No. 2017-1994 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT MODA HEALTH PLAN, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant. Appeal from the United States Court of Federal Claims in Case No. 1:16-cv-00649, Judge Thomas C. Wheeler. BRIEF OF BLUE CROSS BLUE SHIELD ASSOCIATION AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLEE AND IN SUPPORT OF AFFIRMANCE OF THE COURT OF FEDERAL CLAIMS Ursula A. Taylor Sandra J. Durkin Butler Rubin Saltarelli & Boyd LLP 321 North Clark Street Suite 400 Chicago, Illinois 60654 (312) 444-9660 Counsel for Amicus Curiae August 28, 2017 Case: 17-1994 Document: 47 Page: 1 Filed: 08/28/2017
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No. 2017-1994 UNITED STATES COURT OF …...Butler Rubin Saltarelli & Boyd LLP 321 North Clark Street Suite 400 Chicago, Illinois 60654 (312) 444-9660 Counsel for Amicus Curiae August
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No. 2017-1994
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
MODA HEALTH PLAN, INC.,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
Appeal from the United States Court of Federal Claimsin Case No. 1:16-cv-00649, Judge Thomas C. Wheeler.
BRIEF OF BLUE CROSS BLUE SHIELD ASSOCIATION AS AMICUSCURIAE IN SUPPORT OF PLAINTIFF-APPELLEE AND IN SUPPORT
OF AFFIRMANCE OF THE COURT OF FEDERAL CLAIMS
Ursula A. TaylorSandra J. DurkinButler Rubin Saltarelli & Boyd LLP321 North Clark StreetSuite 400Chicago, Illinois 60654(312) 444-9660Counsel for Amicus Curiae
I. THE ACA REQUIRES FULL RISK CORRIDORSPAYMENTS ACCORDING TO THE STATUTORYFORMULA ..........................................................................................5
A. The Requirement of Full Risk Corridors Payments isCompelled by the Statutory Language of the ACA...................6
B. The Purposes of the Risk Corridors Provision and theACA Are Not Served by Uncertain or Partial Payments...........7
C. Risk Corridors Is Not Designed for Budget Neutrality ...........10
D. The ACA’s Requirement of Full Risk CorridorsPayments Did Not Expose the Government to UncappedLiability ....................................................................................13
E. Unlike Risk Corridors, the ACA’s Other RiskStabilization Policies Are Designed to Require or Allowfor Budget Neutrality ...............................................................16
II. THE APPROPRIATIONS RIDERS DO NOT DEFINE ORLIMIT QHP ISSUERS’ RIGHTS TO FULL RISKCORRIDORS PAYMENTS ..............................................................19
Crandon v. United States,494 U.S. 152 (1990)..............................................................................................8
Delverde, SrL v. United States,202 F.3d 1360 (Fed. Cir. 2000) ............................................................................7
Hawkins v. United States,469 F.3d 993 (Fed.Cir.2006) ..............................................................................16
King v. Burwell,135 S. Ct. 2480 (2015)..........................................................................................9
Landgraf v. USI Film Prod.,511 U.S. 244 (1994)............................................................................................23
Mobil Oil v. United States,530 U.S. 604 (2000)............................................................................................23
Nat’l Fed’n of Indep. Bus. v. Sebelius,132 S. Ct. 2566 (2012)........................................................................................19
Turtle Island Restoration Network v. Evans,284 F.3d 1282 (Fed. Cir. 2002) ..........................................................................19
Util. Air Regulatory Grp. v. E.P.A.,134 S. Ct. 2427 (2014)........................................................................................16
Consolidated Appropriations Act, 2017, Pub. L. No. 115-31 (2017)......................23
Health Care and Education Reconciliation Act of 2010, Pub. L. No.111-152, 124 Stat. 1029........................................................................................2
Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124Stat. 119 (2010).....................................................................................................1
