U.S. Dept. of Health and Human Services

In a brief Order issued on December 5, 2016, in U.S. House of Representatives v. Burwell, the U.S. Court of Appeals for the D.C. Circuit granted the motion filed by the U.S. House of Representatives (House) seeking to put the lawsuit challenging the Affordable Care Act’s (ACA’s) cost-sharing subsidies on hold until the Trump administration takes over.  In granting the stay, the court also directed the parties to file motions to govern further proceedings for the case by February 21, 2017.  The Order was issued by the three judge panel hearing the case, Judges Henderson, Tatel and Srinivasan.  Judge Henderson was appointed by President George W. Bush, Judge Tatel by President Clinton and Judge Srinivasan by President Obama.

As we have discussed in prior posts, the House is asking the court to bar the issuance of cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges. If the lower court decision agreeing with the House position is affirmed, one of the central features of the ACA making insurance and healthcare coverage affordable to millions of Americans would be removed.

In a motion filed after the November election, the House asked the court to put the case on hold to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter.

What lies in store for the ACA is being closely watched.  Few programs have been as controversial, have had such broad impact and great consequence.  The new administration, Congress and the many stakeholders will be debating and seeking to influence future policy directions.  The details of what is broadly described by terms such as repeal, repeal and replace, repeal and delay – will determine the future of healthcare for years to come.

The Department of Justice (DOJ) has filed its response to the motion filed on behalf of the U.S. House of Representatives (House) seeking to put the lawsuit challenging the Affordable Care Act’s (ACA’s) cost-sharing subsidies on hold until the Trump administration takes over. Not surprisingly, the DOJ strongly opposes the House request.

In U.S. House of Representatives v. Burwell, the House is asking the court to bar the Obama administration from issuing cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges. The administration has argued that the House does not have legal standing to bring its suit and in any case, the ACA supports payment of the cost-sharing subsidies. The district court agreed with the House and the administration has appealed the rulings to the Court of Appeals for the D.C. Circuit.

In a motion filed after the November election, the House is asking the court to put the case on hold to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter.

In its response opposing the hold request, the DOJ notes that the monthly subsidy payments have been made since 2014 and Congress has taken no legislative action to restrict the ongoing payments. The DOJ says the House suit is unprecedented and raises separation of powers concerns. According to the DOJ, the case “meddl[es] in the internal affairs of the legislative branch” by allowing one House of Congress to circumvent the legislative process. The DOJ states that if the House wants to eliminate the subsidies it should enact legislation, which would require the House to obtain the agreement of the Senate, present the resulting measure to the President, and to accept responsibility for the results.

The DOJ says that the House is seeking to decide how laws will be executed – but that is the job the constitution assigns to the executive branch. Further, the DOJ argues that the House is asking the court to go beyond the judicial branch’s constitutional authority as well. According to the DOJ, the election did not change these constitutional principles and the incoming administration likely won’t agree that the House should be able to alter the way the executive branch administers federal law.

Beyond the procedural concerns, the DOJ states that the lower court adopted a misguided interpretation that “would thwart the structure of the ACA’s carefully calibrated system of subsidies, severely disrupt the insurance markets, and – perversely – lead to substantially greater federal expenditures.” The DOJ referred to amicus briefs filed by the insurance industry expressing concerns about the dire impact sudden removal of the subsidies could have on the insurance market.

The DOJ points out that the ACA and its subsidy provisions remain the law of the land and requiring the House to file its appellate brief on the agreed upon schedule will not constrain the incoming President, as the House asserts. Denying the motion will simply allow the appeal to proceed in an orderly and timely fashion.

The DOJ did offer a way out for the House to avoid proceeding with the case, stating that the administration has no objection if the House wishes to dismiss the case and if the court vacates the lower court decision that agreed with the House position. With such a resolution being highly unlikely, the House’s request is now teed up for the court to rule on the motion.

We will continue to follow this case so check back for further developments.

