The U.S. House of Representatives Committee on Energy and Commerce (Committee), which oversees the Department of Health and Human Services (HHS), recently sent a strong letter to HHS Secretary Sylvia Matthews Burwell after the Committee heard testimony from Andy Slavitt, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS), regarding the Affordable Care Act’s (ACA’s) Risk Corridors program.

The Committee’s action followed the recent announcement by CMS that the agency is open to settlement talks to resolve lawsuits filed by insurers for risk corridors payments.  The Committee wants HHS to answer questions regarding tapping the Judgment Fund, a fund set up to pay monetary claims against the federal government, to make risk corridors payments.

Following the hearing, the Republican members of the Committee have requested documents and responses to questions about CMS’s plans to settle the lawsuits.  The Committee emphasized that “on two occasions Congress passed – and the President signed – appropriations provisions restricting the funds available for payments to insurers participating in the program, so that no federal funds would be made available to make additional payments.”

The Committee wants HHS to explain how it can square inconsistencies it sees in the operation of the Risk Corridors program.  The Committee notes that Congress was told the program would be implemented in a budget neutral fashion.  However, CMS told insurers that they would receive 100 percent of the amounts they claimed and that the federal government is obligated to pay the full amounts.  Nevertheless, CMS paid only 12.6 percent of claimed amounts for 2014 and has acknowledged that it is unlikely that the program will yield enough funds to pay the insurers the full amounts claimed for the three-year program.  The Committee questions how CMS can now settle the lawsuits filed to recover the full amounts claimed.

The Committee questions are sparked by CMS’s announcement that:

We know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date. As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States. However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time.

The Committee wants CMS to explain how it intends to pay risk corridors settlements. The Representatives are concerned that taxpayer dollars from the Judgment Fund will be used to pay settlements when, in the Representatives’ view, Congress intended that no taxpayer dollars whatsoever should be used to fund risk corridors.  The Committee wants to know if CMS and the Department of Justice think the Judgment Fund can be used to settle risk corridors claims.

It has been reported that approximately 175 insurers are owed funds for risk corridors claims for 2014.  The claims for 2015 have not yet been finalized and the program continues through 2016.

How any settlement of risk corridors claims with CMS would be structured raise several questions:

  • Would the settlements be limited to those insurers that filed lawsuits?
  • Would the settlements also provide for payments for insurers that did not sue and would the Judgment Fund be available for such payments?
  • Can the class action suit filed by Health Republic Insurance Company, the Oregon CO-OP, in February of this year provide a platform for a global settlement with all Qualified Health Plans owed amounts under the risk corridors program?
  • What was CMS alluding to when it said that the Department of Justice would vigorously defend claims for risk corridors payments. (That question may have been answered at least in part in Motions to Dismiss filed in risk corridors cases and will be discussed in a follow-up to this post.)

Whatever happens, it is a good bet that we will see continue to see Congressional scrutiny over any settlement involving payment of risk corridors claims with funds not collected within the program.

A copy of the House Committee letter is attached.

EC Letter to HHS on Risk Corridors – Sept 2016


Since the first cases were filed earlier this year, we have been following nationwide litigation seeking full risk corridors payments to qualified health plans (QHPs) providing coverage on the Affordable Care Act (ACA) exchanges.

Most recently, in a bulletin dated September 9, 2016, the federal Department of Health and Human Services (HHS) – through its Centers for Medicare and Medicaid Services (CMS) – has announced that it is open to discussing resolution of those claims. The bulletin also suggests a process through litigation that could allow other QHPs to seek recovery of amounts they are owed in risk corridors payments. The bulletin could open another front in the political battle over the ACA that has ebbed and flowed since 2010.

The risk corridors program is one of three programs (collectively referred to as the 3Rs) designed to stabilize the health insurance market impacted by the implementation of the ACA. The risk corridors program is designed to limit gains and losses in the first three years of the health insurance or exchanges; the basic idea is to collect funds from insurers whose total claims fall below certain target amounts and pay insurers that have experienced higher than expected claims that exceed target amounts.

