Recent Federal Ruling Regarding Cost-Sharing Reduction Reimbursements

Health insurance providers recently won a number of cases on summary judgement against the federal government regarding cost-sharing reduction reimbursements. The Court of Federal Claims in four recent cases ruled that health insurance providers were entitled to recover unpaid cost-sharing reduction reimbursements from the government.

The federal government argued that neither the Affordable Care Act, nor any of the regulations created to implement the legislation, contemplated such reimbursements and that, further, Article I of the Constitution states that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” (U.S. Const. Art. I, § 9, cl. 7). The court ruled, however, that although Congress failed to appropriate funds, this oversight did not remove the government’s obligation to reimburse the health insurance companies as appropriate.

Four Federal Victories

In Common Ground Healthcare Cooperative v. U.S., (2019, Ct Fed Cl) 123 AFTR 2d ¶2019-438, the judge ruled that there was a clear requirement for the government to pay cost-sharing reductions to health insurance providers. Specifically, the judge wrote that the mandate to do so came from the statutory provision that states that “the Secretary [of HHS] shall make periodic and timely payments’ to insurers ‘to the value of the reductions’ made by the insurers.”

Similarly in, Community Health Choice, Inc. v. U.S., (2019, Ct Fed Cl) 123 AFTR 2d ¶2019-437 and Maine Community Health Options v. U.S. (2019, Ct Fed Cl) No. 17-2057C, the same judge dismissed the idea of “silver loading” (the practice of inflating the cost of benchmark plans) as an action that lends credence to the idea that the legislature “did not intend to provide a statutory damages remedy for the government’s failure to make the cost sharing reduction payments.”

“Defendant does not identify any statutory provision permitting the government to use premium tax credit payments to offset its cost sharing reduction payment obligation (even if insurers intentionally increased premiums to obtain larger premium tax credit payments to make up for lost cost sharing reduction payments),” stated the judge in Common Ground.

Local Initiative Health Authority for L.A. County v. U.S. (2019, Ct Fed Cl) No. 17-1542C, meanwhile, was argued in front of a different judge, who also ruled that the government was required to reimburse cost-sharing reductions. His logic was more in line with the concept of a breach of contract. The government “violated the express terms of the ACA and implementing regulations which require full, advanced CSR reimbursement payments.”

On-Going Success?

With the success these four health insurers have had in challenging the federal government and winning rulings, other health plans are considering making similar moves. It is suspected that the government will continue to fight these lawsuits.

Lawsuits such as these four, and many others winding their way through the litigation process, can have a profound impact on the costs and administration of healthcare plans. The team of benefits attorneys at Hall Benefits pays close attention to the outcome of different cases, the logic the judges use in their rulings, and the impact of those rulings on governmental regulatory bodies. We use this information to help our clients make informed decisions when adding, changing, and managing their benefit plans. Give us a call 678-439-6236 today or visit the Hall Benefits Law website to learn more.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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