Summary
The Federal Circuit held that while Section 1342 of the Affordable Care Act created a money-mandating obligation for the government to pay full risk corridor payments to insurers, Congress effectively suspended that obligation for each program year (2014–2016) through appropriations riders that barred use of CMS Program Management funds for such payments, clearly intending to cap payments at the amount of collections. The court also rejected the insurer's implied-in-fact contract theory, finding no government intent to contract where the statute and regulations merely established an incentive program. Key topics: ACA risk corridors, appropriations riders, implied repeal/suspension, Tucker Act jurisdiction, money-mandating statute, implied-in-fact contract.
Topics
Practice areas
Questions Presented
- Whether section 1342 obligated the government to pay full risk corridor payments regardless of budget neutrality
- Whether the appropriations riders suspended that obligation
- Whether an implied-in-fact contract existed for full payment
Holdings
- Section 1342 unambiguously required the Secretary to pay the full amount indicated by the statutory formula for payments out.
- The appropriations riders for FY 2015-2017 clearly indicated Congress's intent to temporarily suspend the obligation to pay out more than payments in.
- No implied-in-fact contract arose from the statute, regulations, or conduct because there was no mutual intent to contract; the program was an incentive, not a contractual offer.
Key quotations
“Section 1342 is unambiguously mandatory. It provides that '[t]he Secretary shall establish and administer' a risk corridors program pursuant to which '[t]he Secretary shall provide' under the program that 'the Secretary shall pay' an amount according to a statutory formula.” (1316)
“The plain language of section 1342 created an obligation of the government to pay participants in the health benefit exchanges the full amount indicated by the statutory formula for payments out under the risk corridors program.” (1321)
“Congress clearly indicated its intent here. It asked GAO what funding would be available to make risk corridors payments, and it cut off the sole source of funding identified beyond payments in.” (1324)
Factual background
The ACA established a risk corridors program for 2014-2016 to mitigate insurer risk from offering coverage on exchanges. Section 1342 mandated payments out based on a statutory formula. HHS implemented regulations and later announced a transitional policy that increased insurer losses. Congress passed appropriations riders prohibiting use of CMS Program Management funds for risk corridors payments. Moda participated and received only prorated payments, leading to this suit.
Procedural history
Moda commenced this action in the Court of Federal Claims under the Tucker Act in July 2016. The court denied the government's motion to dismiss and granted Moda's cross-motion for partial summary judgment as to liability. Both sides stipulated damages, and judgment was entered for Moda. The government appealed.