For 2014, insurers with results below the claims threshold were required to pay approximately $362 million in risk corridors charges. Insurers with higher claims were entitled to approximately $2.87 billion in risk corridors payments. Congress did not appropriate funds to make up the shortfall. Further, in budget bills Congress prohibited the use of other funds available to HHS for risk corridors payments. As a result, CMS only paid approximately 12.6% of the risk corridors payments owed for 2014, stating that it intends to make-up the shortfall with risk corridors funds collected in subsequent years and that it will work with Congress to fully fund the program.

Seeking to recover amounts they are owed, some insurers have sued HHS, arguing that the ACA requires that they be paid in full. HHS does not dispute that the ACA requires full risk corridors payments, but has argued the lawsuits are premature because the full extent of gains and losses cannot be known until the end of the three-year program.

In its September 9th bulletin, CMS announced that preliminary information suggests that risk corridors collections in 2015 will again not cover amounts owed to insurers under the risk corridors program. The agency reported that 2015 risk corridors collections will be applied to make up the 2014 shortfall, but will not fully cover those obligations or allow payment of any of the 2015 obligations at this time.

In an unusual statement, HHS acknowledged the pending risk corridors litigation and invited settlement discussions, writing:

“We know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date. As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States. However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time.”

It is noteworthy that a different source of federal funds, the Judgment Fund, may be available to pay settlements in the risk corridors litigation. The Judgment Fund is a permanent appropriation available to pay judicially and administratively ordered monetary awards against the United States.

The bulletin has raised questions regarding the reasoning and intent behind the statements regarding settlement of the litigation. HHS may believe that it has a weak legal position and is pragmatically trying to resolve the cases in a manner as favorable to the government as possible. Other observers see this as an end-run around the federal budget process. Still others see it as a creative step to help support the viability of the insurance exchanges. Because HHS acknowledges the validity of the obligations and is charged with implementing the ACA, this last view is not an unreasonable interpretation. In any event, if the Judgment Fund can provide a source of funds for risk corridors payments, other similarly situated insurers will likely consider filing their own suits to recover amounts they are owed.

The HHS September 9, 2016, bulletin regarding Risk Corridors Payments for 2015 can be found here:

Legal challenges to controversial provisions in the Affordable Care Act (ACA) continue to work their way though the courts.  In a follow-on to the Supreme Court’s decisions in Burwell v. Hobby Lobby and Zubik v. Burwell (cases addressing how the ACA’s contraceptive coverage mandate applies to companies and religious organizations holding religious objections to certain forms of contraception) a secular pro-life group, Real Alternatives, Inc., has sued the federal government challenging the requirement that the company provide contraceptive coverage to its employees through its health plan.

Real Alternatives claims that requiring the coverage violates the Equal Protection clause of the U.S. Constitution and the federal Administrative Procedures Act (APA).  The group filed an appeal with the U.S. Court of Appeals for the Third Circuit from a federal district court decision denying the claim that the group should not have to provide contraceptive coverage.

The group argues that since it shares the same views on contraceptive coverage as religious groups exempt from the mandate, the exemption cannot be withheld from non-religious groups.  In addition, the group argues that it is irrational and unconstitutional for the government to refuse to extend the same exemption religious groups have to groups opposed to contraceptive coverage for ideological reasons.

Interestingly, the group contends that equal protection rights are denied because secular groups with ideological objections to contraceptive coverage deserve the same protections afforded to religious employers with similar objections.  The APA is violated because the requirement is “irrational and capricious” according to the group.

The group asserts that the basis for the exemption provided to religious organizations is not the religious character of the organizations, rather it is that the women employed by religious organizations most likely do not want the coverage.  That same rationale would apply to employees of Real Alternatives.  When a group and its employees do not want contraceptive coverage to be included, such coverage should not be required.

The group also claims the coverage requirement violates the Religious Freedom Restoration Act because the government has not shown that the mandate advances a compelling governmental interest.  Since the use of certain contraceptives violates the religious beliefs of Real Alternative’s employees, the mandate that the plan include such coverage imposes a substantial burden on the exercise of their religious beliefs.  The government allows an exception for religious employers and it should be able to accommodate the beliefs of the Real Alternative employees and offer the same exception to employees of secular employers with similar objections to the coverage.

