Health Reform WK-EDGE HHS must pay ACA cost sharing reduction despite Congressional funding failure
News
Friday, September 14, 2018

HHS must pay ACA cost sharing reduction despite Congressional funding failure

By David Yucht, J.D.

Congressional failure to appropriate funds for Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) cost sharing reduction (CSR) program was not sufficient to establish a congressional intent to vitiate HHS’ statutory payment obligation. The U.S. Court of Federal Claims in Washington, D.C., granted summary judgment in favor of a health insurer that sells ACA qualified health plans, consequently establishing the insurer’s right to 2017 CSR payments from HHS (Montana Health Co-op v. U.S.September 4, 2018, Kaplan, E.).

ACA-cost-sharing reduction. Under the ACA, Congress established the CSR requirement which was imposed on issuers of certain health plans. Enrollees eligible for CSR under the ACA are entitled to reduced out-of-pocket costs. The ACA requires HHS to reimburse health insurers for these reductions. The ACA required that insurance exchanges be established to provide funds for these re-imbursements no later than January 1, 2014. On July 11, 2013, the Senate Appropriations Committee adopted a bill appropriating money for HHS and other agencies for 2014 which specifically did not include a CSR appropriation. No appropriation has since been enacted to cover the costs of CSR payments. From January of 2014 until October of 2017, HHS made CSR payments with money from the permanent appropriation for tax credit refunds. In October, 2017 HHS issued a memorandum to CMS directing that in the absence of appropriations, CSR payments must stop.

Montana Health Co-op is a health insurer that sells qualified health plans on health care exchanges established by the ACA. According to Montana Health, it is owed about $5 million by the federal government, representing cost-sharing reduction payments it claims it was entitled to receive during 2017 under the CSR program. Montana Health filed a complaint in the U.S. Court of Federal Claims. The government moved to dismiss and Montana Health cross-moved for summary judgment as to liability.

Statutory obligation. The court ruled for Montana Health and determined that the government violated a statutory obligation created by Congress in the ACA when it failed to provide Montana Health its full CSR payments for 2017, and that Congress’s failure to appropriate funds to make those payments did not vitiate that obligation. The ACA language unambiguously imposed an obligation on HHS to make payments to health insurers that have implemented cost-sharing reductions on their covered plans. Notwithstanding this provision, the government argued that the ACA did not give rise to a statutory obligation because Congress never appropriated the necessary funds. The court was not persuaded by the government’s argument because there was no relevant congressional action taken at all after the passage of the ACA. There have been no appropriations bills enacted that made reference to the CSR provisions. All that existed was the payment obligation spelled out by the plain language of the ACA. The court concluded that Congress’ "bare failure" to appropriate funds was not sufficient to establish a intent to vitiate a statutory payment obligation.

The case is No. 18-143C.

Attorneys: Stephen McBrady (Crowell & Moring LLP) for Montana Health CO.-OP. Christopher J. Carney, U.S. Department of Justice, for the United States.

Companies: Montana Health CO-OP.

MainStory: TopStory CaseDecisions AgencyNews CostSharingNews HealthInsuranceExchangeNews InsurerNews CtFedClaimsNews NewsFeed

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Health Reform WK-EDGE

Health Reform WK-EDGE: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health reform legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More