Health Reform WK-EDGE Federal government unable to squirm out of cost-sharing reduction payments
Friday, June 14, 2019

Federal government unable to squirm out of cost-sharing reduction payments

By Jeffrey H. Brochin, J.D.

Although the ACA failed to include cost-sharing reduction appropriations language, this did not reflect congressional intent to foreclose liability for the payments.

The U.S. Court of Federal Claims has ruled that the U.S. government is liable for cost-sharing reduction (CSR) payment obligations under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), even though Congress did not appropriate funds for that purpose, because the government can create a liability without providing for the means to pay for it. At least in certain circumstances, the government may incur a debt independent of an appropriation to satisfy that debt (Maine Community Health Options v. The United States, June 10, 2019, Sweeney, M.).

Cost-sharing reduction mechanism. Among the reforms included in the ACA were the premium tax credit enacted in section 1401, and the cost-sharing reduction (CSR) program enacted in section 1402. The premium tax credits were designed to help people obtain insurance, and the cost-sharing reductions were designed to reduce the out-of-pocket expenses paid by individuals whose household income was between 100% and 250% of the poverty line.

Insurers offering qualified health plans (QHPs) were required to reduce eligible individuals’ cost-sharing obligations by specified amounts, and the Secretary of HHS was required to reimburse the insurers for the cost-sharing reductions they made, via periodic and timely payments to the issuer equal to the value of the reductions.

No funding appropriated. Significantly, the ACA did not include any language appropriating funds to make the CSR payments. Before the health benefit exchanges opened for business, President Obama submitted to Congress his fiscal year 2014 budget that included a request for a line-item appropriation for CSR payments. Congress did not provide the requested appropriation, and Congress never specifically appropriated funds to reimburse insurers for their CSRs. It is undisputed that Congress has never (1) expressly prevented––in an appropriations act or otherwise––the Secretary of HHS or the Treasury Secretary from expending funds to make CSR payments or (2) amended the ACA to eliminate the CSR payment obligation.

Court freezes payments. Although Congress did not specifically appropriate funds for CSR payments, the Obama administration began making advance payments to insurers for cost-sharing reductions in January 2014 from the same account from which the premium tax credit advance payments were made. The U.S. House of Representatives sued the Obama Administration, and a District of Columbia court ruled in favor of the House, holding that although the ACA unambiguously appropriated money for Section 1401 premium tax credits, it did not do so for Section 1402 reimbursements, and such an appropriation could not be inferred. The United States Court of Appeals for the District of Columbia Circuit stayed the appeal to allow President-elect Donald J. Trump and his future administration time to determine how to proceed.

The Trump Administration continued the previous administration’s practice of making advance CSR payments to insurers until the U.S. Attorney General advised that the permanent appropriation for refunding internal revenue collections could not be used to fund the CSR payments. Among various lawsuits filed over that interpretation of law was the instant case by a Maine nonprofit provider of QHPs (see Trump HHS must make unpaid CSR payments to QHPs in Maine, Texas, and Wisconsin, February 20, 2019).

An unambiguous mandate. The health insurer argued that Congress’s failure to specifically appropriate funds for CSR payments did not suspend or terminate the government’s obligation to make the payments. The government countered that Congress expressed its intent that CSR payments should not be made—absent a specific appropriation for that purpose—by not appropriating funds for cost-sharing reductions in the ACA. The court ruled that the statutory provision governing CSRs set forth an unambiguous mandate that the Secretary of HHS "shall make periodic and timely payments to insurers" equal to the value of the reductions made by the insurers.

The court further found that Congress’s failure to include any appropriating language in the ACA did not reflect congressional intent to preclude liability for CSR payments, and, that it is well settled that the government can create a liability without providing for the means to pay for it.

Based on the foregoing, the court ordered the government to pay damages in the amount of $19,230,875.27, representing $846,493.02 in unpaid cost-sharing reduction reimbursements for 2017 and $18,384,382.25 in unpaid cost-sharing reduction reimbursements for 2018.

The case is No. 17-2057C.

Attorneys: Stephen J. McBrady (Crowell & Moring LLP) for Maine Community Health Options. Christopher J. Carney, U.S. Department of Justice, for the United States.

Companies: Maine Community Health Options

Cases: CaseDecisions AgencyNews CostSharingNews CtFedClaimsNews NewsFeed

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