Moda Health Plan, Inc. v. United States
Citation | 892 F.3d 1311 |
Decision Date | 14 June 2018 |
Docket Number | 2017-1994 |
Parties | MODA HEALTH PLAN, INC., Plaintiff-Appellee v. UNITED STATES, Defendant-Appellant |
Court | United States Courts of Appeals. United States Court of Appeals for the Federal Circuit |
Steven Rosenbaum, Covington & Burling LLP, Washington, DC, argued for plaintiff-appellee. Also represented by Shruti Chaganti Barker, Caroline Brown, Philip Peisch.
Alisa Beth Klein, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by Chad A. Readler, Mark B. Stern.
Thomas G. Hungar, Office of General Counsel, United States House of Representatives, Washington, DC, for amicus curiae United States House of Representatives. Also represented by Kimberly Hamm, Todd B. Tatelman.
William Lewis Roberts, Faegre Baker Daniels LLP, Minneapolis, MN, for amicus curiae Association for Community Affiliated Plans. Also represented by Jonathan William Dettmann, Kelly J. Fermoyle, Nicholas James Nelson.
Steven Allen Neeley, Jr., Husch Blackwell LLP, Washington, DC, for amicus curiae National Association of Insurance Commissioners.
Stephen A. Swedlow, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, for amicus curiae Health Republic Insurance Company.
Ursula Taylor, Butler Rubin Saltarelli & Boyd LLP, Chicago, IL, for amicus curiae Blue Cross Blue Shield Association. Also represented by Sandra J. Durkin.
Benjamin N. Gutman, Oregon Department of Justice, Salem, OR, for amici curiae State of Oregon, State of Alaska, State of Connecticut, State of Hawaii, State of Illinois, State of Iowa, State of Maryland, State of Massachusetts, State of Minnesota, State of New Mexico, State of North Carolina, State of Pennsylvania, State of Rhode Island, State of Vermont, State of Virginia, State of Washington, State of Wyoming, District of Columbia.
Before Prost, Chief Judge, Newman and Moore, Circuit Judges.
A health insurer contends that the government failed to satisfy the full amount of its payment obligation under a program designed to alleviate the risk of offering coverage to an expanded pool of individuals. The Court of Federal Claims entered judgment for the insurer on both statutory and contract grounds. The government appeals. We reverse.
This case concerns a three-year "risk corridors" program described in the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) ( )("ACA"), and implemented by regulations promulgated by the U.S. Department of Health and Human Services ("HHS"). The case also concerns the bills that appropriated funds to HHS and the Centers for Medicare & Medicaid Services ("CMS") within HHS for the fiscal years during which the program in question operated. We begin with the ACA.
Among other reforms, the ACA established "health benefit exchanges"—virtual marketplaces in each state wherein individuals and small groups could purchase health coverage. 42 U.S.C. § 18031(b)(1). The new exchanges offered centralized opportunities for insurers to compete for new customers. The ACA required that all plans offered in the exchanges satisfy certain criteria, including providing certain "essential" benefits. See 42 U.S.C. §§ 18021, 18031(c).
Because insurers lacked reliable data to estimate the cost of providing care for the expanded pool of individuals seeking coverage via the new exchanges, insurers faced significant risk if they elected to offer plans in these exchanges. The ACA established three programs designed to mitigate that risk and discourage insurers from setting higher premiums to offset that risk: reinsurance, risk adjustment, and risk corridors. 42 U.S.C. §§ 18061 –63. This case concerns the risk corridors program.
Section 1342 of the ACA directed the Secretary of HHS to establish a risk corridors program for calendar years 2014–2016. The full text of Section 1342 is reproduced below:
In this section:
42 U.S.C. § 18062.
Briefly, section 1342 directed the Secretary of HHS to establish a program whereby participating plans whose costs of providing coverage exceeded the premiums received (as determined by a statutory formula) would be paid a share of their excess costs by the Secretary—"payments out." Conversely, participating plans whose premiums exceeded their costs (according to the same formula) would pay a share of their profits to the Secretary—"payments in." The risk corridors program "permit[ted] issuers to lower [premiums] by not adding a risk premium to account for perceived uncertainties in the 2014 through 2016 markets." HHS Notice of Benefit and Payment Parameters for 2014, 78 Fed. Reg. 15,410, 15,413 (Mar. 11, 2013).
On March 20, 2010, just three days before Congress passed the ACA, the Congressional Budget Office ("CBO") published an estimate of the ACA's cost. See Letter from Douglas Elmendorf, Director, CBO, to Nancy Pelosi, Speaker, House of Representatives tbl. 2 (Mar. 20, 2010) ("CBO Cost Estimate"), https://www.cbo.gov/ sites/default/files/111th-congress-2009-2010/costestimate/ amendreconprop.pdf. The CBO Cost Estimate made no mention of the risk corridors program, though it scored the reinsurance and risk adjustment programs. Id . Overall, CBO predicted the ACA would reduce the federal deficit by $143 billion over the 2010–2019 period it evaluated. Id. at p.2.
Preambulatory language in the ACA referred to CBO's overall scoring, noting that the ACA § 1563(a).
In March 2012, HHS promulgated regulations establishing the risk corridors program as directed by section 1342. Standards Related to Reinsurance, Risk Corridors and Risk Adjustment, 77 Fed. Reg. 17,220, 17,251 –52 (Mar. 23, 2012) (codified at 45 C.F.R. Pt. 153, Subpart F). Those regulations defined terms such as "allowable costs," "administrative costs," "premiums earned," and "target amount," all of which would ultimately factor into the calculations of payments in and payments out required by the statutory formula. E.g. , id . at 17,236 –39.
The regulations also provided that insurers offering qualified health plans in the exchanges "will receive payment from HHS in the following amounts, under the following circumstances" and it recited the same formula set forth in the statute for payments out. 45 C.F.R. § 153.510(b). The regulations similarly provided that insurers "must remit charges to HHS" according to the statutory formula for payments in. Id. § 153.510(c).
In March 2013, after an informal rulemaking proceeding, HHS published parameters for payments under various ACA programs for the first year of the exchanges, 2014, including the risk corridors program. The parameters revised certain definitions and added others, notably incorporating a certain level of profits as part of the allowable administrative costs. 78 Fed. Reg. at 15,530 –31 (codified at 45 C.F.R. § 153.530 ). The parameters also provided that an issuer of a plan in an exchange must submit all information required for calculating risk corridors payments by July 31 of the year following the benefit year. Id. HHS also indicated that "the risk corridors program is not required to be budget neutral," so HHS would make full payments "as required under Section 1342 of the Affordable Care Act." 78 Fed. Reg. at 15,473. This constituted the final word from HHS on the risk corridors program before the...
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