A federal appeals court has ruled that the government does owe insurers unpaid cost-sharing reduction payments mandated by the Affordable Care Act (ACA) but in a separate ruling said they cannot receive the entire unpaid amount.
A three-judge panel of the Court of Appeals for the Federal Circuit ruled that the Trump administration violated the health care reform law when it suddenly ceased to make the cost-sharing reduction payments in October 2017. The subsidies were meant to help low-income Americans pay for health insurance coverage but the Department of Health and Human Services said the money had not been appropriated.
The panel of judges said Sanford Health Plan and Montana Health Co-Op are entitled to the full amount of unpaid subsidies for 2017 because they did not raise silver level premiums that year or receive increased tax credits. A lower court determined that Sanford Health Plan is owed $360,000 and Montana Health Coop was owed more than $1.2 million.
The decision was based on a recent Supreme Court ruling in favor of insurers over the cost of risk corridor payments, which were set up under the ACA to help insurers recover some losses for covering a high number of sick and expensive enrollees during the first three years of the program. "We see no sufficient basis for reaching a different conclusion from the conclusion the Supreme Court drew for the Risk Corridor provision at issue in Maine Community," they wrote.
However, in a separate but related ruling, the same court limited the amount that the government owes insurers for 2018 because the judges said payers were able to silver-load or raise premiums to make up for the loss of subsidies and receive additional premium tax credits.
“The complexity of the process cannot obscure the underlying economic reality 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 ruling said, adding later, "…[T]he government is not urging that [the] plaintiffs’ damages should be reduced merely because [the] plaintiffs passed on their cost-sharing reduction expenses to customers. The crucial point is that [the] plaintiffs passed these expenses on to the government itself, which by virtue of the ACA’s structure is paying the cost-sharing reduction expenses in the form of higher premium tax credits.”
The judges remanded the case to the lower court to determine the amount of premium increases owed (and the resultant premium tax credits), a “fact-intensive task” that may require new summary judgement motions or a trial.