ACA Litigation Round-Up, Part 1: Fight Over Reimbursements For Cost-Sharing Reductions Continues

Litigation continues over the Affordable Care Act (ACA) and ACA-related issues. This post, which builds on two prior posts, highlights the latest developments in pending ACA litigation. Given the transition to the Biden administration, many lawsuits have been put on hold to give federal agencies time to consult with new agency leadership on pending litigation and underlying rules. This post summarizes those lawsuits as well as health-related cases before the Supreme Court and new developments in lawsuits that are still active.

An upcoming second post will summarize recent ACA-related court decisions and oral arguments in more detail. This includes a district court decision in the “take care” lawsuit that set aside several Trump administration policy changes, a district court decision allowing a challenge to the ACA’s preventive services mandate to proceed, and an appellate decision over the health insurance tax as it applies to Medicaid managed care entities. That post also summarizes oral argument before the Fifth Circuit Court of Appeals in a lawsuit over an Obama-era rule implementing Section 1557.

Supreme Court Happenings

We continue to await a Supreme Court decision in California v. Texas, a challenge to the entire ACA that is pending before the Supreme Court. In Texas, a coalition of states led by Texas and two individuals challenge the constitutionality of the individual mandate after Congress set the penalty to $0. They argue that the mandate is now unconstitutional—because it no longer qualifies as a valid exercise of Congress’s taxing power—and that the rest of the ACA should be invalidated alongside it. This challenge is considered the weakest existential legal threat to the ACA to reach the Supreme Court thus far; many of the Justices seemed skeptical during oral argument that the Court should strike down all or parts of the ACA even if it finds the mandate to be unconstitutional.

Briefing and oral argument have long been complete, and a decision could come at any time before the end of the Supreme Court’s term this summer. On February 10, 2021, the Biden administration informed the Court that it was changing its position in Texas. The government’s new position is that the mandate remains constitutional and, even if found to be unconstitutional, is fully severable from the rest of the ACA (meaning that the rest of the ACA should stand even if the mandate is ruled unconstitutional). The letter is unlikely to have a substantive impact on the Court’s decision in Texas, but the Biden administration clearly felt it was important to make its position known to the Court.

Cost-Sharing Reductions

When we last revisited insurers’ request for unpaid cost-sharing reduction payments (CSRs), the Court of Appeals for the Federal Circuit had denied multiple requests from insurers to reconsider two August decisions. The Federal Circuit concluded that insurers were entitled to unpaid CSRs but that the total amount they are owed must be offset by any excess amount of premium tax credits received due to premium loading (generally “silver loading,” which occurred when regulators gave insurers and health plans the authority to load the cost of unreimbursed CSRs on to silver marketplace plans, thereby increasing the cost of ACA benchmark plans and in turn the amount of premium tax credits paid to insurers and health plans by the federal government on behalf of low-income consumers). The court limited the amount owed out of concern that full recovery of unpaid CSRs would be a windfall for insurers. Why? Because insurers that engaged in premium loading (to account for unpaid CSRs) have already been made more than whole through higher premium tax credits.

On February 19, two insurers—Maine Community Health Options and Community Health Choice—asked the Supreme Court to review one of the Federal Circuit decisions. Separately, on February 24, Common Ground Healthcare Cooperative filed its own cert petition. In general, the insurers argue that the Federal Circuit misapplied the Supreme Court’s recent 8-1 decision on unpaid risk corridors, Maine Community Health Options v. United States. The CSR statute, they argue, is unambiguous as to the amount owed to insurers, and the Federal Circuit improperly analogized to contract law in concluding that unpaid CSRs must be offset by higher premium tax credits. (The insurers are represented by Paul Clement, who successfully argued the risk corridors case before the Court last term.)

Amicus briefs in support of the insurers were filed in one or both cases on behalf of Anthem (joined by Blue Cross of Idaho, Highmark, LA Care Health Plan, and Molina), the Association for Community Affiliated Plans, and the U.S. Chamber of Commerce. Each brief urged the Court to hear the appeals and reverse the Federal Circuit’s decision by concluding that insurers are owed full unpaid CSRs. The briefs generally echo points made in the Maine Community Health Options case, asserting that the future of public-private partnership is at risk if insurers cannot recover full CSRs. The briefs generally tried to sidestep the question of whether insurers would receive a windfall or double recovery from the government if total unpaid CSRs can be recovered.

The federal government, following extension requests, will file its responses to the two pending petitions on April 26 and April 30. It is not yet clear whether the Court will agree to hear these appeals. If it does not grant the petitions, we will see settlement negotiations and damages calculations before the lower courts as the government and insurers attempt to recalculate damages and offset any potential unpaid CSRs (for 2018 and beyond) with higher premium tax credits.