American Academy of Actuaries, Fact Sheet: ACA Risk-SharingMechanisms (2013), athttp://actuary.org/files/ACA_Risk_Share_Fact_Sheet_FINAL120413.pdf. .................................................................................................................11
Barack Obama, United Health Care Reform Progress to Date & NextSteps, 316 J. Am. Med. Assoc. 525, 530 (Aug. 2, 2016). ..................................15
Center for Consumer Information and Insurance Oversight,Affordable Exchanges Guidance, at 20 (April 5, 2013), athttps://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf............................22
Center for Consumer Information & Insurance Oversight, StateEffective Rate Review Programs, athttps://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/rate_review_fact_sheet.html ....................................................................21
CMS, QHP Webinar Series Frequently Asked Questions, at 7 (June28, 2013), athttp://bewv.wvinsurance.gov/Portals/2/pdf/QHP%20FAQ%2012%20-%20June%202013.pdf...................................................................................21
CMS, “Risk Corridors Payments for the 2014 Benefit Year” (Nov. 19,2015), at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RC_Obligation_Guidance_11-19-15.pdf........................24
Colorado Division of Insurance, Filing Approach and Timeline for the2014 Plan Year at 17 (Mar. 28, 2013), athttp://connectforhealthco.com/wpfb-file/20130503_board-and-stakeholders_rate-and-form-filing-timeline-for-the-2014-plan-year.pdf ...............................................................................................................21
Erik Huth & Jason Karcher, A Financial Post-Mortem: TransitionalPolicies and the Financial Implications for the 2014 ACAIndividual Market, Milliman White Paper (July 2016), athttp://www.milliman.com/uploadedFiles/insight/2016/2263HDP_20160712(1).pdf; ..................................................................................................15
Letter from Kevin J. Counihan, Director, CCIIO, a division of CMS,to State Insurance Commissioners (July 21, 2015), athttps://www.cms.gov/CCIIO/Resources/Letters/Downloads/DOI-Commissioner-Letter-7-20-15.pdf......................................................................24
Robert King, Study: Special Enrollment Periods Add Costs toObamacare, Washington Examiner (Oct. 5, 2016), athttp://www.washingtonexaminer.com/study-special-enrollment-periods-add-costs-to-obamacare/article/2603692;..............................................15
S&P Global Market Intelligence, The Unfunded ACA Risk CorridorMay Make the U.S. Insurance Market Less Stable, Not More (May1, 2015) ...............................................................................................................10
STATEMENT OF IDENTITY AND INTEREST OF AMICUS CURIAE1
Blue Cross Blue Shield Association (“BCBSA”) is the non-profit trade
association that promotes the national interests of the independent, locally operated
Blue Cross Blue Shield health insurance companies (“Blue Plans”). Together,
these thirty-six community-based Blue Plans provide healthcare coverage to more
than 106 million people – nearly one-third of all Americans – in every zip code in
all fifty states, Washington D.C., and Puerto Rico. The Blue Plans offer insurance
products and services to a wide range of customers, from large private and public
employer groups to small businesses and individuals. The Blue Plans have been
working to make healthcare more affordable for patients since 1929, making the
Blue Plans the oldest, most experienced health insurers in the country, and the
backbone of the individual insurance market. More than eighty years later, the
Blue Plans remain committed to making quality healthcare accessible and
affordable to all Americans.
The Blue Plans are directly and extensively regulated by the Patient
Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010),
1 Pursuant to Federal Rule of Appellate Procedure 29(a)(4)(E), counsel for amicuscuriae certifies that no counsel for a party authored this brief in whole or in part, noparty or counsel for a party contributed money that was intended to fund preparingor submitting this brief, and no person other than the amicus curiae or its counselcontributed money that was intended to fund preparing or submitting the brief.Pursuant to Federal Rule of Appellate Procedure 29, all parties have consented tothe BCBSA filing this amicus curiae brief.
