Richardson v. United States
| Docket Number | 18-1731C |
| Decision Date | 30 November 2021 |
| Parties | BARBARA D. RICHARDSON, in her capacity as Receiver of Nevada Health Co-Op., Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Mark E. Ferrario, Greenberg Traurig, LLP, Las Vegas, NV, for Plaintiff. With him on the briefs were Eric W. Swanis, Donald L. Prunty, and Tami D. Cowden. Of counsel were Michael J Schaengold, Daniel D. Straus, and Melissa P. Prusock Greenberg Traurig, LLP, Washington, D.C.
Phillip M. Seligman, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington D.C., for Defendant. With him on the briefs were Ruth H. Harvey, Director, Kirk T. Manhardt, Deputy Director, and Frances M. McLaughlin, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C.
Plaintiff, Barbara D. Richardson, the Nevada Commissioner of Insurance, acting in her position as the receiver (the "Receiver") for the Nevada Health CO-OP ("NHC"), sued Defendant, the United States, for payments it allegedly owes pursuant to the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) () (the "ACA"). Specifically, the Receiver alleges that the government has improperly withheld such payments - totaling (approximately) at least $38 million and perhaps exceeding $55 million - based on administrative offsets[1] asserted by the Centers for Medicare and Medicaid Services ("CMS"), an agency of the U.S. Department of Health and Human Services ("HHS"), for amounts it contends NHC owes the government pursuant to contract. Because the Court holds that the contract at issue precludes the government's offsets, the Receiver is entitled to judgment on its claims.
On November 8, 2018, the Receiver filed suit in this Court to recover amounts due to NHC pursuant to the ACA, including sums that the government asserted as an offset against what was due to NHC. ECF No. 1 ("Compl.").[2] On March 7, 2019, the government filed a motion to dismiss pursuant to Rule 12(b)(6) of the Rules of the United States Court of Federal Claims (the "RCFC") for failure to state a claim upon which relief can be granted. ECF No. 11 ("Def. MTD"). On July 31, 2019, the Receiver filed a response in opposition to the government's motion to dismiss and a cross-motion for partial summary judgment. ECF No. 20. On August 12, 2019, this Court granted the government's motion to stay this case pending the United States Supreme Court's resolution of several other cases seeking payment pursuant to various alleged money-mandating provisions of the ACA. ECF No. 21. On February 5, 2020, this case was reassigned to the undersigned Judge. ECF Nos. 22, 23.
On April 27, 2020, the Supreme Court issued its decision in Maine Community Health Options v. United States, 590 U.S. --, 140 S.Ct. 1308 (2020). The Supreme Court held that insurers seeking amounts owed under the ACA's Risk Corridors program, discussed infra, "have a right to payment under § 1342 [of the ACA] and a damages remedy for the unpaid amounts." Id. at 1315 (concluding "that § 1342 of the [ACA] established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the Government for damages in the Court of Federal Claims").
Because of the need to supplement the briefing before this Court to address Maine Community Health, and based upon the parties' agreement, the Court ordered the Receiver to file an updated response in opposition to the government's motion to dismiss to include a new cross-motion for partial summary judgment. ECF No. 29. The Receiver filed that brief on September 9, 2020. ECF No. 32 ("Pl. Resp."). The government filed a reply brief on October 26, 2020. ECF No. 34 ("Def. Rep."). The Receiver filed its reply on November 13, 2020. ECF No. 36 ("Pl. Rep.").
On May 19, 2021, the Receiver filed a Notice of Supplemental Authority concerning the decision of our appellate court, the United States Court of Appeals for the Federal Circuit, in Conway v. United States, 997 F.3d 1198 (Fed. Cir. 2021). ECF No. 42. The government filed its response on May 21, 2021. ECF No. 44 ("Def. Resp. to Supp. Auth."). On May 24, 2021, the Court held oral argument on the parties' pending motions. ECF No. 46 ("Tr.").[3]
In March 2010, Congress enacted the ACA, "a series a series of interlocking reforms designed to expand coverage in the individual health insurance market." King v. Burwell, 576 U.S. 473, 478-79 (2015). A key section of the ACA mandated the creation of virtual health insurance markets, called "Health Benefit Exchanges" in each state. 42 U.S.C. § 18031(b)(1). The ACA required that plans offered through such exchanges satisfy certain criteria, including offering a minimum level of "essential" coverage; these plans are referred to as "qualified health plans" ("QHPs"). Id. §§ 18021, 18022, 18031.
