SCOTUS Denies Petition on Cost-Sharing Reduction Reimbursements

The Supreme Court has denied a petition to hear a case brought against the US by Maine Community Health Options and Community Health Choice on cost-sharing reduction reimbursements.

According to the Affordable Care Act section 1402, individuals enrolled in qualified health plans are eligible for reduced cost-sharing. The federal government was considered responsible for reimbursing payers for the increased cost burden that resulted.

However, in 2017, the Trump administration determined that these payments to health plans were illegal and stopped reimbursing health plans for cost-sharing payments.

Payers sued the federal government and the case went to the Federal Circuit court, which sided with the government.

By denying the payers’ petition, the Supreme Court has supported the Federal Circuit court’s ruling on the matter, according to payers involved in the case.

“ACAP is disappointed by the Court’s decision to leave in place the Federal Circuit’s ruling in this case, a ruling we maintain ignores the ramifications of the Government’s refusal to meet its obligations written in statute—not just for the health insurance marketplace but for anyone doing business with the Federal government,” Margaret A. Murray, chief executive officer of the Association for Community Affiliated Plans (ACAP), said in a press release.

“The holding is inconsistent with both the ACA’s clear language establishing an obligation that the government ‘shall make…payments’ to plans as well as the Supreme Court’s own ruling last year that the government ‘should honor its obligations.’”

Her comments echoed the plaintiffs’ arguments in the brief.

“This case implicates not only billions of dollars in past-due obligations under §1402, but also the government’s broader credibility as a reliable business partner,” the plaintiff brief stated.

“In contrast to the risk-corridors program in Maine Community, which was a limited three-year program, the government’s obligations under §1402 are ongoing. Thus, not only do the government’s already staggering unpaid obligations continue to mount, but the Federal Circuit’s ‘mitigation’ ruling, like the government’s cross-petition argument, threatens to make the government’s disregard of its §1402 obligations permanent. The government has not made a §1402 payment since 2017, and the Federal Circuit’s decision eliminates (or at least substantially dulls) the government’s incentive to come into compliance and keep its word.”

Murray expressed concern for small community health plans that would not receive the compensation that they expected for 2017 cost-sharing reductions.

“It is not tenable to require small insurers to wait years without any assurance that they will receive promised recompense for reductions in receipts that follow from their provision of coverage under the ACA,” Murray said.

“We worry this uncertainty sets a dangerous precedent moving forward. Any private party would think twice about partnering with the government if the remedy for a breach of the government’s obligations is expensive, years-long litigation.”

The Supreme Court’s decision ended the Maine Community Health Options’s case against the US which reached the Federal Circuit court in 2019. The case opened in July 2019 and the Federal Circuit court issued its decision in April 2020 when the Federal Circuit court upheld the federal government’s position.

This case represents just one element of the flurry of litigation around cost-reimbursement reimbursement. 

On August 14, 2020, the Federal Circuit court affirmed the Sanford Health Plan case involving Maine Community Health Options, determining that health plans should be compensated for 2017 cost-sharing reimbursements. But on the same day, the court denied payers’ demand to be compensated for 2018 premium tax credits.

As it now stands, the federal government is not responsible for reimbursing payers for the cost-sharing reductions but payers must still reduce cost-sharing for individuals on qualified health plans. In order to cover these payments, health plans continue to engage in silver-loading, a practice that increases premiums to offset reimbursement losses. The practice is considered legal.