Summary
The Federal Circuit held that the government violated its statutory obligation under ACA § 1402 to make cost-sharing reduction payments to insurers, and that insurers may recover damages under the Tucker Act. For 2017, no offset applies because insurers did not raise premiums; for 2018, damages must be reduced by the amount of additional premium tax credits insurers received through "silver loading" as a direct result of their mitigation efforts. The court applied contract-law mitigation principles to this Spending Clause statute, rejecting the collateral source rule and pass-through defenses, and remanded for calculation of the offset.
Topics
Practice areas
Questions Presented
- Whether section 1402 of the ACA imposes an obligation on the government to pay cost-sharing reduction reimbursements enforceable through a damages action in the Court of Federal Claims under the Tucker Act.
- Whether the insurers' damages for 2017 should be reduced because they did not raise premiums.
- Whether the insurers' damages for 2018 must be reduced by the amount of additional premium tax credits they received as a result of the government's nonpayment of cost-sharing reduction reimbursements.
Holdings
- Section 1402 imposes an unambiguous obligation on the government to pay money and that obligation is enforceable through a damages action in the Court of Federal Claims under the Tucker Act.
- There is no basis for a 2017 damages offset because the insurers did not raise their silver-level plan premiums in 2017 or receive increased tax credits for that year.
- The Claims Court must reduce the insurers' damages by the amount of additional premium tax credit payments that each insurer received as a result of the government's termination of cost-sharing reduction payments, because under the contract-law analogy, the insurers received a benefit from their mitigation efforts that must be credited.
Key quotations
“Today in Sanford Health Plan v. United States (“Sanford”), No. 19-1290, we hold that the United States failed to comply with section 1402 of the Patient Protection and Affordable Care Act (“ACA”), Pub. L. No. 111-148, 124 Stat. 119, 220–24 (2010) (codified at 42 U.S.C. § 18071)—which requires the government to reimburse insurers for “cost-sharing reductions.” We hold that section 1402 “imposes an unambiguous obligation on the government to pay money and that the obligation is enforceable through a damages action in the Court of Federal Claims [(‘Claims Court’)] under the Tucker Act.”” (3)
“The traditional damages remedy under contract law is compensatory in nature. Restatement (Second) of Contracts § 347 (1981); Barnes v. Gorman, 536 U.S. at 187–90. The fundamental principle that underlies the availability of contract damages is that of compensation. That is, the disappointed promisee is generally entitled to an award of money damages in an amount reasonably calculated to make him or her whole and neither more nor less.” (16-17)
“The practice of silver loading—and the resulting premium tax credits received by each insurer—“was a direct consequence of the government’s breach” of its obligations, and “indeed was an extreme measure forced” by the government’s nonpayment. LaSalle, 317 F.3d at 1372. The government’s payment of the premium tax credits is directly traceable to the premium increase, and the premium increase is directly traceable to the government’s breach.” (23-24)
Factual background
The ACA requires insurers to offer cost-sharing reductions to low-income enrollees in silver-level plans, with the government obligated to reimburse insurers for those reductions. In October 2017, the government announced it would stop making these payments. Insurers responded by raising premiums for silver-level plans, which increased the premium tax credits the government paid to insurers, mitigating their losses. Community Health Choice and Maine Community Health Options did not raise premiums in 2017 but did so in 2018.
Procedural history
Insurers filed separate actions in the Court of Federal Claims seeking unpaid cost-sharing reduction reimbursements under the ACA. The Claims Court granted summary judgment for insurers, holding that the government violated section 1402 of the ACA and breached an implied-in-fact contract, and awarded full damages for 2017 and 2018. The government appealed.
Remand instructions
Remand to the Court of Federal Claims for a determination of the amount of premium increases (and resultant premium tax credits) attributable to the government's failure to make cost-sharing reduction payments, to be applied as an offset to damages. The insurers bear the burden of proof on the amount of offset.