Conway v. United States ( 2021 )

Case: 20-1292 Document: 48 Page: 1 Filed: 05/17/2021
United States Court of Appeals
for the Federal Circuit
______________________
MICHAEL CONWAY, IN HIS CAPACITY AS
LIQUIDATOR OF COLORADO HEALTH
INSURANCE COOPERATIVE, INC.,
Plaintiff-Appellee
v.
UNITED STATES,
Defendant-Appellant
______________________
2020-1292
______________________
Appeal from the United States Court of Federal Claims
in No. 1:18-cv-01623-RAH, Judge Richard A. Hertling.
______________________
Decided: May 17, 2021
______________________
CLIFTON S. ELGARTEN, Crowell & Moring LLP, Wash-
ington, DC, argued for plaintiff-appellee. Also represented
by CHARLES BAEK, SKYE MATHIESON, STEPHEN JOHN
MCBRADY, MONICA ROSE STERLING, DANIEL WILLIAM
WOLFF.
ALISA BETH KLEIN, Appellate Staff, Civil Division,
United States Department of Justice, Washington, DC, ar-
gued for defendant-appellant. Also represented by
JEFFREY B. CLARK, JEFFREY ERIC SANDBERG.
______________________
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2 CONWAY v. UNITED STATES
Before MOORE, BRYSON, and CHEN, Circuit Judges.
MOORE, Circuit Judge.
The government appeals a final judgment of the United
States Court of Federal Claims. J.A. 21; see also Conway
v. United States, 145 Fed. Cl. 514 (2019) (“Claims Court
Op.”). In 2016, a Colorado court ordered Colorado Health
Insurance Cooperative, Inc., into liquidation. At the time,
the government owed Colorado Health $24,489,799 for re-
insurance debts under the Patient Protection and Afforda-
ble Care Act (ACA), Pub. L. No. 111-148, 124 Stat. 119(2010), and related regulations. Colorado Health, on the
other hand, owed the Department of Health and Human
Services approximately $42,000,000 for risk adjustment
debts, another program under the ACA and related regula-
tions. The government attempted to leapfrog other insol-
vency creditors through offset, rather than paying its debt
in full and making a claim against Colorado Health’s estate
as an insolvency creditor. The Claims Court, however, or-
dered the government to pay. For the following reasons,
we affirm.
BACKGROUND
In the ACA, Congress adopted “a series of interlocking
reforms designed to expand coverage in the individual
health insurance market.” King v. Burwell, 576 U.S. 473,
478–79 (2015). As part of the ACA, Congress enacted three
risk-mitigation programs, often called the “3Rs.” 42 U.S.C.
§§ 18061 (reinsurance), 18062 (risk corridors), 18063 (risk
adjustment). In general, the 3Rs were aimed at stabilizing
health insurance premiums. Patient Protection and Af-
fordable Care Act; HHS Notice of Benefit and Payment Pa-
rameters for 2014, 78 Fed. Reg. 15,410, 15,411 (Mar. 11,
2013) (to be codified at 45 C.F.R. pts. 153, 155–58) (“2014
Final Rule”).
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CONWAY v. UNITED STATES 3
Here, the risk adjustment and reinsurance programs
are particularly relevant. The risk adjustment program,
which is permanent, charges insurers of individuals who
had below-average actuarial risk and pays insurers of indi-
viduals who had above-average actuarial risk. 42 U.S.C.
§ 18063(a). It “is intended to provide increased payments
to health insurance issuers that attract higher-risk popu-
lations, such as those with chronic conditions, and reduce
the incentives for issuers to avoid higher-risk enrollees.”
2014 Final Rule, 78 Fed. Reg. at 15,411. The reinsurance
program, which only lasted three years, collected yearly
payments from all insurers and made payments to insurers
of particularly costly individuals that year. 42 U.S.C.
§ 18061. It “[wa]s designed to protect against issuers’ po-
tential perceived need to raise premiums due to the imple-
mentation of the 2014 market reform rules, specifically,
guaranteed availability.” 2014 Final Rule, 78 Fed. Reg. at
15,467. Both programs operate on a state-by-state basis,
and states are permitted to craft their own programs, pro-
vided the plans comply with federal standards. 42 U.S.C.