compared to related risk-sharing provisions of the ACA, it is clear that Congress
intended eligible QHP issuers to receive risk corridors payments regardless of the
revenue generated from more profitable participants and the amounts paid into the
program.2
A. The Requirement of Full Risk Corridors Payments is Compelledby the Statutory Language of the ACA.
Section 1342 of the ACA, in pertinent part, sets out the payment
methodology of the risk corridors program as follows:
(b) PAYMENT METHODOLOGY.--
(1) PAYMENTS OUT.--The Secretary shall provideunder the program established under subsection (a) that if--
(A) a participating plan’s allowable costs for anyplan year are more than 103 percent but not more than 108percent of the target amount, the Secretary shall pay to the planan amount equal to 50 percent of the target amount in excess of103 percent of the target amount; and
(B) a participating plan’s allowable costs for anyplan year are more than 108 percent of the target amount, theSecretary shall pay to the plan an amount equal to the sum of2.5 percent of the target amount plus 80 percent of allowablecosts in excess of 108 percent of the target amount.
ACA § 1342 (codified at 42 U.S.C. § 18062 (2012)) (emphasis added). The
highlighted statutory language above unambiguously requires that the HHS
2 BCBSA wholly concurs with the reasoning and analysis of the trial court and theappellee that this result is further bolstered by HHS’ rulemaking, guidance andrepeated announcements assuring full risk corridors payments from the federalgovernment to QHP issuers. (Appx26; Appellant Brief (“Br.”) at 6-8.)
Secretary “shall pay” specific amounts to QHP issuers based upon each plan’s ratio
of costs to premiums collected. And, as the trial court correctly concluded, “the
Section gives the Secretary no discretion to increase or reduce this amount”:
It is true that Section 1342(a) gives the Secretary the authorityto “establish and administer” the risk corridor program, but thelater directive that the Secretary “shall pay” unprofitable plansthese specific amounts of money is unambiguous and overridesany discretion the Secretary otherwise could have in making“payments out” under the program. Finally, there is nolanguage of any kind in Section 1342 that makes “paymentsout” of the risk corridor program contingent on “payments in”to the program. Instead, Section 1342 simply directs theSecretary of HHS to make full “payments out.” Therefore, fullpayments out he must make.
(Appx23-24.) Just as QHP issuers whose collected premiums exceeded their
plans’ costs were obligated to make full payment of a specific amount into the risk
corridors program (see ACA § 1342(b)(2) (“the plan shall pay”)), so too is the
government obligated to make full payments out, pursuant to the plain language of
the ACA. The statutory language – “shall pay” – means nothing if, as the
government contends, payments to QHP issuers are contingent upon highly
speculative events such as the payments into the program or future Congressional
legislative budget processes.
B. The Purposes of the Risk Corridors Provision and the ACA AreNot Served by Uncertain or Partial Payments.
In interpreting ACA Section 1342, the Court may look not only to the
language of the statute, but also its structure and purpose. Delverde, SrL v. United
that Congress designed the Act to avoid.”); S&P Global Market Intelligence, The
Unfunded ACA Risk Corridor May Make the U.S. Insurance Market Less Stable,
Not More (May 1, 2015)3 (“Uncertainty of payment due to underfunding [of risk
corridors] can cause volatility in the market for all participants.”).
Congress intended the risk corridors program to require full and certain
payments according to the statutory formula because otherwise the program would
have served no rational purpose in stabilizing the early ACA markets. The
government advances no logical reason as to why Congress would have devised a
risk-stabilizing program premised on government payments yet “reserved its
power” to decide years later whether or to what extent the obligations would
actually ever be paid. (Appellant Br. at 31.) The Court should reject the
government’s interpretation as contrary to the language and purpose of the risk
corridors statute.
C. Risk Corridors Is Not Designed for Budget Neutrality.
The risk corridors program is not designed to achieve budget neutrality. As
detailed above, the statute requires that the government “shall pay” risk corridors
amounts to QHP issuers according to a statutory formula. 42 U.S.C.
§ 18062(b)(1). Specifically, risk corridors calculations include a comparison
3 Available at https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=1396705&SctArtId=314008&from=CM&nsl_code=LIME&sourceObjectId=9141430&sourceRevId=5&fee_ind=N&exp_date=20250430-20:51:02.
