A federal appeals court ruled on Friday that the Trump administration violated the law when it abruptly stopped paying for subsidies intended to reduce healthcare costs for low-income individuals who buy coverage on the Affordable Care Act exchanges.
In a separate decision also issued Friday, the same court said health insurers should not collect a windfall from the decision. While the U.S. Federal Circuit Court of Appeals said insurers are entitled to the full amount of unpaid cost-sharing reduction subsidies for 2017, the amount owed for 2018 should be reduced because insurers were able to raise premiums to make up for the loss of subsidies.
"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," the opinion in Maine Community Health Options v. United States states.
The Federal Circuit remanded that case to the lower court to figure out the amount by which the insurers' damages should be reduced. It noted that determining the damages will be "a fact-intensive task," and may require new summary judgment motions or a trial.
The ACA established cost-sharing reduction subsidies for individuals whose incomes were below 250% of the federal poverty level. The Trump administration ended those subsidies in late 2017, claiming that it lacked an appropriation. But the law still required insurers to reduce copayments and other cost-sharing for eligible individuals.
Insurers in 2018 increased premiums for silver plans on the exchanges to make up for the lack of CSR payments. Because of the way ACA premium tax credits are structured, the federal government ended up paying substantially higher premium tax credits as a result.
Numerous health insurers have sued the federal government over the past few years to recoup unpaid subsidies. Several more filed lawsuits in recent weeks in the wake of an insurer victory in a U.S. Supreme Court challenge over another ACA program known as risk-corridors. That victory suggested insurers may also prevail in their efforts to recoup cost-sharing reduction subsidies.
In one of the decisions issued Friday, the judges affirmed a lower-court decision that a provision of the ACA mandates that the government pay the subsidies. That obligation exists even though Congress did not specifically appropriate money to make the payments, according to the opinion.
The judges rejected the government's argument that it shouldn't have to reimburse insurers for the full amount of subsidies in 2017 because insurers offset the loss of the payments by raising silver plan premiums in 2018. In 2017, the insurers had not yet raised premiums and so didn't offset losses for that year.
The Supreme Court decision in the risk-corridor case "makes clear that the cost-sharing reduction reimbursement provision 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 under the Tucker Act," the opinion states.
The consolidated case involving two insurers, Sanford Health Plan v. United States, concerns only the unreimbursed subsidies for the last quarter of 2017. The lower court held that Sanford was owed about $360,000 and Montana Health CO-OP was owed more than $1.2 million.
In the second decision in a consolidated case involving two more insurers, the judges again affirmed that the government is liable to pay the full amount of cost-sharing subsidies for 2017, but they concluded that the repayment of subsidies for 2018 should be treated differently. The government's liabilities should be reduced by the amount of extra premium tax credits insurers received when they hiked premiums after subsidies were cut off, according to the opinion.
The judges acknowledged that "the government is paying at least some of the increased costs that the insurers incurred as a result of the government's failure to make cost-sharing reduction payments."
The lower court was "required to credit the government with such tax credit payments in determining damages," the judges wrote. They remanded the case to the lower court to determine the amount that insurers raised premiums to account for the government's failure to pay cost-sharing subsidies. They noted that some of the premium increases may be caused by other factors.
Lower courts had determined that Maine Community Health Options was owed about $846,000 in unpaid subsidies for 2017 and $18.4 million for 2018. Community Health Choice was owed $11.2 million for 2017 and $60.4 million for 2018.