A link to the DOJ response is below:

http://premiumtaxcredits.wikispaces.com/file/view/DCC%20Govt%20op%20to%20abeyance%20mo.pdf/600275754/DCC%20Govt%20op%20to%20abeyance%20mo.pdf

Attorneys for the United States House of Representatives (House), in U.S. House of Representatives v. Burwell, the case challenging certain cost-sharing subsidies in the Affordable Care Act (ACA), filed a motion asking the D.C. Circuit Court of Appeals to put a hold on the briefing in the case until after the Trump administration takes office.

As reported in our prior posts, the House filed suit asking the court to bar the federal government from issuing cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges.

The Obama administration has argued that the House does not have legal standing to bring its suit. The administration also argued that the ACA supports payment of the cost-sharing subsidies. After the district ruled that the House had standing to bring the suit and also agreed with the House on the merits of its claim, the Obama administration appealed the rulings on both issues to the Court of Appeals for the D.C. Circuit.

On October 24, 2016, the Obama administration filed its opening brief asking the court to overturn the lower court’s decision. The House’s answer brief is due on December 23rd and the administration’s reply brief, which would complete the briefing of the case, is due on January 19th, the last day full day of the Obama administration.

In its motion filed on November 21st, the House has asked the court to pend the case until February 21st, to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter. The House motion notes that the Obama administration opposes the request for a hold.

The House argues that the court has the authority to manage its docket and stay the proceedings if it chooses to do so. It provides examples of other cases where courts have held proceedings in abeyance when there has been a change in administrations.

The House also says that putting the matter on hold makes sense because there is a high degree of likelihood of a meaningful change in policy in the new administration that could either obviate the need for resolution of the appeal or affect the nature and scope of the issues presented for review. According to the House, “in light of the President-Elect’s stated position, and the potential for resolution of this matter, the requested abeyance will serve to prevent the unnecessary and inefficient expenditure of valuable public resources in all three branches of the federal government that could otherwise result from unnecessary and premature briefing and judicial consideration of this appeal.”

Citing other pressing duties and a limited staff, the House asks that if the court does not hold the matter in abeyance, that it allow the House a 45-day extension of time to file its answer brief. Such an extension would, of course, accomplish the same end sought by the request for abeyance, that is, the opportunity for the next administration and the House to reconsider their positions with regard to the litigation.

The Obama administration’s response to the House motion is due on December 5, 2016. It will be interesting to see how the administration responds. Short-term extensions of time are typically uncontroversial, but in this case, with the possibility of the case being poised for a Court of Appeals decision while the Obama administration is still in office, the stakes of holding the case in abeyance or granting an extension of time are magnified.

Also, while there may be agreement between the incoming administration and the House on the advisability of the subsidies, other issues may come into play in determining the position of the new administration regarding the standing issue addressed in the case. Representatives of the new administration may have a different view than the House regarding the relative powers of the different branches of government.

Furthermore, if the court agreed with the House position, sudden elimination of the subsidies could create chaos in the insurance system, which the new administration and the Republican majority Congress may wish to avoid. On the other hand, a court decision upholding the subsidies would put the House and administration in the difficult political position of either accepting the subsidies, thus alienating ACA opponents, or removing them, and alienating those who rely on the subsidies to afford their healthcare coverage.

The preference of the House and the new administration appears to be to seek a settlement or resolution that avoids having the court resolve these questions and allows the new administration’s plans regarding the ACA to be developed and rollled out in a more controlled fashion.

We will continue to watch developments in this important case.

Readers of this blog may recall that on September 9, 2016, the federal Department of Health and Human Services (HHS) – through its Centers for Medicare and Medicaid Services (CMS) – announced that it is open to discussing resolution of claims made by the Qualified Health Plans (QHPs) providing coverage on the Affordable Care Act (ACA) exchanges seeking payment of amounts owed under the Risk Corridors program. That announcement also said that “[a]s in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States.” In Motions to Dismiss filed in the lawsuits seeking Risk Corridors payments brought by Blue Cross and Blue Shield of North Carolina, Moda Health Plan and Land of Lincoln Health Insurance Company, the Department of Justice (DOJ) has delivered on that promise.