QHP Issuer’s Allowable CostsRisk Corridor Ratio = ----------------------------------
QHP Issuer’s Target
See 42 U.S.C. § 18062. A QHP issuer with allowable costs less than 97% of its
target amount must pay into the risk corridors program, and a QHP issuer with
allowable costs greater than 103% of its target amount shares its losses with the
government by receiving funds, illustrated as follows4:
4 Chart adapted from: American Academy of Actuaries, Fact Sheet: ACA Risk-Sharing Mechanisms (2013), athttp://actuary.org/files/ACA_Risk_Share_Fact_Sheet_FINAL120413.pdf. Inaddition to the profit and loss sharing depicted in this illustration, an additional 2.5percent of the target amount is required to be either paid or received by QHPissuers whose allowable costs deviate by more than eight percent from their targetamount. 42 U.S.C. § 18062(b)(1)(B), (b)(2)(B).
“uncapped government obligation to indemnify insurers against losses” and would
have encouraged deliberate mispricing by QHP issuers. (See Appellant Br. at 32-
33.) Not so. As reflected in the illustration above, QHP issuers remained
incentivized to appropriately price their products because the federal government
was only obligated to share a specified amount of losses with QHP issuers. Even
with the payment of full risk corridors amounts, the government was only required
to absorb 50% of losses between three and eight percent of the target amount and
80% of losses beyond eight percent of the target amount. QHP issuers thus
remained incentivized to minimize losses while the government was expected to
serve as a trusted partner in navigating the uncertainty of the new markets.
Moreover, Congress designed the risk corridors program to operate only
temporarily, for the three earliest years of ACA implementation (2014-16), when
participating QHP issuers lacked information as to how to price plans in the new
markets populated by previously uninsured individuals. Even with risk corridors
as a buffer, an attempt to deliberately underprice plans without adequate
information would have exposed QHP issuers to the risk of significant losses.
There was no incentive to deliberately underprice during the pendency of the risk
corridors program because sufficient data was not available.5 As a result, not only
5 A full year of claims data for calendar year 2014 would not have been availableuntil sometime in 2015, and this data would not have reflected any changes in thenumber or relative cost of insured individuals between the first and second year of
was the government’s liability limited by virtue of the temporary, three-year
duration of the program, but the uncertainty and lack of information concerning the
newly insured populations provided no incentive for QHP issuers to engage in the
gamesmanship that the government now alleges.6
As a result, contrary to appellant’s claim, the government’s liability for risk
corridors payments was safely limited and cabined by the shared obligations of
QHP issuers, the temporary nature of the program, and the disincentives for
mispricing within the new markets. To the extent the risk corridors program
encouraged more aggressive pricing of plans by QHP issuers during the early years
of ACA implementation, however, this result directly aligns with the goals and
ACA implementation. Meanwhile, QHP issuers were required to submit rates forthe third and final year of the risk corridors program by the spring and summer of2015. Thus, there was no opportunity or incentive to try and deliberatelyunderprice QHPs in reliance on risk corridors payments.6 A host of factors unrelated to pricing decisions that could not have been foreseenor controlled by QHP issuers contributed to losses sustained during the early yearsof ACA implementation, including a belated change in policy that allowedpreviously-insured individuals to keep their existing policies despite the lack ofcompliance with the ACA, information technology problems with thehealthcare.gov website and the lack of mechanisms and controls surroundingspecial enrollment periods. See Erik Huth & Jason Karcher, A Financial Post-Mortem: Transitional Policies and the Financial Implications for the 2014 ACAIndividual Market, Milliman White Paper (July 2016), athttp://www.milliman.com/uploadedFiles/insight/2016/2263HDP_20160712(1).pdf;Robert King, Study: Special Enrollment Periods Add Costs to Obamacare,Washington Examiner (Oct. 5, 2016), athttp://www.washingtonexaminer.com/study-special-enrollment-periods-add-costs-to-obamacare/article/2603692; Barack Obama, United Health Care ReformProgress to Date & Next Steps, 316 J. Am. Med. Assoc. 525, 530 (Aug. 2, 2016).
corridors program is not statutorily limited to a specified source of funding such as
the payments into the program.
