- Insurance companies offering plans in the Affordable Care Act exchanges are entitled to receive cost-sharing reduction (CSR) payments that were stopped in late 2017, two U.S. Court of Federal Claims judges have ruled in separate cases, including a class-action lawsuit representing more than 90 payers.
- The judges ruled in orders filed late last week that a lack of specific appropriation of CSR funds from Congress does not mean the payments are not owed. In a case brought by L.A. Health Care Plan, Judge Thomas Wheeler wrote that the payer "should not be left 'holding the bag' for taking our Government at its word."
- In three of the cases, Chief Judge Margaret Sweeney ruled that insurers were owed CSR payments for 2018 in addition to 2017. That decision is key because in 2018 many payers sought relief from the lack of CSRs through the practice of silver loading, or increasing premiums of silver tier ACA plans to prompt inflated premium tax credits. The government argued insurers would be, in effect, double dipping if they also received CSRs for 2018, but Sweeney ruled the tax credits and CSRs "are not substitutes for each other."
CSR payments, which were meant to help insurers cover the cost of sicker beneficiaries who need more health services, have been an ongoing source of tension between payers and the federal government. Litigation began in November 2014, when Republicans in the House of Representatives sued HHS, making the appropriations argument Federal Claims judges just ruled against.
In October 2017, the Trump administration abruptly halted the payments, prompting lawsuits from Democratic state attorneys general and ire from insurance companies. Despite the stop in payments, and numerous other efforts to undermine the ACA, the exchange markets are seeing healthy competition and payers are finding profitability, according to Kaiser Family Foundation reports.
In a blog post on Health Affairs, Katie Keith, principal at Keith Policy Solutions, said she knows of at least a dozen lawsuits payers have brought against HHS seeking CSR payments — and insurers have now won half of them. Many remain in various stages of appeal.
The latest rulings are good news for payers that have offered ACA exchange plans, especially smaller, regional insurance companies without significant budgets. Maine Community Health Options said it is owed about $42 million in CSRs for 2017 and 2018, while L.A. Health Care Plan seeks about $64 million.
The two payers that had already won lawsuits seeking the missing CSR payments are Sanford Health Plan and Montana Health Co-op. Those cases were consolidated upon appeal and are now before the U.S. Court of Appeals for the Federal Circuit. That court ruled in June on a separate case with implications for the CSR lawsuits. The three-judge panel decided against Moda Health Plan, which it said was not owed outstanding risk corridor payments under the ACA. The insurers in Moda Health Plan have asked the U.S. Supreme Court to hear their appeals.
The judges' determination that silver loading by payers is not relevant to whether they are owed CSR payments could push HHS to act on a previous threat of banning the practice. The department declined to do so for 2020 ACA plans but did ask for comment on prohibiting silver loading for 2021 plans.
Keith argues, however, that such a ban would be inefficient. "This could result in ongoing litigation and would undermine the value of premium tax credits for millions of consumers," she wrote. "Indeed, it has taken these insurers more than one year to recover unpaid CSRs from 2017 alone. If anything, the government should reassess its position on CSR funding to avoid paying higher premium tax credits and unpaid CSRs from the Judgment Fund."