The federal government has not yet filed its response to the appeal.  The government is likely to agree with the lower court judge that allowing an exemption in this case could lead down a path to giving exemptions to those with moral objections to any laws.  The judge noted in his opinion that religious organizations do get special protections that are not available to secular organizations.  He also pointed out that the mandate does not require the employees to modify their behavior in a manner contrary to their beliefs.

It is significant that a judge in a district court in D.C. came to a contrary conclusion, ruling that a secular, anti-abortion group can be exempt.  In the event decisions of the Courts of Appeals considering similar challenges are inconsistent or if the Supreme Court decides to take this issue on, we may see another ACA case at the high court.

We will continue to follow these cases as they proceed.

On August 12, 2016, the federal Centers for Medicare and Medicaid Services (CMS) issued both a report delivering a message of optimism regarding the healthcare Marketplaces (or exchanges) and posted a blog written by the exchange CEO in which more regulatory flexibility was promised.  All this against the backdrop of continuing, expanding, nationwide litigation over the future of the 3Rs program, controversy over rate filings and insurers deciding whether or not they will offer coverage on the exchanges will make 2017 a critical and interesting year for the ACA.

CMS Marketplace Report 

CMS released a report presenting three positive findings regarding the evolution of costs in the Affordable Care Act (ACA) individual market from 2014 to 2015.

  1. Per-enrollee costs in the ACA individual market were essentially unchanged between 2014 and 2015.
  2. Available evidence indicates that the slow ACA individual market cost growth resulted at least in part from a broader, healthier risk pool.
  3. Nearly all states saw continued growth in Marketplace enrollment in 2016, suggesting continued risk pool improvement.

Modifications to Risk Adjustment Program

In a companion post to the CMS blog, Kevin Counihan (CEO of the federal Health Insurance Marketplace) announced future rulemaking to modify the ACA’ s permanent Risk Adjustment program.   Mr. Counihan stated that CMS will “propose modifying the risk adjustment program to absorb some of the cost for claims above a certain threshold (e.g., $2 million), funded by a small payment from all issuers.”

The CMS cost findings from 2014 and 2015 appear positive.  But, in any case, questions remain as to whether those findings are indicative of trends for 2017 and beyond.  As insurers became more familiar with their risk pools, individual premiums increased by (on average) about 5% in 2016.  And, with the temporary reinsurance element of the 3Rs program coming to an end in 2017, experts and actuaries expect individual premiums to increase (on average) by about another 10% in 2017.  Some insurers are asking for even larger increases pointing to the high cost of covering insureds with expensive to treat conditions.  Other factors impacting rates include churn from insureds changing carriers or even dropping coverage after receiving expensive healthcare.  Even a relatively small number of individuals with serious health conditions can have a significant impact on an insurer’s cost of coverage.

In response, CMS promises a future modification of the permanent Risk Adjustment element of the 3Rs program “to better adjust for the highest-cost enrollees and their actuarial risk, which would achieve some of the same risk-sharing benefits as the reinsurance program.”

Mr. Counihan also states that CMS is “exploring options” for other rulemaking aspects regarding the Risk Adjustment program, which may be a response to the recent lawsuit filed against CMS by Evergreen Health Cooperative, a Maryland Consumer Operated and Oriented Plan (CO-OP).  Risk Adjustment is a redistributive zero-sum game, with the federal government administering payments from plans with lower-cost members to plans with higher-cost members.  However, as Evergreen and others have argued, the Risk Adjustment formula favors big, established plans with more claims experience by not accounting for the effects of certain claims data and not including prescription drug data.  As a result, CMS may be exploring ways to both stabilize premiums for individuals and level the regulatory playing field for different types of insurers.

Mr. Counihan closes his post by stating that the CMS “door is always open to new ideas that help spread the risk of providing coverage for people with significant health care needs.”  Such ideas are certainly needed as nationwide 3Rs litigation continues, premiums increase and insurers reconsider participation on the exchanges.

The CMS report can be found here:

The companion blog post from Mr. Counihan can be found here:

President Obama recently published an article in the Journal of the American Medical Association, JAMA, discussing his signature legislative achievement, the Affordable Care Act (ACA). The President considers ACA’s comprehensive reforms to be the most important healthcare legislation enacted in the United States since the creation of Medicare and Medicaid in 1965.

