Health Republic Ins. Co. v. United States

• Decision Date: 10 January 2017
• Docket Number: No. 16-259C,16-259C
• Parties: HEALTH REPUBLIC INSURANCE COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

HEALTH REPUBLIC INSURANCE COMPANY, Plaintiff, v. THE UNITED STATES, Defendant.

No. 16-259C

United States Court of Federal Claims

January 10, 2017

Section 1342 of the Patient Protection and Affordable Care Act, 42 U.S.C. § 18062; 45 C.F.R. pt. 153; Risk Corridors Program; RCFC 12(b)(1) Motion to Dismiss; Subject Matter Jurisdiction; Money-Mandating Statute and Regulation; Presently Due Money Damages; Ripeness; Agency Interpretation of Its Own Regulations; Requirement of Annual Risk Corridors Payments

Stephen Swedlow, Chicago, IL, for plaintiff.

Charles E. Canter, United States Department of Justice, Washington, DC, for defendant.

OPINION AND ORDER

SWEENEY, Judge

Plaintiff Health Republic Insurance Company contends, for itself and on behalf of those similarly situated, that defendant United States has not fully paid the risk corridors payments to which it and other insurers are entitled under the Patient Protection and Affordable Care Act ("Affordable Care Act"), Pub. L. No. 111-148, 124 Stat. 119 (2010), and its implementing regulations. Defendant moves to dismiss plaintiff's complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims ("RCFC"). As explained below, the court grants in part and denies in part defendant's motion.

I. BACKGROUND

A. The Affordable Care Act

Congress enacted the Affordable Care Act in March 2010. 124 Stat. at 119. The Act includes "a series of interlocking reforms designed to expand coverage in the individual health insurance market." King v. Burwell, 135 S. Ct. 2480, 2485 (2015).

First, the Act bars insurers from taking a person's health into account when deciding whether to sell health insurance or how much to charge. Second, the Act generally requires each person to maintain insurance coverage or make a payment to the Internal Revenue Service. And third, the Act gives tax credits to certain people to make insurance more affordable.

Id.; accord 26 U.S.C. §§ 36B, 5000A (2012); 42 U.S.C. § 300gg-1 (2012). "These three reforms are closely intertwined. . . . Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement. And the coverage requirement would not work without the tax credits." King, 135 S. Ct. at 2487 (citation omitted).

In conjunction with these three reforms, the Affordable Care Act required the establishment of an American Health Benefit Exchange ("exchange") in each state by January 1, 2014, to facilitate the purchase of "qualified health plans" by individuals and small businesses. 42 U.S.C. §§ 18031, 18041; accord King, 135 S. Ct. at 2485 (describing an exchange as "a marketplace that allows people to compare and purchase insurance plans"). Among other requirements, each "qualified health plan" offered on an exchange must provide a package of "essential health benefits." 42 U.S.C. § 18021(a)(1).

Thus, when enacted, the Affordable Care Act provided benefits and risks for health insurance companies ("insurers"). On the one hand, insurers would have access to a market of previously uninsured individuals, which could result in the insurers attracting more customers. See King, 135 S. Ct. at 2485; accord 42 U.S.C. § 18091(2)(C) ("The requirement [to maintain insurance coverage], together with the other provisions of this Act, will add millions of new consumers to the health insurance market . . . ."). On the other hand, because insurers lacked data "to predict the needs of the newly-insured" individuals, they would be hampered in their ability to "price [qualified health] plans to reflect the medical costs associated with this new and untested marketplace." Compl. ¶ 2; accord id. ¶ 26 ("[I]nsurers generally have less experience in how to accurately price policies in the individual market rather than the group market, and no relevant experience estimating benefit utilization, risk pool composition, and medical spending costs for insurance policies to the post-[Affordable Care Act] market, which included a new demographic and new mandatory coverage requirements."). To mitigate the risk faced by insurers, the Affordable Care Act included three premium stabilization programs: a transitional reinsurance program, a permanent risk adjustment program, and a temporary risk corridors program. See id. ¶¶ 4, 20; 42 U.S.C. §§ 18061-18063.

