A three-judge panel of the U.S. Court of Appeals for the Federal Circuit on Thursday voiced concern that insurers could profit from recouping cost-sharing reduction payments mandated by the Affordable Care Act that the Trump administration stopped paying in October 2017.
During oral arguments, the U.S. Justice Department argued that insurers received increased subsidies when they raised premiums, which more than compensated for their losses from the CSR payments. Forcing the government to repay those funds, which could allow about 100 insurers to recoup $1.6 billion, may be a windfall for the companies. The point sparked concern from the judges.
"If insurers have already been made whole, then why should they recover an additional amount?" Circuit Judge Timothy Dyk asked.
Similarly, Circuit Judge William Bryson questioned whether insurers could get double recovery by recouping the CSR payments.
Justice Department attorney Alisa Klein said the federal government saw a net increase in costs due to what she described as a "hydraulic relationship" between the subsidies and CSR payments. More enrollees were eligible for the premium subsidies than for cost-sharing reduction payments.
The panel's decision on four cases brought by South Dakota-based Sanford Health Plan, Montana Health Co-op, Texas-based Community Health Choice and Maine Community Health Options could decide the fate of several pending cases on the same issue, including a class-action lawsuit.
Lawyers for insurers during Thursday's oral arguments said that the cost-sharing payments and premium subsidies are separate, unrelated issues and the government should not be able to use insurers' strategy to compensate for their losses against them.
"There is no support to find a relationship" between the two payments, said Faegre Baker Daniels attorney William Roberts, who argued on behalf of Community Health Choice.
Judges in the U.S. Court of Federal Claims have so far sided with insurers and ruled that their strategies to mitigate losses from CSR payments do not affect their eligibility for repayment.
The appellate judges also showed interest in whether the federal government can be sued for damages if Congress passes a law directing money be paid without appropriating relevant funds. While attorneys had examples for either outcome, the Affordable Care Act did not specify the fate of CSR payments in that situation.
Some specialized investors have shown interest in betting that courts will rule in favor of insurers in CSR cases by offering to pay cash for a share of legal awards if the courts rule in insurers' favor.