§ 18041(a)–(b). If states fail to act, however, the Depart-
ment of Health and Human Services (HHS) must step in.
Id. § 18041(c). In all but two states, HHS operates both
programs.
To implement these programs, HHS has promulgated
extensive regulations. See, e.g., 2014 Final Rule, 78 Fed.
Reg. at 15,411–540. One such regulation, designed to ease
HHS’ administration of the 3Rs, allows for netting of pay-
ments:
HHS may net payments owed to issuers and their
affiliates operating under the same tax identifica-
tion number against amounts due to the Federal or
State governments from the issuers and their affili-
ates under the same taxpayer identification number
for . . . risk adjustment [and] reinsurance . . . pay-
ments and charges.
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4 CONWAY v. UNITED STATES
45 C.F.R. § 156.1215(b) (the “Netting Regulation”) (appli-
cable after 2014). In promulgating the Netting Regulation,
HHS explained that it was designed “to streamline pay-
ment and charge flows from all of these programs” and that
HHS believed “this process w[ould] enable [it] to operate a
monthly payment cycle that will be efficient for both issu-
ers and HHS.” Patient Protection and Affordable Care Act;
HHS Notice of Benefit and Payment Parameters for 2015,
79 Fed. Reg. 13,744, 13,817 (Mar. 11, 2014) (“2015 Final
Rule”).
The ACA also created a Consumer Operated and Ori-
ented Plan (CO-OP) program “to foster the creation of qual-
ified nonprofit health insurance issuers to offer qualified
health plans in the individual and small group markets in
the States in which the issuers are licensed to offer such
plans.” 42 U.S.C. § 18042(a)(2). That program provided
loans and grants to persons “applying to become qualified
nonprofit health insurance issuers.” Id. § 18042(b)(1). In
setting repayment terms for those loans, HHS is required
to comply with state solvency law. Id. § 18042(b)(3).
Colorado Health, a CO-OP program insurer, partici-
pated in the Colorado reinsurance and risk-adjustment
programs for benefit year 2015. Because Colorado had de-
clined to administer those programs, HHS operated both.
For that year, HHS owed Colorado Health $38,664,334.67
under the reinsurance program, and Colorado Health owed
HHS approximately $42,000,000 under the risk-adjust-
ment program. In early 2016, before the final obligations
for benefit year 2015 were tabulated, HHS made an early
reinsurance payment. Accounting for that payment, HHS
still owes Colorado Health $24,489,799. No other pay-
ments have been made.
Soon after HHS’ early payment, a Colorado court or-
dered Colorado Health into liquidation. Liquidation is a
bankruptcy-like proceeding during which a liquidator, here
Michael Conway, collects and distributes an insurer’s
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CONWAY v. UNITED STATES 5
assets. In Colorado, such proceedings are governed by the
Insurers’ Rehabilitation and Liquidation Act. Colo. Rev.
Stat. §§ 10-3-501 to 10-3-559; see also 1992 Colo. Legis.
Serv. S.B. 92–12 (repealing and recodifying that Act in its
entirety). The Act sets the priority for asset distribution.
See Colo. Rev. Stat. § 10-3-541. For example, it prioritizes
administrative expenses and policyholders over the federal
government:
Class 1. The costs and expenses of administration
during rehabilitation and liquidation, including but
not limited to the following: . . . .
Class 2. All claims under policies [with various ex-
ceptions] . . . .
Class 3. Claims of the federal government, except
those described in [Class 2].
Id. § 10-3-541(a)–(c). It also creates exceptions to those pri-
ority rules. One such exception, added during the 1992 re-
codification, is offset:
Notwithstanding any other provision of this title,
mutual debts or mutual credits, whether arising out
of one or more contracts between the insurer and an-
other person in connection with any action or pro-
ceeding under this part 5, shall be set off, and the
balance only shall be allowed or paid, except as pro-
vided in subsections (2) and (4) of this section and
section 10-3-532.
Id. § 10-3-529(1) (as amended in 2001). This set off statute
overruled, in part, Bluewater Insurance Ltd. by Tennessee
Insurance Co. v. Balzano by Colaiannia, 823 P.2d 1365(Colo. 1992) (holding no right to offset existed).