As he prepares to leave office, the President reviews the factors influencing his decision to pursue health reform, summarizes data on the law’s impacts, recommends further action to improve the healthcare system, and discusses public policy lessons learned.

The President credits the ACA as having helped to improve the US healthcare system. He points out that the uninsured rate has declined by 43%, from 16.0% in 2010 to 9.1% in 2015. He also credits the law for improved access to care, providing financial security through reduction in debts sent to collection, and better population health. The President also points to benefits from trends in provider compensation, noting that an estimated 30% of traditional Medicare payments now flow through alternative payment models.

Noting this progress, the President suggests ways that remain to further improve the healthcare system. He recommends continuing to implement the programs and policies in the law, such as the health insurance marketplaces, delivery system reform, and providing and increasing federal financial assistance for marketplace enrollees.

While prescription drug cost reform was not a focus of the ACA, the President believes that cost increases must be addressed. He recommends that Congress require more transparency around manufacturers’ actual production and development costs, increase rebates manufacturers are required to pay for drugs prescribed to certain Medicare and Medicaid beneficiaries, and give the federal government the authority to negotiate prices for certain high-priced drugs.

Significantly, President Obama also suggests introducing a public plan option in areas that lack competition in the individual insurance market. The public option was considered but not included in the ACA in favor of Consumer Operated and Oriented Plans, or CO-OPs. As we have addressed in this Blog, the CO-OP program has been unsuccessful in many of the states where CO-OPs were established. However, the President believes that costs could be better controlled by public plans operating alongside private insurers in areas of the country where competition is limited.

While recognizing that the law can be improved and supporting efforts to do so, President Obama notes much time has been absorbed by the more than 60 attempts to repeal parts of all of the ACA. Hyperpartisanship and the financial power of special interests are viewed as obstacles to progress. However, he concludes with an optimistic assessment that the ACA demonstrates that positive change addressing complex challenges is achievable.

President Obama’s article can be read in its entirety at the following link:


Land of Lincoln Mutual Health Insurance Company, one of the Consumer Operated and Oriented Plans (CO-OPs) set up under the Affordable Care Act (ACA) and intended to provide an alternative to traditional insurers and foster competition in the state marketplaces, is facing difficult financial circumstances. The company, the Illinois insurance regulator and the federal government have all taken steps recently to keep the company operating.

Land of Lincoln has joined at least six other of the Qualified Health Plans (QHPs) that offer health insurance coverage on the ACA healthcare exchanges by filing a lawsuit against the federal government seeking amounts owed under the ACA Risk Corridors program. As explained in our prior posts, Risk Corridors is one of three programs established under the ACA to provide market stability in the first few years of the exchanges. Known as the 3Rs, the Risk Corridors, Risk Adjustment and Reinsurance programs, were designed to protect insurers from the losses anticipated as a result of the uncertainty inherent in the expanded health insurance market.

Like most of the other suits we have blogged about previously, Land of Lincoln filed its case in the U.S. Court of Federal Claims, a court of limited jurisdiction that is authorized to hear money claims against the federal government. In its lawsuit, Land of Lincoln is asking the court to award approximately $70 million the company claims it is owed under the Risk Corridors program.

Most recently, the Illinois Department of Insurance has also taken action to keep Land of Lincoln afloat by ordering the company not to make Risk Adjustment payments to the federal government. Under the Risk Adjustment program, insurers that have enrolled healthier and therefore less expensive to cover enrollees pay into the program while insurers covering less healthy, more expensive to cover enrollees receive payments from the program. In a June 30, 2016 letter to CMS describing an Agreed Corrective Order, the Illinois Acting Director of Insurance informed CMS that she ordered Land of Lincoln not to pay the approximately $31.8 million CMS announced Land of Lincoln owes in Risk Adjustment payments for 2015. In a separate Stipulation and Consent Order, the Director ordered Land of Lincoln not to renew small and large group policies and to not write any new business without the Director’s prior written approval.

The federal government has also taken steps intended to help the remaining CO-OPs survive. In May of this year, the Centers for Medicare & Medicaid Services issued a regulation allowing CO-OPs to seek funding from private investors. That and other rule changes are intended to support the financial viability of the CO-OPs and give them the flexibility of other private insurers. While Land of Lincoln is reported to have sought private funding, reports are that its efforts to obtain such funding have so far been unsuccessful.

