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Litigation over various parts of the Affordable Care Act (ACA) and related regulations continues. ACA challenges are now under consideration by the Supreme Court and federal appellate and district courts across the country. This post provides a status update on ongoing litigation over the risk corridors program, cost-sharing reductions, the risk adjustment program, association health plans, and short-term plans. A previous post discussed the status of litigation over the contraceptive mandate.

Risk Corridors

As regular readers know, insurers sued the Department of Health and Human Services (HHS) for failure to make more than $12 billion in outstanding risk corridors payments. Lower court rulings were mixed. In June 2018, a three-judge panel of the Federal Circuit held that the government did not have to pay insurers the full amount owed to them in risk corridors payments. By a 2-1 majority, the court concluded that the ACA required the government to make risk corridors payments, but this obligation was suspended by subsequent appropriations riders that required these payments to be budget neutral.

The insurers’ request for en banc review by the Federal Circuit (meaning the case would be reheard by the entire Federal Circuit bench) was denied in November 2018. The insurers then petitioned the Supreme Court to hear their appeal in early February 2019. The petitions from the four insurers can be found here: Moda Health Plan, Blue Cross and Blue Shield of North Carolina, Land of Lincoln, and Maine Community Health Options. The case is focused on whether Congress can use the appropriations process to amend or repeal substantive statutory payment obligations and whether these changes can be applied retroactively.

In early March, an array of stakeholders filed nine amici briefs, all in support of the Supreme Court hearing the cases. Briefs were filed by the U.S. Chamber of Commerce, America’s Health Insurance Plans, the Blue Cross Blue Shield Association, the National Association of Insurance Commissioners, the Association for Community Affiliated Plans, 19 state attorneys general led by Oregon, six insurers led by Highmark, and economists and professors.

The federal government’s response was initially due on February 4 but the Trump administration requested and received two extensions to file its response on May 8, 2019. In its opposition brief, the federal government asks the Supreme Court not to accept the appeal. The brief includes many of the same arguments made in the lower courts. In the government’s view, it was not required to make full risk corridor payments under the ACA because there was no appropriation to make such payments. Even if there was an obligation to do so, this obligation was subsequently eliminated by appropriation riders added by Congress. The federal government asks the court to look at the congressional history and context of the appropriations riders in precluding HHS from making full risk corridor payments.

The insurers have one more opportunity to respond before the Supreme Court considers whether to accept the appeal or not. If the Supreme Court does not agree to hear the case, the ruling by the Federal Circuit will stand, and insurers will not receive the more than $12 billion they are seeking.

Cost-Sharing Reduction Payments

In a related challenge, insurers have sued HHS for at least $2.3 billion in unpaid cost-sharing reduction payments (CSRs) since the Trump administration decided to stop making the payments in October 2017. To date, six insurers—in front of three different judges at the Court of Federal Claims—have succeeded in their challenges over unpaid CSRs. One of these lawsuits, brought by Common Ground Healthcare Cooperative, is a class action that includes more than 90 insurers. More insurers are being added to the class action on a regular basis, including four March, four in April, and one in May.

Federal Circuit

Three of the cases—brought by Montana Health CO-OP, Sanford Health Plan, and Community Health Choice—have already been appealed to the Federal Circuit and were consolidated. This means the three cases will be heard and decided together by the same panel of judges. The federal government filed its opening brief on March 22. Montana Health CO-OP and Sanford Health Plan filed their brief on May 1. Other insurers with pending lawsuits for unpaid CSRs filed amicus briefs in support of the insurers. Amicus briefs were filed by Blue Cross Blue Shield of North Dakota, L.A. Health Care Plan, Molina, and Common Ground.