In response to Colorado Health’s insolvency, HHS ex-
pressed an intent to offset Colorado Health’s risk adjust-
ment debt against HHS’ reinsurance debt. After various
proceedings in state court, Conway sued HHS in the
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6 CONWAY v. UNITED STATES
Claims Court, seeking direct payment of HHS’ reinsurance
debt. Before the government answered, Conway moved for
summary judgment. The government opposed and filed a
countermotion to dismiss.
The Claims Court granted-in-part and denied-in-part
both motions. See Claims Court Op., 145 Fed. Cl. at 518.
As is relevant here, the Claims Court held “neither the
ACA nor another statute require or authorize HHS to issue
a rule offsetting among different ACA programs payments
HHS owes to an insurer in liquidation proceedings and con-
tributions HHS is owed.” Id. at 522, 523–24. It also held
that federal common law controlled the government’s right
to offset, rather than state law. Id. at 524. But the Claims
Court recognized that existing federal law does not address
offset during state-law insolvency proceedings. Id. And
the Claims Court declined to create federal common law
that would conflict with state law. Id. at 526–27. Inter-
preting Colorado’s offset provision, the Claims Court held
the government was not entitled to offset. Id. at 524–26.
Thus, it entered judgment on the merits in Conway’s favor.
Id. at 530. The parties stipulated to the amount of dam-
ages, and the Claims Court entered final judgment. J.A.
21. The government appeals. We have jurisdiction under
28 U.S.C. § 1295(a)(3).
DISCUSSION
The government challenges the Claims Court’s deci-
sion at every turn. It argues that Colorado law, as properly
interpreted, affords it a right to offset ACA debts during
insolvency proceedings. Thus, even if state rules of deci-
sion apply, the government seeks reversal. Moreover, fed-
eral law, the government contends, provides a right to
offset ACA debts during insurer insolvency or at least fore-
closes the Claims Court’s money judgment. Put simply, the
government argues its ACA debts take priority over all
other creditors’ claims during Colorado insolvency
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CONWAY v. UNITED STATES 7
proceedings. Oral Arg. 1 at 8:42–9:23 (agreeing that the
government argues that, “if a debt is owed under the ACA,
then it trumps insolvency entirely”). We do not agree.
A. Colorado Law
With respect to state law, the government reads Colo.
Rev. Stat. § 10-3-529 as allowing offset of statutory obliga-
tions, not just contractual obligations. Alternatively, the
government believes it is entitled to offset statutory obliga-
tions under Colorado common law.
I. Statutory Law
Under Colorado law, “[o]ur primary duty in construing
statutes is to give effect to the intent of the General Assem-
bly, looking first to the statute’s plain language.” Vigil v.
Franklin, 103 P.3d 322, 327 (Colo. 2004). When the statute
is “clear and unambiguous on its face,” we “need not look
beyond the plain language.” Id. “Words and phrases shall
be read in context and construed according to the rules of
grammar and common usage.” Colo. Rev. Stat. § 2-4-101;
accord id. Also, we must “presume that the legislature did
not use language idly. Rather, the use of different terms
signals the General Assembly’s intent to afford those terms
different meanings.” Bd. of Cty. Comm’rs of the Cnty. of
Teller v. City of Woodland Park, 333 P.3d 55, 58 (Colo.
2014) (citation omitted).
Section 10-3-529(1)’s plain language, which in part
overturned Bluewater, allows offset of contractual obliga-
tions. In relevant part, that section requires that “mutual
debts or mutual credits, whether arising out of one or more
contracts . . . , be set off” during insurer insolvency proceed-
ings. By its terms, the “one or more contracts” clause ex-
plains which “mutual debts or mutual credits . . . shall be
1 Available at http://oralarguments.cafc.uscourts.
gov/default.aspx?fl=20-1292_12092020.mp3.
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8 CONWAY v. UNITED STATES
set off.” The Colorado offset provision is limited to offset-
ting debts and credits in contractual obligations. The “one
or more contracts” clause lacks any broad, catchall lan-
guage that would extend further. Thus, § 10-3-529(1)’s
plain language requires offset for obligations “arising out
of one or more contracts,” but no other obligations.