The Illinois Department’s letter to CMS, including the Agreed Corrective Order and the Stipulation and Consent Order, can be viewed at the following link:

To update our recent post, “Exchange Players File ACA Lawsuits Against CMS,” two new suits were filed by Qualified Health Plan (QHP) issuers selling coverage on the Affordable Care Act (ACA) exchanges. As described in our earlier post, for 2014, QHP issuers paid a total of $362 million in risk corridors charges to the government and asked for payments from the program of $2.87 billion. As a result, the Department of Health and Human Services (HHS) only paid 12.6 percent of the amounts owed. Regarding the remaining two years of the three-year risk corridors program, HHS told issuers that it would not know the total loss or gain for the program until the fall of 2017, and that in the event of a shortfall HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations.

The two new lawsuits are described below:

1. Blue Cross Blue Shield of North Carolina

In one case, Blue Cross Blue Shield of North Carolina (BCBSNC) filed suit in the U.S. Court of Federal Claims seeking payments under the risk corridors program, one of the three premium rate stabilization programs, known as the 3Rs, created by the ACA.

BCBSNC claims that the federal government’s failure to make full risk corridors payments breaches the QHP contracts between BCBSNC and the federal government and is also a “taking” in violation of the U.S. Constitution. BCBSNC is seeking in excess of $147 million, less the partial payments made by the government, representing the amount of risk corridor payments owed to BCBSNC for 2014. The company is also asking the court to order the government to make full risk corridor payments for 2015 and 2016. The case was brought under the Tucker Act, which provides a cause of action for claims for damages over $10,000 against the United States.

BCBSNC asserts that the promise of financial risk sharing through the risk corridors program was a significant factor in its decision to become a QHP and to participate in the ACA exchanges. The company notes that it had contractually committed to participate in the exchanges when the government announced that it would implement the risk corridors program in a budget neutral, rather than fully funded, manner. The company argues that there are no provisions in the ACA limiting the government’s obligation to make full risk corridor payments owed to QHPs. BCBSNC also refers to statements in which the government, through HHS, acknowledged its obligation to make risk corridor payments. While Congress specifically targeted risk corridors payment obligations in appropriations bills that prohibited the use of federal money to fund risk corridors, the insurer claims that the failure to appropriate funds does not defeat the obligation that is still in the law to make risk corridor payments in full.

2. Moda Health Plan, Inc.

The second case was filed by Moda Health Plan, Inc. (Moda), an insurer operating in the Pacific Northwest and providing coverage in Alaska, Oregon, and Washington. Moda also filed its suit in the U.S. Court of Federal Claims and makes similar allegations. Moda is asking for risk corridors payment of approximately $89 million for its 2014 QHPs and $101 million for its 2015 QHPs. Moda also claims that the government breached its statutory and contractual obligation to make full risk corridors payments by paying out only $11 million of the amount that Moda is owed for 2014 and not paying any of its risk corridors obligations for 2015.

Moda claims that rates for QHP products were set based on the law’s provisions. Moda also points to other policy changes, such as HHS’s extension of its transitional policy, allowing individuals to stay on certain plans without ACA required benefits, as keeping healthier individuals on existing plans and making the QHP risk pool more expensive to cover.

Moda asserts that the failure to pay the full amount of the risk corridors payments has limited Moda’s ability to sell ACA plans in Alaska and Oregon. Regulators in those states will only allow Moda Health to continue to operate if it raises private capital to replace the loss the of risk corridors payments due in 2014 and 2015. Moda announced it has raised sufficient capital to continue to operate in Oregon for 2016 and 2017, but it will not be offering individual coverage in Alaska for 2017, where it was one of only two insurers offering coverage.

We will continue to update our posts following developments in these cases and additional lawsuits that may be filed by other insurers.

The Affordable Care Act (ACA) has been the impetus for extensive litigation since it was enacted in 2010. The Supreme Court has heard oral argument in four cases, and scores of other cases have been filed in the lower courts. Many of the challenges have come from individuals and groups ideologically or otherwise opposed to the controversial law, seeking to have it fully repealed or at least significantly narrowed. Some recent lawsuits, however, have been filed by the issuers of the qualified health plans (QHPs) that were fully on board with the ACA by offering individual and group coverage on the health insurance exchanges.

