Health Plan Weekly, a subscription-based publication of AIS Health, featured L.A. Care in its February 25, 2019 article, "L.A. Care, Other Insurers Win Lawsuits Over Unpaid CSRs".
L.A. Care, Other Insurers Win Lawsuits Over Unpaid CSRs
Amid health insurers' ongoing legal fight to recover billions of dollars in Affordable Care Act risk corridor payments, things remain up in the air over a related matter: whether insurers will recover a substantial sum from the federal government for unpaid cost-sharing reduction (CSR) reimbursement under the ACA. Several more insurers, including L.A. Care Health Plan, recently won lawsuits in the U.S. Court of Federal Claims to recover CSR payments — which had been distributed for several years to help exchange plans subsidize coverage costs for low-income enrollees, until President Trump halted them in October 2017.
The first insurer win came a year later, when the federal claims court ordered the federal government to pay about $1.2 million in CSR reimbursement owed to Montana Health CO-OP. Sanford Health Plan also succeeded in its legal challenge over owed CSRs; the federal government appealed both cases and they were consolidated on appeal.
In a Feb. 17 post on her ACA blog for Health Affairs, attorney Katie Keith, a research professor at Georgetown University's Center on Health Insurance Reforms, says she is aware of at least a dozen separate lawsuits filed by insurers against HHS for unpaid CSRs, including a class action lawsuit joined by 91 insurers.
She notes the two federal claims court judges who issued four rulings in mid-February — in favor of L.A. Care, Community Health Choice, Inc., Maine Community Health Options and Common Ground Healthcare Co-operative, the last being the class action suit — both conclude the ACA has an "unambiguous mandate" requiring HHS to make timely CSR payments to insurers.
Keith tells AIS Health that despite ongoing CSR uncertainty, the bottom line is "more plans are winning" in the judicial system, which should encourage other health insurers to get involved. "If there are insurance companies either not part of the [Common Ground] class action or not filing [their own CSR lawsuits] yet, they're going to be pretty motivated to do it," Keith says, "because the courts are saying, 'You're entitled to payments.'"
Insurers Won't See Payouts Very Soon
Experts sum it up in this way: CSR payment cases favoring insurers are likely to slowly wend their way through the appeals process, and it probably would take significant time before any federal funds would be paid out to health plans even if they ultimately win. But the final legal outcome remains uncertain, especially given the practice of "silver loading" that many states allowed plans to begin in 2018 to increase government subsidies in response to unpaid CSRs.
In the latest legal decisions, Keith notes the judges said silver loading won't count toward calculating plans' damages. But some legal commentators predict that what they view as a potential payment windfall for health plans likely won't stand on appeal.
Says Chris Sloan, a director at Avalere Health who tracks ACA developments: "I don't necessarily think we have a better idea of where we're going to end up than a couple of months ago [since it's uncertain] what the upper courts will say." But he says one aspect is clear: "There's a lot of money at stake. It's billions of dollars...to be paid back to health plans."
Silver Loading Makes Claims 'Fuzzier'
Sloan says it is clear that exchange plans lost millions of dollars at the end of 2017 when CSR payments were halted. But insurers were able to reprice products for 2018 and incorporate "silver loading," in which insurers opt to load premium increases into popular silver-tier exchange plans, where premium tax credit subsidies rise with premiums, thus making up for unpaid CSRs. This strategy, he says, makes plans' argument for owed CSR payments in 2018 "fuzzier."
In the exchange marketplace itself, the people who bore the brunt of the CSR halt and silver loading are customers and would-be customers who don't qualify for federal subsidies and thus must pay the full premium or choose a different product. On the regulatory side, CMS said Jan. 17 in its 2020 Notice of Benefit and Payment Parameters (NBPP) for the ACA exchanges that the Trump administration "supports a legislative solution that would appropriate CSR payments and end silver loading." The agency said it seeks comment on how HHS might address silver loading if Congress doesn't act, "for potential action in future rulemaking applicable not sooner than plan year 2021."
After L.A. Care's favorable ruling on Feb. 14 from the federal claims court, its CEO John Baackes issued a statement saying his plan "is pleased that yet another court has ruled that the Trump Administration violated a statutory obligation of the [ACA] when it failed to provide full [CSR] payments for 2017."
"As the judge put it, L.A. Care should not be left 'holding the bag' just because the government decided to breach an implied contract with L.A. Care," Baackes said. "We strive to keep our plans affordable, and the CSRs helped us to do that."
After Covered California's 2019 enrollment period ended on Jan. 15, there were 92,000 enrollees in L.A. Care Covered Plan, the name of its plan on the state-based ACA exchange. That included 26,000-plus new enrollees, spokesperson Penny Griego says.
"In 2017, when CSRs were discontinued, we had 64 percent CSR eligible," Griego says. Of L.A. Care's current exchange plan enrollees, 63% would be CSR eligible, she adds.