The next subsection, which excludes certain obliga-
tions from § 10-3-529(1)’s purview, supports that interpre-
tation. The General Assembly excluded only two specific
categories of obligations:
(e) The obligation of the person is to pay an assess-
ment levied against the members or subscribers of
the insurer, or is to pay a balance upon a subscrip-
tion to the capital stock of the insurer, or is in any
other way in the nature of a capital contribution; or
(f) The obligations between the person and the in-
surer arise from business in which either the person
or the insurer has assumed risks and obligations
from the other party and then has ceded back to that
party substantially the same risks and obligations;
except that, with regard to such business, the com-
missioner has discretion to allow certain setoffs if
the commissioner deems them appropriate.
Id. § 10-3-529(2)(e)–(f). Each category describes contrac-
tual obligations: obligations of owners or subscribers in
subsection (e) 2 and obligations that allocate risk in
2 “Assessments” are an example of “consideration for
[contracts of insurance].” See Colo. Rev. Stat. § 10-3-502(4)
(“Doing business” includes . . . [c]ollecting premiums, mem-
bership fees, assessments, or other consideration for such
contracts[.]”). Colorado courts may be able to order an as-
sessment for “all members of the insurer who are subject to
assessment,” id. § 10-3-530, but the obligation to pay arises
out of contract.
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CONWAY v. UNITED STATES 9
subsection (f). In contrast, § 10-3-529(2) does not carve out
any specific noncontractual obligations, supporting our
reading of § 10-3-529(1).
The offset statute’s effective date provision, § 10-3-
529(6), further supports our interpretation of § 10-3-529:
This section shall be effective January 1, 1993, and
shall apply to all contracts entered into, renewed, ex-
tended, or amended on or after said date and to debts
or credits arising from any business written or trans-
actions occurring after January 1, 1993, pursuant to
any contract including those in existence prior to
January 1, 1993, and shall supersede any agree-
ments or contractual provisions which might be con-
strued to enlarge the setoff rights of any person
under any contract with the insurer. For purposes of
this section, any change in the terms of, or consider-
ation for, any such contract shall be deemed an
amendment.
It provides a detailed framework for determining when
§ 10-3-529 becomes effective for contractual obligations,
considering various fact patterns. But it is silent as to sim-
ilar problems that would arise for noncontractual obliga-
tions. By treating contractual obligations in such detail,
the General Assembly conveys its sole focus on such obli-
gations.
The government does not read the language of § 10-3-
529(1) as limited to offsets “whether arising from one con-
tract or arising from more than one contract.” Instead, the
government suggests that the statute should be construed
as if it allowed offsets “whether or not they arise out of con-
tract.” But in recodifying the Insurers’ Rehabilitation and
Liquidation Act, the Colorado General Assembly used
“whether . . . or not” extensively. See, e.g., 1992 Colo. Legis.
Serv. S.B. 92–12, §§ 10-3-516(1)(a) (using “whether or
not”), 10-3-520(1)(u) (same). By using “whether” rather
than “whether . . . or not,” the General Assembly created a
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10 CONWAY v. UNITED STATES
presumption that it intended different meanings. See
Teller, 333 P.3d at 59. And nothing in the plain language
of the statute or the broader statutory scheme rebuts the
presumption.
After considering all relevant sources of authority, we
hold that Colo. Rev. Stat. § 10-3-529(1) provides an offset
right that is limited to contractual obligations. Because the
obligations here arise out of a statute, § 10-3-529 does not
afford the government a right to offset.
II. Common Law
“[W]here the interaction of common law and statutory
law is at issue, [Colorado courts] acknowledge and respect
the [Colorado] General Assembly’s authority to modify or
abrogate common law, but can only recognize such changes
when they are clearly expressed.” Vigil, 103 P.3d at 327.
“A statute, general in its terms, is always to be taken as
subject to the common law.” Id. (internal quotation marks
omitted). But “when the legislature speaks with exacti-
tude, [Colorado courts] must construe the statute to mean
that the inclusion or specification of a particular set of con-
ditions necessarily excludes others.” Id.
