Cmty. Health Choice, Inc. v. United States
| Decision Date | 14 August 2020 |
| Docket Number | 2019-1633,2019-2102 |
| Citation | 970 F.3d 1364 |
| Parties | COMMUNITY HEALTH CHOICE, INC., Plaintiff-Appellee v. UNITED STATES, Defendant-Appellant Maine Community Health Options, Plaintiff-Appellee v. United States, Defendant-Appellant |
| Court | U.S. Court of Appeals — Federal Circuit |
William Lewis Roberts, Faegre Drinker Biddle & Reath LLP, Minneapolis, MN, argued for plaintiff-appellee in 19-1633. Also represented by Jonathan William Dettmann, Nicholas James Nelson.
Daniel William Wolff, Crowell & Moring, LLP, Washington, DC, argued for plaintiff-appellee in 19-2102. Also represented by Stephen John McBrady, Skye Mathieson, Charles Baek, Clifton S. Elgarten.
Alisa Beth Klein, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by Mark B. Stern, Ethan P. Davis.
Stephen A. Swedlow, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, for amicus curiae Common Ground Healthcare Cooperative. Also represented by David Cooper, New York, NY; J. D. Horton, Adam Wolfson, Los Angeles, CA.
Before Dyk, Bryson, and Taranto, Circuit Judges.
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." Sanford , No. 19-1290, slip op. at 3.
In these cases, following our decision in Sanford , we affirm the Claims Court's decisions as to liability. As in Sanford , we conclude that the government is not entitled to a reduction in damages with respect to cost-sharing reductions not paid in 2017. As to 2018, we address an issue not presented in Sanford : the appropriate measure of damages. We hold that 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. We reverse and remand for further proceedings with respect to damages.
In 2010, Congress enacted the ACA, which includes "a series of interlocking reforms designed to expand coverage in the individual health insurance market." King v. Burwell , 576 U.S. 473, 135 S. Ct. 2480, 2485, 192 L.Ed.2d 483 (2015). "[T]he Act requires the creation of an ‘[e]xchange’ in each State—basically, a marketplace that allows people to compare and purchase insurance plans." Id. Insurance plans sold on the ACA exchanges must provide a minimum level of "essential health benefits" and are referred to as "qualified health plans." See 42 U.S.C. § 18031. The ACA defines four levels of coverage: bronze, silver, gold, and platinum, which are based on the percentage of essential health benefits that the insurer pays for under each type of plan. Sanford , No. 19-1290, slip op. at 4. For example, under a silver-level plan, the health insurance provider pays for 70 percent of the actuarial value of the benefits, and either the insured or the government pays the remaining 30 percent. Id.
Under most health insurance plans, the insured individual must bear two types of costs. First, the insured must pay a monthly premium to maintain coverage. Second, the insured must pay an additional fee—called "cost-sharing"—when medical expenses are incurred. Deductibles, coinsurance, and co-payments are examples of such fees. See 42 U.S.C. § 18022(c)(3)(A)(i). The ACA includes two sections, 1401 and 1402, that reduce the premiums and cost-sharing for low-income insureds by government payments to the insurers. These sections "work together: the [premium reductions] help people obtain insurance, and the cost-sharing reductions help people get treatment once they have insurance." See Cmty. Health Choice, Inc. v. United States , 141 Fed. Cl. 744, 750 (2019) (quoting California v. Trump , 267 F. Supp. 3d 1119, 1123 (N.D. Cal. 2017) ). These sections apply to taxpayers with a household income of between 100 percent and 400 percent of the federal poverty line. See 42 U.S.C. § 18071(b)(2) ; 26 U.S.C. § 36B(c)(1)(A) ; Sanford , No. 19-1290, slip op. at 5, 7. The statute refers to them as "applicable taxpayer[s]" in the case of section 1401, 26 U.S.C. § 36B(c)(1)(A), and "eligible insured[s]" in the case of section 1402, 42 U.S.C. § 18071(b).
Premium reductions. Under section 1401, each "applicable taxpayer" enrolled in an ACA exchange plan at any level of coverage is entitled to a "premium assistance credit amount" ("premium tax credit") to offset part of the monthly premiums of the enrollee entitled to the premium tax credit. 26 U.S.C. § 36B. The ACA specifies a formula for determining the amount of premium tax credits, which depends on the applicable taxpayer's household income, but not on the monthly premium or the coverage level for the applicable taxpayer's plan. The premium tax credit cannot exceed the actual monthly premium for the individual's plan. See id. § 36B(b)(2). The government pays these premium tax credit amounts directly to insurers. See Sanford , No. 19-1290, slip op. at 8; 31 U.S.C. § 1324. Thus, the amount of the premiums charged by the insurers to the insured is effectively reduced.
