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By David McPeak, Staff Writer
Absent an express appropriation, just exactly when does Congress commit taxpayers to a financial obligation? The old adage “if something seems too good to be true, it probably is”— speaks to insurance companies’ theory of relief in Maine Community Health Options v. United States. The case consolidates three suits brought by insurance companies on the belief that taxpayers owe them $12 billion for participating in health exchanges created under The Patient Protection and Affordable Care Act (ACA). [1] The federal government argues that its obligation to pay is nonexistent, as subsequent congressional actions prohibited payments thus impliedly repealing any financial obligation for taxpayers to foot the bill. [2]
Under the appropriations clause of the United States Constitution, payment of federal funds is prohibited absent an appropriations bill. [3] As such, Congress’ ability to control the power of the purse is manifest. [4] If Congress has entered into a contract or otherwise committed to a financial obligation for which it has not appropriated funds, aggrieved parties can seek relief under the “Tucker Act,” and may be able to receive payment from “the judgment fund.” [5] The government argues that insurers lack a cause of action under the Tucker Act, as the ACA’s language does not create a contractual obligation between the United States and the insurance companies, and as Congress expressly and intentionally limited the avenues for subsidy payments. [6]
Under the ACA, § 1342 directs the Secretary of Health and Human Services (HHS) to implement a “risk corridors” program. [7] The risk corridors allow insurance companies to mitigate financial losses incurred from providing plans to customers previously deemed uninsurable. [8] The statutory language mandates that relatively profitable companies pay money in, while the HHS Secretary is to “pay money out” to those who are unprofitable on the exchanges. [9] However, the Congress that crafted this legislation failed to appropriate any actual funds for the payments out. [10] The only possible source for the HHS Secretary to make payments to insurers with losses was from either the payments in (made by profitable companies) or, through Congress’ annual appropriation through the “Centers for Medicare and Medicaid Services” (CMS) program management “lump sum.” [11]
For those who do not recall the halcyon days of “Obama Care” political fights—the 2010 midterm election resulted in an express rejection of many a Congressperson who voted to pass the ACA. [12] Control of Congress and its budgeting authority was given to Republicans, whose constituents were in no mood to subsidize insurance companies to the tune of billions of dollars. [13] By only appropriating funds from the pool of payments in, Congress ensured that the risk corridors would be self-funding. [14] At the same time, insurance companies who continued to offer plans would bear greater risk than they had anticipated—as unsurprisingly—claims from losses far outpaced payments in. [15]
The insurance companies argue that they were induced to provide their plans on the basis that the risk corridors program— among other subsidies—would shield them from financial losses. [16] The crux of this argument being that they wouldn’t have just traded risks from the insurance markets for the risks of future congress’ funding priorities. [17] But this is exactly what they did, as does any private individual or company does when they rely on a government subsidy that is not backed by an appropriation or an express contract. [18]
Additionally, insurance companies point to the fact that HHS made a fundamental change in the program. [19] When HHS allowed individuals and companies to maintain enrollment in non-ACA compliant plans, HHS kept more profitable customers off the exchange. [20] This move, as the argument goes, subjected the companies to unforeseen risk because they priced plans, and received state approval, anticipating a different, healthier customer pool. [21] This point actually furthers the government’s argument—that Congress has the constitutional ability to spend funds, not the executive branch by way of a public agency. [22]
Under the insurance companies’ view, the executive branch could succumb to political pressures and subsequently shift policies, thus triggering unforeseen financial repercussions for which congress did not approve, and for which taxpayers are handed the bill. [23] Here, the government has a powerful separation of powers argument for why the relief sought by the insurance companies is improper: instead of relying on actual congressional appropriation, insurers relied on fanciful promises and projections from HHS. [24]
The case was argued before the Supreme Court on December 10, 2019. An opinion from the Court has not yet been issued.
[1] Respondents Brief 3, May. 8, 2019, No. 18-023, 18-028, 18-038.
[2] Id. at 18.
[3] U.S. Const. Art. I, § 9, Cl. 7.
[4] 31 U.S.C. 1341(a)(1)(A).
[5] Petitioners Brief 16, Aug. 30, 2019, No. 18-023, 18-028, 18-038.
[6] Resp’t’s Br. at 23.
[7] 42 U.S.C.S. § 18062 (LexisNexis 2020).
[8] Pet’r’s Br. at 4.
[9] 42 U.S.C.S. § 18062 (LexisNexis 2020).
[10] Pet’r’s Br. at 14
[11] Resp’t’ss Br. at 8
[12] Brief for Amicus Curiae Americans For Prosperity in Support of Respondent 6, Oct. 25, 2019, No. 18-023, 18-028, 18-038.
[13] Id.
[14] Resp’t’s Br. at 16.
[15] Pet’r’s Br. at 15.
[16] Id. at 27
[17] Pet’r’s Br. at 29.
[18] Resp’t’s Br. at 53.
[19] Pet’r’s Br. at 14-15.
[20] Resp’t’s Br. at 43.
[21] Pet’r’s Br. at 15.
[22] Resp’t’s Br. at 21-22
[23] Amicus Br. AFP, at 3.
[24] Id at 9.