At the outset, insurance carriers offering QHPs faced heightened risk because they lacked "reliable data to estimate the cost of providing care for the expanded pool of individuals seeking coverage" on the new Exchanges. Maine Cmty. Health Options, 140 S.Ct. at 1316 (quoting Moda Health Plan, Inc. v. United States, 892 F.3d 1311, 1314 (Fed. Cir. 2018)). To encourage insurers to enter the Exchanges, the ACA established several programs to defray the financial burden on insurers and to mitigate their risks. See id. at 1315. Among these initiatives were three premium stabilization programs, dubbed the "3Rs": (1) risk corridors; (2) risk adjustment; and (3) reinsurance. See Conway, 997 F.3d at 1202 (citing 42 U.S.C. §§ 18061-63).
The risk corridor program was a temporary program for the exchanges' first three years, 2014 to 2016, pursuant to which amounts collected from profitable insurance plans effectively funded payments to unprofitable plans. 42 U.S.C. § 18062; see also Maine Cmty. Health Options, 140 S.Ct. at 1316 () (quoting 42 U.S.C. § 18062)). The risk adjustment program, in contrast, is a permanent program under which amounts collected from insurers with healthier-than-average enrollees are used to fund payments to insurers with sicker-than-average enrollees. 42 U.S.C. § 18063. Finally, the reinsurance program was a temporary program that "required insurers to pay premiums into a pool that compensated carriers covering 'high risk individuals.'" Maine Cmty. Health Options, 140 S.Ct. at 1316 n.1 (quoting 42 U.S.C. § 18061).[5]
The "Cost Sharing Reduction" program permits the government to subsidize premium costs for lower income participants. 42 U.S.C. § 18071. Under this program, insurers offering QHPs are required to reduce eligible individuals' costs by specified amounts based on household income, id. § 18071(a)-(c), and HHS is required to reimburse the insurers for those costs, id. § 18071(c)(3)(A). The government issues periodic subsidy payments to the insurers, id. §§ 18071(c)(3)(a), 18082(c)(3), with a yearly reconciliation for payments that are too high or too low, 45 C.F.R. § 156.430.
To "foster the creation of qualified nonprofit health insurance issuers to offer qualified health plans in the individual and small group markets," the ACA established the "Consumer Operated and Oriented Plan" ("CO-OP") program. 42 U.S.C. § 18042(a)(2). The ACA authorized HHS to lend money to prospective health insurers seeking to qualify as CO-OPs offering QHPs. Id. § 18042(b)(1). As discussed in more detail below, the ACA required HHS to promulgate regulations governing the issuance of loans, as well as their repayment "in a manner consistent with State solvency regulations and other similar State laws that may apply." Id. § 18042(b)(3).
NHC's predecessor in interest, Hospitality Health, Ltd., was a Nevada health maintenance organization that participated in the CO-OP program. Pl. Resp. at 6-7; A151 (Loan Agreement, Section 1.1). On May 17, 2012, Hospitality Health, Ltd. and CMS executed a loan agreement (the "Loan Agreement") that included two promissory notes: (1) a start-up loan of $17, 105, 047 (the "Start-Up Loan"); and (2) a solvency loan of $48, 820, 349 (the "Solvency Loan"). Compl. ¶ 56; Pl. Resp. at 7; A157 (Loan Agreement, Section 3.2). Collectively, the Loan Agreement defined the term "Loans" to "mean[] both of them together" - i.e., both the Start-up Loan and the Solvency Loan. A154 (Loan Agreement, Section 2.1).[6] These Loans subsequently were assigned to NHC, A226-28 (Amendment to Loan Agreement), and were intended to facilitate NHC's offering "health plans primarily in the individual and small group markets." Pl. Resp. at 7; A157 (Loan Agreement, Section 3.1).
The Loan Agreement addresses, inter alia, NHC's repayment obligations:
4.4 Repayment of the Start-Up Loan. . . . Principal repayments on the Start-Up Loan will be . . . subject to [NHC]'s ability to meet State Reserve Requirements and other solvency regulations or requisite surplus note arrangements. Unless [CMS] terminates this Agreement for cause under Section 16.3 below, [NHC] shall be obligated to repay 100% of the Start-Up Loan amount disbursed, plus any capitalized Interest to [CMS] . . . subject to its ability to meet State Reserve Requirements and other solvency regulations, or requisite surplus note arrangements. If [CMS]...
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