Under the risk adjustment program, payments are made into or out of the
program based on the “actuarial risk” (the relative health or sickness) of the QHP
issuers’ enrollees as compared to the “average actuarial risk of all enrollees in all
plans or coverage in such State for such year.” 42 U.S.C. § 18063(a)(1), (2). The
comparison between each QHP issuers’ experience to the “average actuarial risk”
in each state allows for a budget neutral interpretation for risk adjustment because,
unlike risk corridors, the payments in and out of the risk adjustment program are
calibrated around a statewide average.7 In contrast, Section 1342 indicates that the
government “shall pay” risk corridors payments according to a statutory formula
and the amount of the statutorily required payments out of the program to QHP
issuers is unaffected by the amount of the payments into the program. See 42
U.S.C. § 18062.
“Where Congress uses certain language in one part of a statute and different
language in another, it is generally presumed that Congress acts intentionally.”
7 Where a state has elected to have HHS implement its risk adjustmentmethodology (every state except Massachusetts in 2014), HHS has operated theprogram such that the total risk adjustment charge and payment amounts net tozero across each market and within each state. HHS NBPP for 2014, 78 Fed. Reg.at 15,417; HHS NBPP for 2018, 81 Fed. Reg. 94,058, 94,082 (Dec. 22, 2016)(codified at 45 C.F.R. pts. 144, 146, 147, 148, 153, 154, 155, 156, 157, & 158)(noting that a proposed change to risk adjustment will “maintain the balance ofpayments and charges within the risk adjustment program”).
Exchanges in the following calendar year.8 Rates are typically approved by the
state regulators and set well in advance of the year before the applicable coverage
year.9 Once set, there is little or no opportunity to make mid-year adjustments to
rates.10 Even year-to-year requests for rate adjustments are subject to time-
consuming approval processes and are far from guaranteed, involving independent
actuarial review, public hearings and/or notice periods for insureds.11 Thus, QHP
issuers could not account for contingencies surrounding future legislative actions
when setting premium rates years earlier, except to ignore the potential effects of
risk corridors altogether as a stabilizing force in the new markets, which, as
discussed above, would run counter to the goals and purposes of the risk corridors
program.
8 See e.g. Colorado Division of Insurance, Filing Approach and Timeline for the2014 Plan Year at 17 (Mar. 28, 2013) (requiring rate filings by May 1, 2013 for the2014 coverage year), at http://connectforhealthco.com/wpfb-file/20130503_board-and-stakeholders_rate-and-form-filing-timeline-for-the-2014-plan-year.pdf.9 See e.g., id. (Department of Insurance rate approval between May 1, 2013 andJune 30, 2013 for the 2014 coverage year).10 See e.g., CMS, QHP Webinar Series Frequently Asked Questions, at 7 (June 28,2013) (“In the individual market, one set of rates applies for the entire calendaryear.”), at http://bewv.wvinsurance.gov/Portals/2/pdf/QHP%20FAQ%2012%20-%20June%202013.pdf.11 See e.g., Oregon Division of Financial Regulation, Understanding HealthInsurance Rate Review, at http://dfr.oregon.gov/healthrates/Pages/understanding-rate-review.aspx; see also The Center for Consumer Information & InsuranceOversight, State Effective Rate Review Programs, athttps://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/rate_review_fact_sheet.html.
issuers were, thus, undertaking substantial risk and obligations months in advance
of the calendar year in which they agreed to offer health insurance coverage under
the QHPs.
Despite the early and significant undertakings and commitments by QHP
issuers, the government argues that its obligation to pay risk corridors obligations
has always been contingent upon the passage of budget legislation in subsequent
years. (Appellant Br. at 10.) By the government’s reasoning, the government’s
obligation to pay risk corridors amounts was not defined until fiscal year 2017
12 See e.g., Center for Consumer Information and Insurance Oversight, AffordableExchanges Guidance, at 20 (April 5, 2013), athttps://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf.