By Jason C. Lynch and Andy Liu

On Monday, June 24, the Supreme Court granted certiorari in a case involving “risk corridor” payments authorized and mandated by the Affordable Care Act.  The “risk corridor” is one of three elements of the ACA meant to decrease the cost of offering plans through exchanges.  The idea is simple: the relatively profitable exchange plans pay in, and the relatively unprofitable plans receive payments out.  The question will be whether Congress’ subsequent appropriations statutes, which expressly prohibited one of two identified funding sources for those payments, prevents HHS from making risk-corridor payments from other sources.

Money for the payments out has to be appropriated.  And because the payments in have not nearly equaled the required payments out, some additional appropriation is required.  In 2014, Congress asked GAO to study what other sources might be available.  GAO identified only one: a CMS “program management” appropriation.  Later in 2014, Congress passed the FY2015 continuing appropriation act, in which it expressly forbade HHS from using the “program management” appropriation to make risk-corridor payments.  That left only the payments in from the profitable plans.  The petitioner health plans had advanced two claims, one statutory and one based on an implied-in-fact contract, both of which were rejected by the Federal Circuit.

The plaintiffs in these risk-corridor cases nonetheless claimed that HHS was still liable, under the ACA itself, for the amount of the payments.  In all four cases, the Federal Circuit rejected that argument.  The court held that the subsequent appropriations restrictions had “repealed or suspended [that] obligation” and thus vitiated the plans’ claim to the money.  Having commissioned a study of other available sources and then expressly forbidding the one source identified, Congress had made its intention clear: the only available source of funding is the payments in.  If that money does not cover the payments out, so be it

The Federal Circuit also rejected the plans’ implied-in-fact contract claim.  Under the rubric in which courts presume that a statute does not create a contract, the court found “no promissory language” in the ACA and “no statement by the government [that] evinced an intention to form a contract.”

The Supreme Court’s answers to these questions will be important.  In recent years, we’ve seen annual appropriations deployed as a tool to undo or constrain previously enacted statutes.  This often victimizes the intended recipients of those funds, such as the health plans here.  Will they go without redress?  We will see next term.