In the meantime, the lower courts have generally stayed pending CSR litigation. The government appealed a decision awarding Guidewell Mutual Holding Corporation (which includes Blue Cross and Blue Shield of Florida, Florida Health Care Plan, and Health Options) about $225 million for unpaid CSRs owed for 2015 through 2017. The Federal Circuit summarily affirmed a lower court decision awarding Blue Cross and Blue Shield of Vermont about $7.2 million for unpaid CSRs for 2017 and 2018. And the Federal Circuit dismissed the government’s appeal of a decision awarding Blue Cross and Blue Shield of North Dakota about $8.85 million for unpaid CSRs for 2017 and 2018 in October. These actions likely occurred because neither of these two insurers engaged in premium loading during those years. Some new complaints are being filed as well: MDwise Marketplace, for instance, is owed about $4.2 million in unpaid CSRs for 2016 and 2017.

Medicaid Work Requirements

Another significant health policy issue pending before the Supreme Court is Azar v. Gresham, a dispute over the Trump administration’s approval of Medicaid work requirement waivers in Arkansas and New Hampshire. That litigation has been covered extensively on the Health Affairs Blog by Sara Rosenbaum. This litigation has become somewhat more complicated given the timing and the new Biden administration’s changed position. Opening briefs were filed on January 19, and briefing was completed in March.

Beginning on February 22, the Biden administration urged the Court not to rule and instead to vacate the lower court decisions and remand the waivers for Arkansas and New Hampshire back to the Department of Health and Human Services (HHS). In doing so, the Biden administration cited the pandemic and the fact that HHS notified those states that it is withdrawing approval for their work requirements waivers. Given these changed circumstances, the Biden administration argued that these cases no longer present the right context for the Court to rule on the validity of the underlying waiver approvals. This request was supported by the plaintiffs who sued over the waivers in each state but opposed by Arkansas, which is a party to the litigation.

The Court canceled oral argument (which had been scheduled for March 29) per the Biden administration’s request. On April 5, the Court agreed to hold the Medicaid work requirements litigation in abeyance until further order. The delay could be to provide time for HHS to withdraw the approved waivers, a process that HHS began on March 17 for Arkansas and New Hampshire. Or it could be to give more time for the Justices to write opinions (or dissents) on the underlying motion to vacate and remand. At least for now, it means that oral argument will not proceed but we will continue to wait on whether the Court will keep the litigation—or grant the government’s motion to vacate the lower court cases and remand the issue back to HHS.

Public Charge Rule

Since the last update, the Court dismissed pending lawsuits over Trump-era regulations on the public charge rule. The Court had granted pending cert petitions on February 22. But, on March 9, the Biden administration and plaintiffs filed a joint stipulation to dismiss the appeal. This was granted on the same day. The Department of Justice then asked for dismissal of its pending appeals in several appellate courts. Once the Seventh Circuit Court of Appeals dismissed the appeal, a nationwide vacatur of the rule from a district court in Illinois went into effect. This move has generated some criticism, and Republican attorneys general have attempted to keep the litigation alive (but those efforts have been unsuccessful thus far).

Citing the Illinois district court decision (and other challenges), the Biden administration revoked the underlying public charge rule on March 15. It will resume using interim field guidance from 1999; this is the standard that was in place before the 2019 rule. Given the Department of Homeland Security’s decision to reinstate the 1999 interim field guidance, it does not appear that the administration intends to undertake notice-and-comment rulemaking on public charge related-issues any time soon.

Title X Rule

A similar result may play out in pending lawsuits over the Title X program. Like the public charge rule cases, the Supreme Court granted pending cert petitions on February 22. Unlike the public charge rule cases, a coalition of Republican attorneys general led by Ohio asked to intervene to defend the rule if the Biden administration opted not to. The attorneys general cited an executive order from President Biden issued in January 2021. Four days later, the Biden administration and plaintiffs filed joint stipulations to dismiss the appeals. And the American Association of Pro-Life Obstetricians and Gynecologists filed a separate request to intervene in the litigation.

These activities kicked off a flurry of briefs in response. The Biden administration and plaintiffs opposed the requests to intervene and asked the Court to dismiss the cases and deny the intervention requests. The federal government also asked for a delay in the deadline to file opening briefs until May 6. That request was granted. From here, we wait to see how the Court will rule on the requests for dismissal and the requests to intervene. Meanwhile, the Biden administration has indicated that it will issue a proposed rule by April 15 that rescinds the 2019 rule and replaces it with a version that is substantially similar to the Title X regulations that were in effect from 2000 until 2019.