The first of the cases was filed by an insolvent Consumer Operated and Oriented Plan, or CO-OP, from Oregon, Health Republic Insurance Company of Oregon (HRIO) on February 24, 2016, in the U.S. Court of Federal Claims. The case, a putative class action, alleges that the government had no right to reduce Risk Corridors program payments owed to QHPs authorized to sell insurance on the federal exchanges. The putative class in HRIO’s suit would include all issuers who did not receive the full amounts they were owed under the Risk Corridors program, which HRIO estimates as totaling $5 billion.

The Risk Corridors program is one of the so-called 3Rs programs established to provide market stability in the first few years of the exchanges. Risk Corridors, along with the Risk Adjustment and Reinsurance programs, was designed to protect insurers from oversized losses anticipated as a result of the uncertainty inherent in the expanded health insurance market.

The Risk Corridors program is a temporary measure designed to limit QHPs’ gains and losses in the first three years of the exchanges. The program shifts money from QHPs with lower than expected losses to QHPs with losses exceeding certain benchmarks. Because QHP losses overall were larger than the amounts paid into the program by profitable QHPs and because Congress did not appropriate additional funds to cover the QHPs’ losses, the federal agency responsible for administering the 3Rs programs, the Centers for Medicare and Medicaid Services (CMS) announced that it would only pay 12.6% of the $2.87 billion owed QHPs for 2014. CMS said that it would make-up the shortfall in future years as funds become available.

Some less well-financed QHPs, including HRIO, were depending on receiving millions of dollars more from the 3Rs programs than they actually received and needed those funds for their continued viability. HRIO, in its lawsuit, claims that the money could have allowed it to continue operating. HRIO’s efforts to collect Risk Corridors funds is to help it proceed through its liquidation and pay its creditors, including healthcare providers such as physicians, hospitals and other health professionals.

A second lawsuit was filed by CoOportunity Health, another ACA CO-OP that operated in Iowa and Nebraska, before becoming insolvent. The Iowa insurance commissioner handling the CoOpportunity liquidation filed a lawsuit against the federal government in federal district court on May 3, 2016, alleging that the government is improperly withholding approximately $60 million in payments owed to the CO-OP, $20 million for Iowa and $40 million for Nebraska, as well as an additional $130 million in Risk Corridors payments. The Iowa/Nebraska suit alleges that by withholding amounts the government owes to CoOpportunity, CMS is improperly seeking to get a preferred position with regard to other creditors of the failed company. CoOpportunity argues that the government’s actions in withholding payment owed the CO-OP are in violation of state and federal law.

The most recent suit was filed on May 17, 2016, by Highmark, Inc., which owns and is affiliated with several Blue Cross and Blue Shield-related entities. Highmark filed its lawsuit in the U.S. Court of Federal Claims, asserting that it is owed nearly $223 million in Risk Corridors payments for 2014, and will be owed an additional $500 million in such payments for 2015. Despite heavy losses, Highmark has said it is committed to staying in the ACA market and believes its lawsuit is necessary to require the government to honor its obligations.

With three suits filed already in 2016, it remains to be seen how these cases will be handled and whether similar lawsuits will follow. The government has yet to file its formal responses to the complaints so how the government will respond is not yet known.

We will continue to track these cases, so look for updates on our blog.


The U.S. Supreme Court issued an unusual decision in the latest legal challenge to the Affordable Care Act (ACA) to reach the high court. In Zubik v. Burwell, the Court consolidated appeals filed by religious nonprofit organizations that object to the “accommodation” process providing an exemption from ACA’s contraceptive coverage mandate. The nonprofits believe the process the Department of Health and Human Services (HHS) established for the organizations to take advantage of the exemption violates the Religious Freedom Restoration Act (RFRA).

The Court heard oral argument on March 23, 2016, and from the Justices’ questions it appeared the Court was evenly split 4-4 on whether the accommodation violates RFRA. Then, less than a week later, on March 29, 2016, in an Order indicating that a majority of the Justices could not agree on an outcome, the Court ordered the parties to file supplemental briefs asking them to look for compromise and to address how contraceptive coverage could be obtained through the insurance companies the petitioners use for their healthcare coverage without involving the nonprofits.

