Health Reform WK-EDGE Health plan may not recover cost-sharing damages for pending benefit year
Tuesday, November 26, 2019

Health plan may not recover cost-sharing damages for pending benefit year

By Patricia K. Ruiz, J.D.

No cost-sharing reductions for qualified health plans when reconciliation is ongoing.

A qualified health plan (QHP) may not seek cost sharing reduction (CSR) damages for a year for which the government has not completed the reconciliation process, the Court of Federal Claims held. In a dispute with the government over 2017, 2018, and partial 2019 CSR payments, the court held that the QHP could recover damages for 2017 and 2018 but could not recover for 2019 until the reconciliation process had been finalized (Local Initiative Health Authority for L.A. County v. U.S., November 18, 2019, Wheeler, T.).

CSR program. The CSR program provides a subsidy to eligible exchange plan purchasers to reduce the out-of-pocket expenses paid by individuals with incomes between 100 percent and 250 percent of the poverty line. Insurers with qualified health plans (QHPs) must reduce eligible individuals’ cost-sharing obligations by certain amounts. Local Initiative Health Authority for L.A. County (L.A. Care) is a certified QHP and participated in the California Exchange since 2014. It, along with other QHPs, stopped receiving monthly advance CSR payments in October 2017.

Two and a half years of CSR damages. In February 2019, a court granted partial summary judgment to L.A. Care, finding that the government violated cost-sharing reduction requirements under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) and breached an implied contract to make advance CSR payments in 2017 and 2018. The court directed the parties to file a joint status report setting out a plan for resolving the action. In the report, L.A. Care said it planned to modify its claim to include additional damages for 2019. It filed an amended complaint in March 2019 requesting unpaid CSR damages for 2017, 2018, and the first six months of 2019. L.A. Care asserts that the government owes it more than $53 million in unpaid CSR damages for this time period.

Reconciliation process. The government argued that, while the reconciliation process for 2017 and 2018 is complete, the final value of CSRs provided to eligible enrollees in 2019 is not yet known. Because L.A. Care structured its claim for 2017 through 2019 as a single claim, it can only recover once reconciliation is complete for all benefit years. Thus, the claim is not ripe, the government argued. However, the court held that the government has a statutory obligation to make full advanced monthly CSR payments. Each month that it fails to make CSR payments constitutes a separate breach imposing a distinctive injury, the court held. The amounts become final once HHS completes its reconciliation process for that benefit period.

The court rejected the government’s argument that L.A. Care has a single claim which is dependent on a final ruling on damages. The court held that the government must pay damages for the uncontested 2017 and 2018 amounts. However, the court held that the claim for 2019 damages is not final until all issues pertaining to that benefit year are known and denied the request for 2019 damages pending finalization of the 2019 reconciliation.

The case is No. 1:17-cv-01542-TCW.

Attorneys: Lawrence S. Sher (Reed Smith LLP) for Local Initiative Health Authority for L.A. County, d/b/a L.A. Care Health Plan. Albert S. Iarossi, Office of the Attorney General, for the United States.

Companies: Initiative Health Authority for L.A. County, d/b/a L.A. Care Health Plan

Cases: CaseDecisions AgencyNews CostSharingNews HealthInsuranceExchangeNews InsurerNews ReinsuranceNews CtFedClaimsNews NewsFeed

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