April 27, 2020

Supreme Court Decides Moda Health Plan, Inc. v. United States

On April 27, 2020, the U.S. Supreme Court decided Moda Health Plan, Inc. v. United States, holding that the Affordable Care Act requires the federal government to compensate insurers for significant losses their health plans incurred during the first three years of the Act’s marketplaces, and that insurers can sue for nonpayment in the Court of Federal Claims.

The Affordable Care Act included a “Risk Corridors program,” under which, for the first three years of the Act’s insurance marketplaces, “plans with profits above a certain threshold” on the marketplaces “would pay the Government, while plans with losses below that threshold would receive payments from the Government.” But “Congress did not simultaneously appropriate funds for the yearly payments.” Over the marketplaces’ first three years, the government’s net risk-corridors obligations to insurers totaled about $12 billion. Each year, however, Congress enacted an appropriations measure that included “a lump sum for” the Center for Medicare and Medicaid Services, but provided that none of those funds “may be used for” risk-corridors payments. Insurers sued to recover the payments, but the Federal Circuit held that the appropriations measures repealed the Government’s obligation to pay.

The Supreme Court reversed by an 8-1 vote, stating that “the Government should honor its obligations.” The Court first held that the original risk-corridors statute created a binding obligation that the government pay insurers by stating in “mandatory” terms that the government “‘shall pay’ insurers for losses exceeding the statutory threshold.” The Court noted that the Anti-Deficiency Act and the Constitution’s Appropriations Clause “constrain how federal employees and officers may make or authorize payments without appropriations,” but it held that Congress remains free to “create or incur an obligation directly by statute,” even without providing an appropriation to pay it.

Second, the Court held that Congress’ later appropriations restrictions did not repeal the statutory payment obligation. The Court noted that “Congress merely appropriated a less amount than that required to satisfy the Government’s obligation, without expressly or by clear implication modifying it,” and that under the Court’s precedents, this was insufficient to overcome the presumption against an implied repeal.

Third, the Court held that the risk-corridors statute authorizes unpaid insurers to sue “[t]o collect payment through a damages action in the Court of Federal Claims.” The Court explained that, under its precedents, a statute creates money-damages claims against the United States only if it “can be fairly interpreted as mandating compensation by the Federal Government,” but that “statutory ‘shall pay’ language often” meets that test. That is especially true of the risk-corridors statute, the Court said, because it involves a “backwards-looking formula” that compensates “for past injuries.”

Justice Sotomayor delivered the opinion of the Court, in which Chief Justice Roberts and Justices Ginsburg, Breyer, Kagan, and Kavanaugh joined, and in which Justices Thomas and Gorsuch joined in part. Justice Alito filed a dissent.

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