The context of the statutory scheme suggests § 10-3-
529 defines all permissible offsets during insurer insol-
vency. As discussed above, that section is “specific in its
terms and without ambiguity or qualification.” See Vigil,
103 P.3d at 328. And it was passed as part of a “compre-
hensive and exhaustive” statutory scheme. See id.; 1992
Colo. Legis. Serv. S.B. 92–12. In that statutory scheme, the
General Assembly included a detailed order for creditor
priority. Colo. Rev. Stat. § 10-3-541. Allowing offset be-
yond the plain terms of § 10-3-529 would disrupt that pri-
ority order. It would also render § 10-3-529 superfluous.
The common law right the government argues for would
cover every obligation that must be offset under § 10-3-529,
i.e., contractual obligations, leaving the statute’s language
meaningless. Because the statutory language is clear, our
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CONWAY v. UNITED STATES 11
inquiry begins and ends with the unambiguous statutory
language. Vigil, 103 P.3d at 327.
The Colorado Supreme Court’s closest case on point—
Bluewater, 823 P.2d 1365—supports our conclusion.
There, the Colorado Supreme Court held that Colorado’s
then-effective insolvency statutes “abrogate[d] any right of
the reinsurer to offset unpaid premiums from the reinsur-
ance proceeds due.” Id. at 1366. The court reasoned that
the Colorado General Assembly had passed a group of stat-
utes changing “the very nature of the reinsurance con-
tract,” id. at 1372, rather than just overruling the Supreme
Court’s holding that reinsurance was a contract of indem-
nity, see Fidelity & Deposit Co. v. Pink, 302 U.S. 224 (1937).
And the insurance commissioner gave sensible effect to
those statutes by excluding an offset clause in the relevant
reinsurance contracts. Deferring to the commissioner’s in-
terpretation, then, the court held that “the plain words of
the [insurance] statutes abrogate the alleged [equitable]
right to offset.” Bluewater, 823 P.2d at 1373. Later, it also
noted offset would create an impermissible preference for
reinsurance creditors: “the relief prayed for by the reinsur-
ers, predicated on the existence of an equitable right to off-
set, would favor their private interest over the interest of
policyholders, contrary to law.” Id. at 1374. In the same
way, allowing the government to offset here would allow its
interests to leapfrog policyholders’ interests, and that
would be contrary to the priority framework set out in § 10-
3-541 and to the absence of non-contractual debts from
§ 10-3-529(1)’s scope. We see no basis in Colorado common
law to adopt the sweeping offset provision advocated for by
the government.
Therefore, because § 10-3-529 defines all permissible
offsets under Colorado insolvency law, there is no equitable
right to offset. Without such a right, the government can-
not offset ACA obligations under Colorado common law.
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12 CONWAY v. UNITED STATES
B. Federal Law
Because Colorado law does not provide the government
a right to offset, we consider federal law. The government
argues that debts arising under the federal regulatory
scheme, i.e., the ACA and HHS’ regulations implementing
the ACA, are not subject to Colorado insolvency law. In the
alternative, it relies on federal common law for a right to
offset in state insolvency proceedings. Finally, even if it
cannot offset, the government argues a money judgment
was inappropriate. We take each contention in turn.
I. The Federal Scheme
The parties’ dispute regarding the federal scheme has
been a bit of a moving target. Initially, the government
focused on the validity and applicability of the Netting Reg-
ulation. See Appellant Br. at 14–24. Throughout the ap-
peal, the government expanded its preemption position,
arguing any debt owed to the government under the ACA
is exempted from Colorado’s priority statute. Oral Arg. at
7:55–10:15. The government argued that federal ACA
debts are not subject to state insolvency law—they move to
the front of the line of creditors. Oral Arg. at 8:42–9:23
(agreeing that the government argues that, “if a debt is
owed under the ACA, then it trumps insolvency entirely”).
In the end, the parties present a question of preemption:
whether the federal scheme preempts state law fixing cred-
itors’ rights during insolvency.
1
“Put simply, federal law preempts contrary state law.”
Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1297
(2016). “Pre-emption fundamentally is a question of
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CONWAY v. UNITED STATES 13
congressional intent . . . .” 3 English v. Gen. Elec. Co., 496
U.S. 72, 78–79 (1990). “To discern Congress’ intent we ex-
amine the explicit statutory language and the structure
and purpose of the statute.” Ingersoll-Rand Co. v. McClen-
don, 498 U.S. 133, 138 (1990). Additionally, we must “re-
spect not only what Congress wrote but, as importantly,
what it didn’t write.” Va. Uranium, Inc. v. Warren, 139 S.