Premium review. The ACA includes various measures for regulating insurance premiums. Section 1003 of the ACA establishes a "premium review process" that requires insurers to report their premium rate increases to the Secretary of Health and Human Services ("the Secretary") and state regulators. See 42 U.S.C. § 300gg-94 (codifying ACA section 1003). State authorities can review the proposed rates. However, "[t]he rate review process does not establish federal authority to deny implementation of a proposed rate increase; it is a sunshine provision designed to publicly expose rate increases determined to be unreasonable." See Bernadette Fernandez, Vanessa C. Forsberg & Ryan J. Rosso, Cong. Rsch. Serv., R45146, Federal Requirements on Private Health Insurance Plans 9 (2018). If a state regulator finds that an insurer's premium rate increases are "excessive or unjustified," it is required to recommend that the Secretary "exclude[ ] [the insurer] from participation in the [state] [e]xchange." 42 U.S.C. § 300gg-94(b)(1)(B).
Following the enactment of the ACA, states have taken a varied approach to premium rate review programs. Some, but not all, states have reserved the express authority to approve or deny premium rate increases. See Mark Newsom & Bernadette Fernandez, Cong. Rsch. Serv., R41588, Private Health Insurance Premiums and Rate Reviews 15 (2011) ("There is substantive variation in state regulation of health insurance rates."). In states where there is no express approval requirement, insurers are still required to notify state regulators of premium increases above a certain threshold. See 42 U.S.C. § 300gg-94(a)(2) ; Fernandez et al., Federal Requirements on Private Health Insurance Plans at 9. The damages issue here does not turn on whether the states have required express approval of premium increases.
Cost-sharing reductions. Section 1402 of the ACA requires insurers to reduce the insured's "cost-sharing" payments and requires the Secretary to "make periodic and timely payments to the [insurer] equal to the value of the [cost-sharing] reductions." 42 U.S.C. § 18071(c)(3)(A). The section applies to "eligible insured[s]" enrolled in silver-level plans offered on the exchanges. Id. § 18071(a), (b). Eligibility under section 1402 is tied to eligibility under section 1401, and the amount of cost-sharing reductions is directly tied to the household income of the eligible insured. See Id. § 18071(c), (f)(2) ; Sanford , No. 19-1290, slip op. at 7 n.2.
On October 12, 2017, the Secretary announced that the government would cease payment of cost-sharing reduction reimbursements. Sanford , No. 19-1290, slip op. at 1112. The suspension of cost-sharing reduction reimbursements did not relieve the insurers of their statutory obligation to "offer plans with cost-sharing reductions to customers," meaning that "the federal government's failure to meet its [cost-sharing reduction] payment obligations meant the insurance companies would be losing that money." California , 267 F. Supp. 3d at 1134. The solution for the insurers was to increase premiums. These states "began working with the insurance companies to develop a plan for how to respond" "in a fashion that would avoid harm to consumers." See id. The resulting plan involved the tax credit provision of section 1401 of the ACA.
Under section 1401, the government is required to subsidize an amount equal to the lesser of (1) the monthly premium for the applicable taxpayer's plan and (2) the difference between the monthly premium for the "applicable second lowest cost silver plan [ (the ‘benchmark plan’) ] with respect to the taxpayer" and a statutorily-defined percentage of the eligible taxpayer's monthly household income. 26 U.S.C. § 36B(b)(2) (codifying ACA section 1401(b)(2)). This percentage generally varies from 2% to 9.5% based on the eligible taxpayer's income relative to the federal poverty line. Id. § 36B(b)(3)(A). These payments are guaranteed since, unlike the cost-sharing reduction payments situation, there is a permanent appropriation for premium tax credits. See Sanford , No. 19-1290, slip op. at 8.
In effect, if the insurers increased the monthly premium for their benchmark silver plans, each insurer would receive an additional dollar-for-dollar increase in the amount of the premium tax credit for each applicable taxpayer under its silver plans, all while keeping the out-of-pocket premiums paid by...
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