In 2010, Congress enacted the Affordable Care Act as part of a comprehensive scheme of health insurance reform.  One provision of the reform Act included a cost-sharing reduction designed to reduce the out-of-pocket expenses paid by individuals whose household income is between 100% and 250% of the poverty line. Under the Act, the Secretary of Health and Human Services must reimburse the insurers for cost-sharing reductions they make. The Act states that “the Secretary [of HHS] shall make periodic and timely payments to insurers ‘equal to the value of the reductions’ made by the insurers.” Although Congress did not specifically appropriate funds for cost-sharing reductions, the Obama administration made payments to insurers for cost-sharing reductions. The Trump administration initially continued the previous administration’s practice of making these reimbursements, but on October 12, 2017, the administration terminated all reimbursements.

On January 2, 2018, Community Health Choice, Inc., formed as a Texas nonprofit corporation that offers qualified health plans on Texas’s exchange, sued in the U.S. Court of Federal Claims seeking to recover the cost-sharing reduction payments it did not receive.  Community Health argued that the government violated its statutory mandate to make the reimbursement payments, and breached an implied-in-fact contract between the government and the insurers.

Both parties moved for summary judgment on liability. The Government argued that although the Affordable Care Act mandated the reimbursement payments, that mandate was unenforceable because Congress never appropriated the funds to do so. The Court disagreed, holding that the failure to appropriate the funds “did not reflect a congressional intent to foreclose, either temporarily or permanently, the government’s liability to make those payments.” The Court explained: “If Congress did not intend to create such an obligation, it would not have included any provision for reimbursing cost-sharing reductions in the Act.”

In addition, the Court held that the government breached an implied-in-fact contract to make these cost-sharing payments:

[T]he government offered to reimburse insurers for their mandated cost-sharing reductions, plaintiff accepted that offer by offering the qualified health plans with reduced cost-sharing obligations, and consideration was exchanged (plaintiff supplied qualified health plans that helped the government reduce the number of uninsured individuals, and the government made cost-sharing reduction payments to plaintiff).

The Court has directed the parties to file a joint status report setting forth the amounts owed to Community Health for its unpaid cost-sharing reduction reimbursements for 2017 and 2018.

Read Chief Judge Sweeney’s full decision here. [Community Health Choice, Inc. v. United States, No. 18-5C, 2019 WL 643011 (Fed. Cl. Feb. 15, 2019). See also Maine Cmty. Health Operations v. United States, No. 17-2057C, 2019 WL 642968 (Feb. 15, 2019).]