The transitional reinsurance program required insurers to fund, for the three-year period beginning January 1, 2014, reinsurance entities that would make payments to insurers that covered high-risk individuals "for any plan year beginning" in the three-year period. 42 U.S.C. § 18061. The permanent risk adjustment program requires each state to "assess a charge on health plans and health insurance issuers (with respect to health insurance coverage) . . . if the actuarial risk of the enrollees of such plans or coverage for a year is less than the average actuarial risk of all enrollees in all plans or coverage in such State for such year" and "provide a payment to health plans and health insurance issuers (with respect to health insurance coverage) . . . if the actuarial risk of the enrollees of such plans or coverage for a year is greater than theaverage actuarial risk of all enrollees in all plans and coverage in such State for such year . . . ." Id. § 18063.

The third program-the one at issue in this case-is the temporary risk corridors program. Pursuant to section 1342 of the Affordable Care Act:

The Secretary [of the Department of Health and Human Services ("HHS")] shall establish and administer a program of risk corridors for calendar years 2014, 2015, and 2016 under which a qualified health plan offered in the individual or small group market shall participate in a payment adjustment system based on the ratio of the allowable costs of the plan to the plan's aggregate premiums. Such program shall be based on the program for regional participating provider organizations under part D of title XVIII of the Social Security Act [42 U.S.C. 1395w-101 et seq.].

42 U.S.C. § 18062(a) (first alteration added). Section 1342 describes the methodology for collecting and making payments that HHS was required to adopt:

(1) Payments out

The Secretary shall provide under the program established under subsection (a) that if-

(A) a participating plan's allowable costs for any plan year are more than 103 percent but not more than 108 percent of the target amount, the Secretary shall pay to the plan an amount equal to 50 percent of the target amount in excess of 103 percent of the target amount; and

(B) a participating plan's allowable costs for any plan year are more than 108 percent of the target amount, the Secretary shall pay to the plan an amount equal to the sum of 2.5 percent of the target amount plus 80 percent of allowable costs in excess of 108 percent of the target amount.

(2) Payments in

The Secretary shall provide under the program established under subsection (a) that if-

(A) a participating plan's allowable costs for any plan year are less than 97 percent but not less than 92 percent of the target amount, the plan shall pay to the Secretary an amount equal to 50 percent of the excess of 97 percent of the target amount over the allowable costs; and(B) a participating plan's allowable costs for any plan year are less than 92 percent of the target amount, the plan shall pay to the Secretary an amount equal to the sum of 2.5 percent of the target amount plus 80 percent of the excess of 92 percent of the target amount over the allowable costs.

Id. § 18062(b). "The amount of allowable costs of a plan for any year is an amount equal to the total costs (other than administrative costs) of the plan in providing benefits covered by the plan," minus "any risk adjustment and reinsurance payments received under section[s] 18061 and 18063 . . . ." Id. § 18062(c)(1). And, the "target amount of a plan for any year is an amount equal to the total premiums (including any premium subsidies under any governmental program), reduced by the administrative costs of the plan." Id. § 18062(c)(2). Neither section 1342 of the Affordable Care Act nor any of the Act's other provisions appropriated funds specifically for the risk corridors program. See generally Pub. L. No. 111-148, 124 Stat. at 119-1024.

B. Regulations Implementing the Risk Corridors Program

As contemplated by the Affordable Care Act, the Secretary of HHS established a risk corridors program. Proposed regulations first appeared in the Federal Register on July 15, 2011. See Patient Protection and Affordable Care Act; Standards Related to Reinsurance, Risk Corridors and Risk Adjustment, 76 Fed. Reg. 41,930 (to be codified at 45 C.F.R. pt. 153). HHS explained that the temporary risk corridors program was, in general, "designed to provide QHP issuers with greater payment stability as insurance market reforms are implemented" and would "protect against uncertainty in setting rates in the Exchange by limiting the extent of issuer losses (and gains)."¹ Id. at 41,931; accord id. at 41,948. In addition, HHS noted that although the proposed regulations did not contain any deadlines for qualified health plans to remit charges to HHS or for HHS to make risk corridors payments to qualified health plans, such deadlines were under consideration:

For example, a QHP issuer required to make a risk corridor payment may be required to remit charges within 30 days of receiving notice from HHS. Similarly, HHS would make payments to QHP issuers that are owed risk corridor amounts from HHS within a 30-day period after HHS determines that a payment should be made to the QHP issuer. We believe that QHP issuers who are owed these amounts will want prompt payment, and also believe that the payment deadlines should be the same for HHS and QHP issuers.

Id. at 41,943. Finally, with respect to the expected cost of the risk corridors program, HHS stated, in a summary of its preliminary regulatory impact analysis:

[The Congressional Budget

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