Health Reform WK-EDGE Court dismisses Maine CO-OP’s suit for balance of risk corridor payments
Monday, August 7, 2017

Court dismisses Maine CO-OP’s suit for balance of risk corridor payments

By Joseph Arshawsky, J.D.

Congress, acting in a timely manner, affirmatively barred the use of public funds, predating the maturation of any obligation to make statutory entitlement payments under the temporary risk corridors program (RCP), and therefore a Maine-based Consumer Operated and Oriented Plan’s (CO-OP) suit against the federal government for $22.9 million was dismissed by the U.S. Court of Federal Claims (Maine Community Health Options v U.S., July 31, 2017, Bruggink, E.).

In its lawsuit, Maine Community Health Options (CHO) alleged that HHS unilaterally decided to pay a small fraction of payments due under the RCP, in violation of Section 1342 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The purpose of the RCP was to induce health insurer participation in the marketplace by mitigating their risk of loss. The U.S. did not dispute that the amounts CHO calculated on a yearly basis were correct. Instead, the U.S. argued that Congress intended the RCP to be "budget neutral," meaning that Sec. 1342 limits the government’s payment obligations to the amounts collected from insurers whose costs were below the target amount, and who therefore paid in to the RCP. In the alternative, the U.S. argued that Congress’ appropriations riders in 2014 and 2015 expressly barred the use of any appropriated funds other than fees collected, and this Congressional intent trumps Sec. 1342. The court agreed with the U.S. and granted the motion to dismiss.

Legislative history and regulatory framework. The court reviewed the legislative history of the ACA. The final version of the bill deleted a funding mechanism from the Treasury, and had no reference to funding the RCP. Once the final draft of the ACA was prepared, the Congressional Budgetary Office (CBO) released its budget scoring, notably omitting RCP from the scoring and attributing no expenses to it. The statute is silent as to funding for the payments out other than the implication that the payments in could be used in that manner, the court concluded. HHS published an impact analysis of its new regulation, stating "CBO did not score the impact of the risk corridors program, but assumed collections would equal payments to plans in the aggregate."

Agency action. Despite the clear legislation and regulatory framework, the agency made less-than-clear statements. In summary, however, HHS attempted to maintain the general position that the RCP is not statutorily required to be budget neutral, but that HHS intended to implement it in a budget neutral manner. According to its interpretation, any additional payments owed but not covered by the RCP would be paid subject to the availability of appropriations.

Appropriations riders. On December 16, 2014, Congress adopted an appropriation for fiscal year 2015, in which Congress affirmatively prevented CMS Program Management funds from being used to satisfy any obligations under the RCP. "Congress thus expressly barred the use of appropriated funds for RCP payments and implicitly limited HHS to user fees funds to satisfy RCP payments," the court held. The following year Congress adopted the identical appropriations rider, and included language the import of which is that extra funds appropriated to Medicare’s operating budget could not be used to meet other obligations created by the ACA, such as the RCP.

Statutory interpretation. CHO argued that in Sec. 1342, the use of "shall pay" creates an enforceable obligation (see Maine CO-OP sues alleging HHS skimped on risk corridor payments, August 17, 2016). But the court noted that "Congress controls the purse." Congress also has the right to nullify what would otherwise appear to be a binding commitment, and it did so here. The "shall pay" language of Sec. 1342 is not dispositive in the face of the two appropriations riders that limit the source of funding for that obligation. In this case, Congress timely intercepted its RCP obligations by passing the appropriations provisions in December of each year. The effect of the riders was to prevent HHS from using its CMS operating fund to meet any governmental liability created by the RCP. This left HHS with only the user fees as available to make RCP payments. In the case at bar, it is the demonstrated clear Congressional intent that prevents the payment of federal funds to make the RCP payments. Under the U.S. Code, an agency may not spend more money than Congress authorizes it to use on a particular program, nor may it cannibalize one reticule to supplement another. Here, the language of entitlement is not specific with respect to Congress’s intent to appropriate, but its subsequent language disavowing any such obligation is clear.

Mere non-appropriation of sufficient funds to meet an existing obligation created by statute will not thwart the courts’ enforcement of the obligation. Whether Congress, in subsequent appropriations legislation, can block enforcement of a substantive obligation depends, ultimately, on how clearly it expresses its intent to do so. Here, Congress made clear its intention that no public funds be spent to reimburse RCP participants beyond their user fee contributions. It asked the Government Accountability Office (GAO) what moneys were available to HHS to make risk corridor payments. The GAO answered that user fees and the CMS program management fund were the only sources. Congress expressly blocked the use of the latter, leaving only the former. The government’s obligation was thus capped to the amount brought in from user fees. Congress affirmatively barred the use of public funds in a timely manner, predating the maturation of any obligation to make the statutory entitlement payments. Congress had every opportunity to include an appropriation as it had in other sections of the ACA, and remove any doubt of budget neutrality, but declined to do so. The court therefore denied CHO’s motion for summary judgment, granted the governments motion to dismiss, and dismissed the case with prejudice.

The case is No. 16-967C.

Attorneys: Stephen John McBrady (Crowell & Moring LLP) for Maine Community Health Options. Marcus Scott Sacks, U.S. Department of Justice, for the United States of America.

Companies: Maine Community Health Options; United States of America

Cases: CaseDecisions NewsFeed AgencyNews HealthInsuranceExchangeNews InsurerNews ReinsuranceNews CtFedClaimsNews

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