Cases Currently On Hold

Many pending ACA-related cases were already on hold. This should not be surprising given the degree of litigation over Trump-era rules to implement the ACA. Citing the need to consult with new agency leadership under the Biden administration, the Department of Justice has asked for several lawsuits to be held in abeyance. These requests have generally been unopposed by the plaintiffs in each case; granted by the courts; and require the parties to submit regular status reports and file motions within 30 days of relevant agency proceedings.

Litigation is on hold in lawsuits over the:

Association Health Plan Rule

This challenge is pending before the Court of Appeals for the District of Columbia Circuit, and a decision was expected at any time. This is especially true because oral argument was held more than one year ago. A status report is due every 60 days beginning on April 9.

Double Billing Rule

This rule requires insurers to bill for abortion coverage separately from their billing for other coverage. Multiple district court decisions were appealed and are pending before the Fourth and Ninth Circuit Courts of Appeal. Those appeals are now in abeyance. The Ninth Circuit stayed the litigation until April 2; ahead of that deadline, the government asked for a continuation with status reports every 60 days. (The same requests were made for both pending appeals, one that stems from a ruling in Washington and the other from a ruling in California.) The Fourth Circuit granted the request to suspend proceedings on January 28, and a status report is due every 60 days beginning on March 29.

Provider Conscience Rule

Multiple district court decisions were appealed and consolidated before the Second and Ninth Circuit Courts of Appeal. Oral argument was scheduled for early February before the Ninth Circuit, but the court granted the government’s request to hold the appeals in abeyance and removed the argument from the calendar. The parties filed a status report on March 30 to request additional time to review the rule and consult with new leadership. The court granted the request; another status report is due by June 1. A similar process played out in the Second Circuit: oral argument was scheduled for March 17 but removed from the calendar after the court agreed to hold the appeals in abeyance. Status reports—from the federal government and Christian Medical and Dental Association (which intervened in the litigation)—were filed on March 8. The government indicated that more time is needed, and the parties will continue to file status reports every 30 days.

Immigration Proclamation

A request for en banc review of a proclamation, signed by President Trump in 2019, is pending before the Ninth Circuit. This request was filed by the plaintiffs after a three-judge panel upheld the proclamation. The government’s response was initially due on February 10, but this deadline was extended to April 12. On April 2, the government filed an additional extension request, asking to file its response by June 11.

Section 1557

Lawsuits challenging the Trump administration’s rule to implement Section 1557 remain pending. The Trump administration already appealed two district court decisions, to the Second Circuit and the DC Circuit. Those decisions preliminarily enjoined the parts of the rule that would strip explicit protections for LGBTQ people. Those appeals—as well as pending district court litigation in DC and New York—are all held in abeyance with joint status reports due on May 14. Plaintiffs in the Massachusetts district court challenge opposed the government’s request for a stay (arguing that an indefinite stay is inappropriate and HHS has not indicated its view of the legality of the Trump-era rule, any intended changes, or a timeline for changes); the court scheduled a hearing on the motion to stay the proceedings for May 10.

In the meantime, litigation continues over the Obama-era rule on Section 1557. The Fifth Circuit heard oral argument on March 2; this argument is summarized in detail in a separate post. The government also asked a district court in North Dakota to revisit a recent decision concluding that parts of the Obama-era rule and interpretation of Title VII violate the Religious Freedom Restoration Act. The plaintiffs then voluntarily dismissed their remaining claims and asked the district court to enter final judgment. The court did so on February 19, issuing a revised permanent injunction that prohibits HHS and the EEOC from interpreting or enforcing Section 1557 or Title VII against the Catholic plaintiffs in a way that requires them to cover or perform medical procedures (defined broadly to include surgical procedures as well as counseling and hormone therapy) for gender transition. The court then dismissed the government’s motion to reconsider as moot. The Biden administration may appeal to the Eighth Circuit Court of Appeals.

Contraceptive Mandate

Litigation over the scope of the ACA’s contraceptive mandate continues before district courts in California and Pennsylvania as well as the First Circuit Court of Appeals. These courts are considering the scope of the mandate following the Supreme Court’s decision in Little Sisters of the Poor v. Pennsylvania. In Little Sisters, the Court held that the federal government had the authority to allow religious and moral exemptions to the contraceptive mandate but did not rule on whether the two Trump-era rules at issue were arbitrary and capricious.

A district court in Massachusetts was the first to answer this question and concluded that the rules were neither arbitrary and capricious nor unconstitutional. Massachusetts, the plaintiff, appealed to the First Circuit which granted the Biden administration’s request to hold the appeal in abeyance until at least April 30. Other litigation remains pending before district courts in California and Pennsylvania; these challenges were fully briefed and awaiting a decision but have been put on hold until April 30 as well.