Ct. 1894, 1900 (2019) (Gorsuch, J., announcing judgment
and delivering an opinion). When Congress is “silen[t] on
[an] issue,” despite “its certain awareness of” that issue,
that “is powerful evidence that Congress did not intend”
preemption. Wyeth v. Levine, 555 U.S. 555, 575 (2009).
“[B]ecause the States are independent sovereigns in
our federal system, we have long presumed that Congress
does not cavalierly pre-empt” state law. Medtronic, Inc. v.
Lohr, 518 U.S. 470, 485 (1996). Particularly when “Con-
gress has legislated in a field which the States have tradi-
tionally occupied, we start with the assumption that the
historic police powers of the States were not to be super-
seded by the Federal Act unless that was the clear and
manifest purpose of Congress.” Id. (internal quotation
marks and citations omitted).
3 Although the Supreme Court casts preemption in
congressional terms, these statements apply with equal
force to agency regulations. “Federal regulations have no
less pre-emptive effect than federal statutes.” Fidelity Fed.
Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 153 (1982).
The relevant questions are whether a regulation was in-
tended to preempt state law and, if so, whether that regu-
lation is within the scope of HHS’ delegated authority. Id.Because the government has not shown that HHS had a
“clear and manifest” intent to preempt state law fixing
creditor priority during insolvency, we need not reach Con-
way’s arguments regarding the latter question.
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14 CONWAY v. UNITED STATES
There are strong justifications for applying the pre-
sumption against preemption to insurer insolvency law.
“[T]he regulation of ‘insurance’ . . . has traditionally been
under the control of the States.” SEC v. Variable Annuity
Life Ins. Co. of Am., 359 U.S. 65, 68–69 (1959) (citation
omitted). And there is a “historic primacy of state regula-
tion of matters of health and safety,” which supports apply-
ing the presumption to health insurance regulations.
Medtronic, 518 U.S. at 485. In fact, Congress has recog-
nized the benefits of state regulation of insurance: “the con-
tinued regulation and taxation by the several States of the
business of insurance is in the public interest.” McCarran-
Ferguson Act ch. 20, § 1, 59 Stat. 33, 33 (1945) (codified at
15 U.S.C. § 1011); see also id. § 2, 59 Stat. at 34 (codified as
amended at 15 U.S.C. § 1012) (limiting federal preemption
of state insurance law).
Thus, for federal law to control in state insurer insol-
vency proceedings, the government must overcome the pre-
sumption against preemption. To do so, it must identify a
clear and manifest intent to preempt Colorado law that
fixes creditors’ rights during insolvency. But neither the
ACA nor HHS’ regulations implementing the ACA evi-
dence such an intent. 4
2
To begin our analysis of preemptive intent, we start
with the ACA. First, we look to the statutory text, which
4 Conway argues that our preemption analysis is
narrowed by the McCarran-Ferguson Act’s nonpreemption
provision, 15 U.S.C. § 1012, and the ACA’s nonpreemption
provision, 42 U.S.C. § 18041(d). Because we hold federal
law does not preempt under the ordinary preemption
framework, we need not address this argument. We do
note, however, that Conway concedes the ACA relates to
insurance. Appellee Br. at 17.
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CONWAY v. UNITED STATES 15
is silent regarding state insolvency law. See N.Y. State
Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 655 (1995). Next, we consider the statu-
tory scheme’s broader structure, which suggests an ab-
sence of broad preemptive intent. Then, we consider the
purposes of the statutory scheme, which are far narrower
than the government contends. All told, nothing about the
statutory scheme suggests a clear intent to preempt state
insolvency law sufficient to overcome the presumption
against preemption.