Notably, the arguments in the DOJ’s motions go further than the arguments it has made in the past in other cases, such as the putative class action filed by the Oregon co-op, Health Republic Insurance Company (Health Republic of Oregon), and assert that the government is under no obligation to make the Risk Corridors payments if the program is not funded. The House of Representatives, observing that the DOJ did not file a similar motion to dismiss in the Health Republic of Oregon case, requested that it be permitted to file an amicus brief in that case to bring the arguments in the recent DOJ motions to the court’s attention.

In its recent briefs, the DOJ has reiterated the arguments it has made previously in the Health Republic Oregon case stating that because the three-year payment framework for Risk Corridors has not yet run its course, QHPs have no present right to full payment of their receivables from the program. Even though additional funding in the near future seems improbable, DOJ nevertheless argues that whether sufficient funds will be available to make full payment of claims for any particular benefit year or at some point in the future is unknown. As a result, DOJ asserts the claims cannot be brought at this time.

But, in a significant expansion of the arguments made previously in Risk Corridors litigation, in the motions to dismiss, DOJ also argues that the ACA does not require that risk corridors payments be made in excess of collections from QHPs. According to the DOJ, the program was intended to be self-funding pointing out that the ACA contains no reference to any other source of funds.

The DOJ refers to the appropriations riders that Congress enacted after the ACA’s passage that prohibit HHS from using other sources of money to fund the Risk Corridors program to reinforce its position that liability for Risk Corridors payments is limited to amounts collected under the Risk Corridors program. The DOJ relies on cases where courts have said that provisions enacted in annual appropriations laws can amend money-mandating provisions in previously enacted law, which allows a subsequent law to eliminate or reduce the government’s obligation to pay.

The QHPs have also argued that the government’s failure to make Risk Corridors payments violates the contracts QHPs must sign to offer plans on the exchanges. The DOJ’s response is that the QHP contracts are limited in scope and don’t apply to Risk Corridors payments. They assert that the United States has no contractual obligation to make Risk Corridors payments and that any amounts determined to be owed or due for Risk Corridors arise only as a matter of statute and regulation. As a result, the only recourse for QHPs is through Congress or HHS, not through the courts.

The DOJ also rejects the argument that there is an implied contractual obligation that the government make Risk Corridors payments because the QHP contracts don’t require the payments and insurers such as Moda operating in states with their own exchanges don’t even have QHP agreements with HHS. To arguments that the QHPs are relying on promises and statements made by HHS that the payments will be made, the DOJ says that such promises and statements don’t create a legal obligation for the United States. According to DOJ, “[a]n agency simply cannot bind itself to the payment of money through its oral or written statements— absent express contracting authority bestowed by Congress.”

The categorical rejection of the QHPs’ claims for Risk Corridors payments in the motions is curious in light of the prior CMS announcement of its interest in settling the litigation. Whether the legal positions asserted by DOJ are intended to provide leverage in settlement negotiations or indicate a change in or divergence of opinion within the government will be closely watched as the issues surrounding the Risk Corridors program continue to develop.

The motions have received considerable attention, including from the House of Representatives. The House, seeing that the new arguments had not been made in the Health Republic of Oregon case, filed an amicus brief reiterating the DOJ’s new arguments so the court can consider those arguments in that case.

The next step in these cases will include the filing of responses by the QHPs to the motions seeking to counter the DOJ’s arguments.

As we approach the end of the Obama administration we can anticipate a flurry of activity surrounding the Risk Corridors program in the courts, in settlements talks between the QHPs and the administration, and in the Congress. Stay tuned as we continue to track these matters.

The links below are to the motions and briefs:

BCBSNC – DOJ Motion to Dismiss

Moda Health Plan – DOJ Motion to Dismiss

Land of Lincoln-DOJ Motion to DIsmiss

Health Republic Insurance-House Amicus Brief

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

 

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.

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:

http://insurance.illinois.gov/newsrls/2016/06/coop_06302016.pdf.

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:

Background

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.