rider to the appropriations bill, disallowing any payments for the Risk Corridors program. The total deficit under the program exceeded $12 billion.
Four insurers, Maine Community Health Options, Blue Cross and Blue Shield of North Carolina, Land of Lincoln Mutual Health Insurance Company, and Moda Health Plan, Inc., asserted that their plans were unprofitable for the three-year period of the program and that the government failed to reimburse them for the losses. Each individual case was brought in the United States Court of Federal Claims, invoking the Tucker Act, 28 U.S.C. §1491. The insurers alleged that the government was obligated to pay the full amount for the insurers' losses as calculated under § 1342. Only Moda prevailed at the United States Court of Federal Claims. In each appeal, the United States Court of Appeals for the Federal Circuit ruled in favor of the government.
The Court of Appeals held that, although § 1342 "initially" created a government obligation to pay, the riders in the appropriations bills "repealed or suspended" the government's prior obligations. The Court of Appeals stated that the riders "adequately expressed Congress's intent to suspend" the payments required under § 1342. Id. at 8.
The Supreme Court considered the following three questions: 1) Did § 1342 of the ACA obligate the government to pay participating insurers the full amount calculated by that statute? 2) Did the obligation survive Congress' appropriations riders? 3) May petitioners sue the government under the Tucker Act to recover on that obligation? The Supreme Court answered all three in the affirmative.
Writing for the 8-1 majority, Justice Sotomayor first concluded that § 1342 of the ACA obligates the government to pay participating insurers the full amount calculated by the statute. This obligation exists even though Congress did not specifically appropriate funds to make those payments. Parsing the distinction between the permissive "may" and the mandatory "shall" in statutory language, the majority highlighted Congress' use of "shall" in characterizing the government's obligation to pay, reaching the result that "the statute meant what it said: The government 'shall pay' the sum that §1342 prescribes." Id. at 11-13.
Second, the rider to the appropriations bills that prohibited the use of funds for the Risk Corridors did not repeal or suspend the government's obligation under § 1342. Because the rider was not a direct repeal, the obligation remains in effect unless Congress impliedly repealed it. Generally, unless Congress' intention to repeal is "clear and manifest" or the two laws are "irreconcilable," each law remains effective. Id. at 17. Under this standard, that Congress appropriated a lesser amount to the program through the use of the riders did not amount to a repeal of § 1342.
Third, the insurers properly brought this case under the Tucker Act. Generally, the government has sovereign immunity; however, under the Tucker Act, sovereign immunity may be waived if a claim can "fairly be interpreted as mandating compensation by the federal government" for the damage sustained and neither of the exceptions applies. Id. at 26. The language in § 1342 stating that the government "shall pay" can fairly be interpreted as mandating payment from the government. Id. at 26-27.
Accordingly, reasoning that the "government should honor its obligations," the decision entitles the insurers to "seek to collect payment through a damages action in the Court of Federal Claims." Id. at 31.
In the sole dissenting opinion, Justice Alito expressed concern that the majority went too far in finding that the "shall pay" language created a private right of action and warned that the decision will "have a massive immediate impact" because similar "shall pay" language "appears in many other federal statutes." Slip op., Dissent at 3.
The decision is posted here.
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