On May 16, 2016, the Court issued a per curiam opinion (a unanimous ruling of the Court) vacating the decisions of the Courts of Appeals and sending the cases back to those courts for further proceedings. The Court did not rule on the issues it had taken the case to decide, that is: “whether petitioners’ religious exercise has been substantially burdened, whether the Government has a compelling interest, or whether the current regulations are the least restrictive means of serving that interest.” Apparently, even with the supplemental briefing, a majority of Justices could not reach agreement on those issues. The Court may have decided to vacate the lower court decisions, instead of leaving them in place, because there is a split in the circuits on this issue, with the Court of Appeals for the Eighth Circuit (in Dordt College v. Burwell), ruling that the accommodation does violate RFRA. Had the Court merely affirmed the lower court decisions with a per curiam order, as is typical when there is no majority support for a decision, there would have been inconsistent requirements in different states.

The Court’s decision directed the Courts of Appeals to give the parties the opportunity to arrive at a compromise that accommodates the petitioners’ religious beliefs, and ensures that women covered by the petitioners’ health plans “receive full and equal health coverage, including contraceptive coverage.” Perhaps recognizing that in its current composition it is not able to decide these issues, the Court indicated that it is in no hurry to see these cases return to the Supreme Court, stating that it “anticipate[s] that the Courts of Appeals will allow the parties sufficient time to resolve any outstanding issues between them.” The Supreme Court was explicit in not ruling on the RFRA issues presented in Zubik, so the lower courts have no additional guidance regarding RFRA to apply to the cases that have been remanded. In a concurrence, Justice Sotomayor, joined by Justice Ginsburg, warned that lower courts should “not construe either today’s per curiam or our order of March 29, 2016, as signals of where this Court stands.” Justice Sotomayor also emphasized that the lower courts should, in considering the new submissions of the parties, feel free to rule on the merits of the cases and either uphold the accommodation if they believe it is consistent with RFRA or reject it if they do not. If the lower courts were satisfied that the government’s accommodation is consistent with RFRA, they are likely to find that any additional accommodation agreed to by the parties is consistent with RFRA as well. On the other hand, the Eighth Circuit may reach the same conclusion it reached in Dordt College, that the accommodation violates RFRA. This may result in a continuing split in the circuit courts so the Supreme Court may be asked to resolve the issue once again.

Recognizing the probability of continued litigation, the government asked the Court to issue a ruling that resolves the RFRA issues with some finality. The Court’s opinion clearly does not do that. Thus, until the limits of RFRA are clarified, and for so long as the controversies regarding ACA and its implementation continue, we are likely to see continued challenges to the coverage and other requirements of this transformational law.

In a suit brought by the U.S. House of Representatives challenging the administration’s implementation of the Affordable Care Act (ACA), a federal district court for the District of Columbia ruled in a major decision that the administration exceeded its authority, and in doing so violated the Constitution, by funding ACA’s cost-sharing reductions program with funds that had not been specifically appropriated for that purpose by Congress.  The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes up to 250% of the federal poverty line (FPL), who enroll in “Silver” plans through the healthcare exchanges.

The judge, Rosemary M. Collyer, enjoined the administration from making any further reimbursements under the cost-sharing reduction provisions of the ACA.  The decision is not expected to have an immediate impact as the judge stayed the injunction pending appeal, and the administration has announced that it will appeal.  Further, the court did not suggest that the injunction would be applied retroactively, so those health insurance issuers that have participated on the exchanges to date will not be required to repay amounts previously received under Section 1402.

That appeal will be to the United States Court of Appeals for the DC Circuit.  If the case tracks other ACA challenges, based on the composition of the DC Circuit, there is a significant possibility that Judge Collyer’s decision will be overturned.  The next level of appeal is to the U.S. Supreme Court, where once again, a major case involving a challenge to the ACA could be heard.  When and whether the Supreme Court would hear the case is uncertain.  When and by whom the current vacancy on the Supreme Court is filled, could impact the disposition of the case.

We will continue to follow developments in this important case, so check our blog for updates.