Two contraceptive mandate cases are not on hold. First, we are awaiting a decision from a district court in Indiana on pending motions to dismiss a separate challenge to the Trump-era rules and a settlement agreement between HHS and objecting organizations. Second, the Fifth Circuit will hold oral argument on April 26 regarding a class action lawsuit over Obama-era rules on the contraceptive mandate.

Stays could remain in place for months but are ultimately only temporary. Litigation in these cases could resume. Or the Biden administration could opt to settle, ask for dismissal, or request that a rule be remanded back to an agency for changes.

Other Recent Developments

Georgia’s Section 1332 Waiver

In mid-January, Planned Parenthood Southeast and the Feminist Women’s Health Center sued HHS in district court in DC over its approval of Georgia’s waiver under Section 1332. The lawsuit alleges that prior guidance on Section 1332 and HHS’s approval of Georgia’s waiver are unlawful because these actions violate Section 1332 of the ACA and the Administrative Procedure Act. This case will be heard by Judge James E. Boasberg, who presided over the Medicaid work requirements litigation and the association health plan rule litigation discussed above.

On March 26, Georgia asked to intervene to defend its interests in the challenge to its waiver approval. Georgia noted its concern that, if the plaintiffs succeed, it cannot enforce state law or make changes to address concerns about its health insurance market. Georgia also raises the possibility that HHS, under the Biden administration, will not fully defend approval of the state’s waiver. Neither the federal government nor the plaintiffs took a position, and Judge Boasberg swiftly granted the request. The Biden administration’s response to the complaint is due on May 25 following an extension.

SUNSET Rule

On March 9, a coalition led by Santa Clara County—and including the California Tribal Families Coalition, the National Association of Pediatric Nurse Practitioners, the American Lung Association, Center for Science in the Public Interest, and the National Resources Defense Council—challenged the “sunset” rule. As discussed more here, this rule added global expiration dates to most current HHS rules. As such, nearly 20,000 HHS rules would expire automatically unless HHS took further action to prevent expiration. Among other claims, the challengers argue that the rule failed to satisfy procedural notice and comment requirements under the Administrative Procedure Act and that this deregulatory effort exceeds HHS’s authority and is arbitrary and capricious.

HHS heavily cited the legal challenge in a new rule issued on March 23 to delay the effective date of the sunset rule by one year—until March 22, 2022. The preamble notes that HHS is taking “a fresh and critical look” at the sunset rule in light of the litigation and prior comments. The preamble lays out many concerns raised about the rule, such as limited HHS capacity (especially during the pandemic) and uncertainty and confusion for the plaintiffs, industry, and beneficiaries (among other concerns).

In the meantime, Congress may invalidate the sunset rule on its own. On March 30, Democratic Reps. Anna Eshoo (CA-18) and Raja Krishnamoorthi (IL-08) introduced a resolution to invalidate the sunset rule using the Congressional Review Act (CRA). Given the timing of when the sunset rule was finalized, the new Congress can, by a simple majority in each chamber, pass a resolution that, if signed by President Biden, invalidates the rule in its entirety and prevents HHS from adopting a substantially similar rule in the future. It is not yet clear who will cosponsor the resolution in the Senate or the timeline for passage, but Congress must act relatively swiftly—likely before the end of the month—to take advantage of this process under the CRA. (As discussed here, Congress used the CRA to invalidate many rules in 2017 but the current Congress has introduced few CRA resolutions.)

Data Marketing Partnership Arrangement

In November 2020, the federal government appealed a district court decision blessing yet another alternative to ACA coverage. The decision overturned an advisory opinion from the Department of Labor that would have restricted a new arrangement designed to avoid major ACA protections and state regulation of private health insurance. There had been a possibility that the Trump administration would not appeal the lower court’s decision, but it was encouraged to do so by stakeholders such as the National Association of Insurance Commissioners and filed the notice of appeal after the 2020 election on November 27, 2020.

The government’s opening brief was initially due on January 13, but, following multiple extensions, the government filed its opening brief on March 31. The brief argues that the district court wrongly concluded that the Department of Labor’s advisory opinion was a final agency action; a non-final action would be unreviewable in court. Even if the advisory opinion is reviewable, the government argues that the arrangement does not cover “participants” under federal law in a way that makes it operate as a self-funded single employer plan under the Employee Retirement Income Security Act. The brief provides additional explanation of how this arrangement operates and why the district court’s ruling should be reversed. Amicus briefs in support of the government’s position are due on April 7, and briefing will continue from there.

Author’s Note

I would like to extend a special thanks to Mark Regan, who tracks these lawsuits as closely as I do and who makes all the filings publicly available on his website. He is a national treasure.