Rulings for Montana Health CO-OP and Sanford Health Plan were limited to unpaid CSRs for 2017. However, Judge Elaine D. Kaplan of the Court of Federal Claims suggested that insurers could recover for 2018 and beyond even if insurers had used silver loading to insulate themselves from losses. (In mid-April, both insurers filed new complaints before Judge Kaplan for unpaid CSRs for 2018. Montana Health CO-OP sued for an additional $27 million, and Sanford Health Plan sued for an additional $11 million. Judge Kaplan stayed both cases pending a decision in the Federal Circuit.) The third case, for Community Health Choice, includes unpaid CSRs for 2017 and 2018. The amount of unpaid CSRs for 2018 was agreed to by the federal government and estimated based on 2017 costs.

Lower Courts

At least nine cases for unpaid CSRs, including the class action lawsuit, remain pending in the Court of Federal Claims. Two additional cases, brought by Maine Community Health Options and Common Ground, remain before Judge Margaret M. Sweeney. Judge Sweeney previously held that the insurers were owed unpaid CSRs for 2017 and 2018 and recently allowed Maine Community Health Options to amend its complaint to include nearly $36 million in unpaid CSRs for 2018. Common Ground separately estimated that its class is owed more than $2.3 billion for 2017 and 2018.

These estimates notwithstanding, the final amount owed will be determined through the CSR reconciliation process. In theory, insurers will complete this process in May 2019 and then the court can enter a final judgment reflecting actual 2018 CSR amounts by June. Judge Sweeney directed the parties to file a status report proposing the amount due to the class for 2018 within seven days of when HHS notifies all of the CSR class members of actual 2018 payments.

In mid-April, the plaintiffs asked for an extension of HHS’s deadline for the CSR reconciliation process, arguing that some class members would not have sufficient time to complete the submission process by the May 3 deadline. Judge Sweeney denied this request but noted that the government assured the court that all class members who ask for an extension to May 31 will be granted one. If a class member cannot meet the extended May 31 deadline and the government refuses to provide an additional extension, the plaintiffs can refile their motion.

In a separate challenge, Judge Thomas C. Wheeler held that L.A. Health Care Plan was entitled to unpaid CSRs for 2017. While the parties disagreed on the amount owed, L.A. Care filed an amended complaint on March 29 to reflect unpaid CSRs for 2018 and 2019 in the amount of about $83.5 million. L.A. Care will no longer seek unpaid CSRs for 2017 because it received more in advance CSR payments in 2017 than it ultimately paid out.

Most other CSR lawsuits—with a few exceptions like the lawsuits brought by Blue Cross Blue Shield insurers in North Dakota and Vermont—have now been stayed pending a decision by the Federal Circuit. The lawsuit brought by Guidewell Mutual Holding Corporation (which includes Blue Cross and Blue Shield of Florida, Florida Health Care Plan, and Health Options) was recently stayed as was a lawsuit brought by Health Alliance Medical Plans. The lawsuit brought by Harvard Pilgrim Health Care was separately stayed , but the insurer received permission to file an amended complaint to include about $21.5 million in unpaid CSRs for 2018. Molina’s $160 million challenge remains stayed until after a final, non-appealable judgment is issued in Moda Health Plan.

Risk Adjustment Program

Litigation continues over the methodology used in the risk adjustment program. A lawsuit brought by New Mexico Health Connections (NMHC) resulted in the brief suspension of about $10.4 billion in 2017 risk adjustment payments. The suspension occurred after Judge James O. Browning set aside the part of the risk adjustment methodology that uses a statewide average premium from 2014 to 2018. He later denied a request from the federal government to reconsider and overturn this ruling.

The federal government then appealed the decision to the Tenth Circuit. In mid-February, the Tenth Circuit directed the parties to address whether the court has jurisdiction to review Judge Browning’s order and judgment. The court is interested in whether the judgment is ripe for review since Judge Browning vacated part of the risk adjustment methodology and remanded the case to HHS. The cases cited by the Tenth Circuit’s clerk suggest that courts have answered this question differently: some have treated remand to an agency as a final decision (meaning it is appealable) while others have not.

The federal government filed a revised opening brief on March 22, with a request for oral argument. The government reiterates the reasons why it adopted a statewide average premium and a budget-neutral risk adjustment program and argues that NMHC waived its objections because these issues were not raised during the rulemaking process. The government also takes issue with the district court’s decision to vacate parts of the rule entirely (as opposed to limiting its ruling to NMHC or New Mexico). The government believes vacatur was inappropriate, did not reflect a balance of equities or the public interest, and was nationally disruptive to the risk adjustment program.

This point was echoed in an amicus brief from America’s Health Insurance Plans and the Blue Cross Blue Shield Association, noting that vacating the entire rule was “not only inequitable, but also unworkable” and “needlessly and retrospectively pull[ed] the rug out from under health plans that have relied on the final risk adjustment rules.” The brief highlights the impracticalities of adjusting the risk adjustment methodology (and thus the billions of dollars in risk adjustment transfers and medical loss ratios) for 2014 to 2016. They encourage the court to remand the risk adjustment regulations to HHS, without vacating them, to allow the agency to provide an additional explanation for its methodology for the 2014 to 2016 benefit years. These organizations filed a similar statement with the district court after HHS unexpectedly froze risk adjustment payments for 2017.

NMHC filed its opening brief on April 22, taking issue again with HHS’ use of a statewide average premium and arguing that the district court’s remedy—to vacate part of the risk adjustment methodology—was appropriate. The federal government’s reply brief was due on May 13 but it requested and received an extension to June 3.

Second Challenge

Separately, HHS issued new final rules to justify its risk adjustment methodology for 2017 and 2018. In August 2018, NMHC filed a new lawsuit challenging the final rule on the 2017 risk adjustment methodology. This means there are currently two lawsuits pending against the federal government brought by NMHC over the risk adjustment program. In late January, the parties asked Judge Browning to stay the second lawsuit while the original lawsuit is on appeal to the Tenth Circuit.

Association Health Plans

In July 2018, a coalition of 12 Democratic attorneys general filed a lawsuit challenging the final rule to expand access to association health plans (AHPs). Judge John D. Bates of the District of Columbia ruled in March 2019 that the rule violated federal law and was “clearly an end-run around the ACA.” The court set aside the rule’s provisions related to working owners and commonality of interest and remanded the rule back to the Department of Labor (DOL) to determine how the regulation’s severability provision affected the remainder of the rule.

The Trump administration appealed the ruling to the Court of Appeals for the District of Columbia (D.C. Circuit) where a panel of judges will consider the legal questions anew. The DOL also issued guidance that lays out its enforcement stance for already-in-existence AHPs, directs AHPs to pay claims, and prohibits AHPs from marketing to or enrolling new members.

On May 9, the federal government asked the D.C. Circuit for an expedited appeal in light of the fact that some consumers have already enrolled in AHPs. The DOL estimates that there are tens of thousands of enrollees in AHPs, many of whose plans will end between September and December 2019. Although the guidance and enforcement stance noted above are designed to mitigate disruption for enrollees, the administration urged a swift appeal. The D.C. Circuit granted this request. The government’s opening brief is due on May 31; the plaintiffs will file their opening brief on July 15. Final briefs will be due August 8. Oral argument has not yet been scheduled.

Short-Term Plans

Litigation continues over a separate final rule that expanded access to short-term plans. In September 2018, a coalition of consumer advocates and safety-net health plans sued over the new rule, arguing that it is contrary to Congress’s intent in adopting the ACA and should be invalidated. In November 2018, the plaintiffs withdrew their request for a preliminary injunction, and the case proceeded to the merits. The parties traded briefs throughout February and March, and amicus briefs were filed in support of the plaintiffs by patient advocates, AARP, and a range of medical associations.

Judge Richard J. Leon of federal district court in D.C. held oral argument on May 21. Media reports suggest that Judge Leon expressed continued skepticism of the plaintiffs’ arguments and whether (and the degree to which) they are harmed by the final rule. The court questioned enrollment data presented by the safety net health insurers and suggested that more time is needed to assess the impact of the new rule. Judge Leon also focused on why Congress had not acted to curb enrollment in short-term plans after the ACA if they were so harmful. He hopes to issue his decision this summer.