A more detailed summary of Judge Collyer’s analysis is below:


U.S. House of Representatives v. Burwell was filed by the House of Representatives (House) in late 2014, alleging that the administration usurped the House’s legislative authority and caused the House to suffer institutional harm.  The House asked the court to bar the federal government from issuing cost-sharing subsidies unless and until Congress appropriates the funds.  As it relates to the cost sharing subsidies, the court addressed two legal issues in separate decisions.

Initially, the administration asked the court to dismiss the case for lack of standing.  It termed the dispute a political fight that should not be resolved by the judiciary.  The court, after noting that the case was unprecedented, ruled in favor of the House, holding that it had standing to pursue its constitutional claims.  The court then denied the administration’s request to seek an immediate appeal on the standing issue.  The case proceeded with consideration of the parties’ motions for summary judgment.

The District Court Decision

Judge Collyer’s analysis begins with the observation that Congress has sole authority to authorize the appropriation and expenditure of public monies, thus tying the Executive Branch to the Legislative Branch via purse strings.

     a.  The ACA Subsidies

Section 1401 of the ACA added a new section to the Tax Code providing tax credits and refunds for individuals and families with household incomes between 100% and 400% of FPL to help defray the cost of their insurance premiums.

Section 1402 of the ACA establishes the cost sharing reduction program and requires health plan issuers to reduce cost sharing (co-insurance and deductibles) for individuals and families with incomes between 100% and 250% of FPL who purchase the “Silver” level plans offered on the exchanges.  Issuers are to be reimbursed by the government for the reductions provided through the Section 1402 subsidies.

While Congress passed a permanent appropriation of the funds needed for the premium tax credits under Section 1401, it has not specifically appropriated funds to pay for the cost sharing reductions program under Section 1402.

The administration argued that Sections 1401 and 1402 must work together.  But the relevant appropriation statute, 31 U.S.C. § 1324, only appropriates monies for Section 1401 and not for Section 1402.  The court was not swayed by the administration’s statutory construction arguments looking at the fabric of the ACA as a whole, relying instead on the plain language in the law’s text.

In support of its contextual reading, the administration cited the Supreme Court’s decision in King v. Burwell, upholding the premium tax credit subsidies on the federal exchanges.  In that case, the Court described the ACA as a “closely intertwined” system of subsidies.  The administration argued that language that appears unambiguous out of context may have a different meaning when considering the statute as a whole.  The court distinguished King v. Burwell because in that case the ACA could not function if the phrase was interpreted literally so it “had to saved from itself.”  The court determined that a plain text reading of the statute in the case brought by the House would not impede operation of the ACA.

     b.  Unintended consequences

The administration additionally argued that a “cascading series of nonsensical and undesirable results” would occur if the House’s argument prevailed.  For example, insurers would still be required to reduce cost-sharing to qualifying customers and if they were not reimbursed, the result would be higher premiums for all.  The court responded that higher premiums would be mitigated by increased tax credit subsidies, although the increase in tax credits would end up costing the government more than the cost-sharing subsidies.

The only question according to the court was whether it would be “nonsensical” or “absurd” for Congress to authorize a program permanently in 2010 but not appropriate for it permanently at the same time.  Referring to the ACA Risk Corridors program as an example, the court said that Congress “can authorize a program, mandate that payments be made, and yet fail to appropriate the necessary funds.”  While negative consequences could result, it was Congress’s prerogative to structure the law and the court could not override Congress by rewriting the provision.

     c.  ACA’s Legislative History

The administration also pointed out that since the cost-sharing provision was scored by the Congressional Budget Office (CBO) as “direct spending,” the funds must be considered appropriated.  Individual Representatives and Senators also presumed the provision would be funded.  The court was not persuaded, noting that the CBO is required to assume programs will be funded and Congress’ expectations regarding how funds will be spent is dependent on actual appropriations.  The court found persuasive that HHS requested an appropriation for the cost-sharing program in its 2014 budget request.  Not persuasive were statements by Members of Congress considered anecdotal and not evidentiary.  The court also refused to give deference to the administration’s own interpretation of the law as, in its view, the statute is clear.

     d.  Still Standing

Finally, court refused the administration’s request that it reconsider its prior decision that the House has standing to bring its suit.