L.A. Care Aims to Amend Its Complaint
Griego notes the court granted summary judgment on the federal government's liability for CSR amounts owed to L.A. Care for 2017 and held that the government's failure to pay from October 2017 and beyond constitutes a breach of contract. Thus, she says, L.A. Care "intends to amend its complaint to update the amount of judgment to account for advance CSR payments that were not made in 2018. We will then ask the Court to enter judgment for the full amount of CSR payments owed to L.A. Care Health" — totaling $64 million: $6 million to finish out 2017, and another $58 million for full-year 2018.
"This is money that the government had promised to pay L.A. Care," she says when asked whether this would constitute "double dipping."
With respect to the ACA's risk corridor payment program, Moda Health Plan and three co-plaintiff insurers asked the U.S. Supreme Court on Feb. 4 to hear their case, an expected move. In November, a federal appeals court denied the insurers' request for a rehearing on their lawsuit, Moda Health Plan v. U.S., seeking billions of dollars in unpaid claims.
Supreme Court Review Is ‘Key’
According to Keith, a decision by the Supreme Court on Moda’s risk-corridor payments could also "play a key role" in whether insurers are entitled to unpaid CSRs. The question right now is whether the nation's high court takes up the risk corridors case or not.
Moda is relevant to CSRs "because of the reasoning used by the Federal Circuit," Keith explains in an email. "The federal government definitely won in Moda — meaning insurers aren’t entitled to risk corridor payments" because, the court reasoned, while the statute did require payment even in the absence of an appropriation, subsequent appropriations riders passed by Congress require risk corridors to be budget-neutral.
"The risk corridors statute and the CSR statute are separate but structured the same," Keith explains. "So every judge that has looked at this for CSRs has relied on the decision in Moda to say that the CSR statute requires payment. Because there is no follow-on appropriations issue for CSRs like there was for risk corridors, the statute controls and payments are owed."
If the Supreme Court doesn't take up Moda, "the Fed Circuit decision stands and I assume insurers would continue to win these CSR cases and the government will need to repay," Keith says. "If SCOTUS takes up risk corridors, there are a lot more potential outcomes to overturn Moda or parts of Moda that could affect the CSR decisions."
How Would Courts Measure Damages?
"It’s not surprising to me the risk corridor cases are losing, and the CSR cases are winning," says attorney Christopher Condeluci, principal of CC Law & Policy in Washington, D.C., and a former Republican staffer for the Senate Finance Committee during the ACA's drafting.
Condeluci says he doesn't believe the ACA obligates the government to pay on the risk corridor side, given that congressional action "ties the hands of HHS from dipping into other [funding] buckets for a program that's budget neutral." However, he adds, "CSRs seems like a winning argument because the statute is clear" this reimbursement to carriersmust be paid.
Yet insurers have no right to be "enriched or to double dip" by getting CSRs along with silver loading, he asserts, "so we need a [court] decision to parse out what insurers got for silver loading and what the government owes them."
As for the timeline, "I don’t think the judicial process is going to run its course for at least a year or a year-and-a-half," Condeluci says, "and [the Dept. ofJustice] will take time to settle...so carriers should expect to silver load for 2020 while we all figure out how to parse out the mess associated with making everybody whole."
Nicholas Bagley, a law professor at the University of Michigan, in a Feb. 19 blog post described the daunting practical challenges to calculating damages: "It's hard to know what the world would have looked like if the [CSR] payments had been made, so it's hard to know whether any given insurer is better off or worse off now....Many insurers will doubtless claim that they lost market share because they couldn't cope as effectively with silver-loading as their competitors. Others will say that ending the [CSR] payments drove some of their customers away, silver-loading notwithstanding....Some of those claims will be true; others, not so much. And the right measure of damages will vary from state to state and insurer to insurer."
"It’ll be a huge mess," Bagley asserts. "And it's not like the court can decide the mitigation question once and move on. The [federal claims court] would have to undertake a demanding inquiry for every single insurer on the exchanges — not once, but for each and every year until Congress fixes this mess."
Bagley predicts that the appeals court "will hold that the United States breached its payment obligation, but that it should still have a chance to demonstrate that insurers have mitigated their damages." He says it is also possible that the federal circuit court will simply say plans have fully mitigated their CSR damages, at least in the 43 states that adopted silver loading in 2018.
Congress must "stop the bleeding," Bagley says, noting, "Every year that the cost-sharing obligation stays on the books, the United States is accruing roughly $12 billion in potential liability" — and, as he sees it, "there's no reason at all to funnel money to insurers that have adjusted to a world without cost-sharing payments."
In the end, Avalere's Sloan says, "It's going to take a while to figure out [unpaid CSR and risk corridor payments to exchange plans]. Right now, it doesn't seem we're anywhere close to a resolution on this issue."
by Judy Packer-Tursman
AIS Health