October 28, 2020

Volume X, Number 302

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October 27, 2020

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October 26, 2020

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Supreme Court Issues Long Awaited Ruling on Affordable Care Act Premium Subsidies

The Supreme Court issued a long-awaited ruling on April 27, 2020, directed at a more than $12 billion challenge related to the temporary risk corridors program provided established by the Affordable Care Act (the “ACA”).  Challenges were brought under multiple consolidated cases, Maine Community Health Options v. United States, Moda Health Plan v. United States, Land of Lincoln Mutual Health v. United States, and Blue Cross Blue Shield of North Carolina v. United States (the “Consolidated Cases”).  In its decision, the Court reversed the decision of the United States Court of Appeals for the Federal Circuit and remanded the case for further proceedings.

Background

Section 1342 of the ACA provided for a temporary risk corridors program to encourage insurers to participate on the health care exchanges created by the ACA.  The risk corridors program was in effect from 2014 through 2016.  Under the program, the government was required to make payments to insurers that incurred losses on their exchange plans and to receive payments from insurers that made money of their exchange products.  These payments were to be determined in accordance with the formula established under Section 1342.

The ACA did not explicitly designate how the risk corridor payments were to be funded; it simply provided that the insurers “shall be paid.”  In its 2015-2017 appropriations for the Department of Health and Human Services (“HHS”), which administered the risk corridor program, the Republican controlled Congress blocked the risk corridor payments by including a rider preventing HHS from using its appropriated funds to make the risk corridor payments owed to insurers.  Insurers brought suit.

The Decision

In a resounding 8-1 decision for the insurers written by Justice Sotomayor, the Supreme Court confirmed the government had an obligation, or as Justice Sotomayor put it “a legal duty…that could mature into a legal liability through the insurers’…participa[tion] in the healthcare exchanges,” to pay insurers the full amount required by Section 1342.  The Court also unequivocally stated that payment under the risk corridors program was “neither contingent on nor limited by the availability” of any funds – defeating any argument the government had made regarding the payments being impliedly conditioned on the availability of proper appropriations.

This is a major victory for insurers and bodes well for a favorable ruling on pending challenges to the government reneging on its obligation to pay insurers for cost-sharing amounts.  It will not have any bearing on the fundamental challenge to the ACA’s constitutionality.


*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 118
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Christine Clements, Sheppard Mullin Law Firm, Washington DC, Corporate and Health Care Law Attorney
Partner

Christine M. Clements is a partner in the Healthcare Team in the firm's Washington, D.C. office with 25 years of experience on managed care law issues. Ms. Clements focuses her practice on federal healthcare government contract programs, with particular focus on the Medicare Advantage Program, the Medicare Prescription Drug Benefit, the Federal Employees Health Benefits Program, Medicaid managed care, and the Medicare-Medicaid Plans. Ms. Clements advises clients on the issues most important to them, including contract applications and service area expansions, responses...

202-747-1848
Aytan Dahukey, Sheppard Mullin, Health Care Lawyer, Finance Attorney
Partner

Aytan Dahukey is a partner in the Corporate Practice Group in the firm's Century City Office and is a member of the firm's Healthcare, Emerging Growth/Venture Capital and Private Equity Industry Teams. As an active member of these industry teams, Aytan enjoys a wide-ranging practice that spans across several sectors.

Aytan’s healthcare practice focuses on public and private mergers and acquisitions and general corporate counsel representing a wide variety of healthcare-related clients in California and nationally. His clients include independent physician associations, large physician groups, hospitals and hospital-affiliated foundations and other integrated multi-specialty medical clinics, provider management services organizations, accountable care organizations (ACOs) and other healthcare entities as well as those private equity funds and strategic investors that participate in the healthcare sector.

310-228-3729
Associate

Vinay Bhupathy’s health care practice bridges the gap between regulatory and transaction law and he represents all manner of healthcare entities from providers such as hospitals and physician groups to payors and health information technology companies. 

310.228.3735
Dhara B. Waghela Associate Corporate Healthcare
Associate

Dhara Waghela is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm’s Healthcare team.

424-288-5331
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