The text of the statutory scheme is silent regarding
creditor priority during insurer insolvency. No section of
the ACA, which spans thousands of pages, relates to in-
surer liquidation. Most importantly, there are no provi-
sions addressing the order in which creditors are paid
during insolvency. In fact, the ACA does not mention the
words “creditor” or “debtor” anywhere in its tomes. Alt-
hough the statute does contain the words “credit,” “debt,”
“estate,” “claims,” “priority” and “insolvency,” they are used
in unrelated contexts. See, e.g., 26 U.S.C. §§ 38 (discussing
tax “credit”), 1401(b)(2) (discussing taxation and mention-
ing “estate”); 42 U.S.C. §§ 1320d-2(j)(4)(D)(ii) (making pen-
alties for failing to comply with certain standards of a past
due “debt,” including by allowing the Internal Revenue
Service authority to offset under 26 U.S.C. § 6402),
18002(c) (discussing submission of “claims” for reimburse-
ment), 18042(b)(2)(A)(ii) (discussing “priority” for choosing
who receives certain loans); see also ACA sec. 10103,
§ 1254, 124 Stat. at 895–96 (requiring study of large group
market, including evaluation of risk of insurers becoming
“insolvent” due to the ACA). Likewise, the ACA does not
contain any provision that addresses exceptions to the pri-
ority framework during insolvency. There is nothing in the
ACA approaching an offset statute like Colo. Rev Stat.
§ 10-2-529.
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16 CONWAY v. UNITED STATES
The government relies on two inapposite ACA provi-
sions: 42 U.S.C. §§ 18041(d) and 18063(c). Section
18041(d), by its terms, does not address insurer insolvency:
Nothing in [title I] shall be construed to preempt
any State law that does not prevent the application
of the provisions of th[at] title.
If anything, § 18041(d) expresses congressional intent to
preempt only a narrow class of state laws. See Gobeille v.
Liberty Mut. Ins. Co., 136 S. Ct. 936, 947 (2016) (character-
izing § 18041(d) as an “anti-pre-emption provision”); St.
Louis Effort for AIDS v. Huff, 782 F.3d 1016, 1022 (8th Cir.
2015) (“This preemption clause is a narrow one.”); Unum
Life Ins. Co. of Am. v. District of Columbia, 238 A.3d 222,
227 (D.C. 2020) (noting § 18041(d) “could be called an ex-
press nonpreemption provision”). It does not, therefore,
provide evidence of a clear intent to preempt state law fix-
ing creditor priority during bankruptcy. Likewise,
§ 18063(c) says nothing about insolvency:
A health plan or a health insurance issuer is de-
scribed in this subsection if such health plan or
health insurance issuer provides coverage in the
individual or small group market within the State.
This subsection shall not apply to a grandfathered
health plan or the issuer of a grandfathered health
plan with respect to that plan.
Section 18063(c) merely defines the scope of insurers sub-
ject to the risk adjustment program. See 42 U.S.C.
§ 18063(a). Conway concedes that Colorado Health owes
HHS a risk adjustment debt and, thus, is subject to the risk
adjustment framework. Section 18063(c) does not speak to
the crux of this appeal: whether the government can leap-
frog other insolvency creditors when seeking repayment for
a debt under the ACA. That is, § 18063(c) is simply silent
on the relevant point.
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CONWAY v. UNITED STATES 17
The broader statutory structure, like its text, suggests
an absence of clear preemptive intent. Repeatedly, Con-
gress identified the ACA’s impact on state law. See, e.g., 42
U.S.C. § 18041(d) (limiting impact of title I). Specifically,
it preserved some state insurer solvency law. Id.§§ 18001(g)(5) (preserving state solvency law when creat-
ing immediate relief for uninsured individuals with a
preexisting condition), 18044 (requiring qualified health
plans and private health plans be subject to the same sol-
vency law). At no point, however, did Congress expressly
supplant state solvency law. In fact, the ACA initially con-
tained a provision requiring HHS to establish a federal sol-
vency standard for the community health insurance option.
ACA § 1323, 124 Stat. at 192. But the community health
insurance option, along with HHS’ obligation to create a
federal solvency standard, was removed before the ACA be-
came law. Id. § 10104(m), 124 Stat. at 902 (striking
§ 1323). Congress expressly addressed some aspects of the
ACA’s impact on state solvency law without addressing its
impact on creditor priority during insolvency, providing
strong evidence that Congress left state priority law intact.
Likewise, there is no clear purpose underlying the ACA
that suggests congressional intent to supplant state law
fixing creditor priority during insolvency. The government
argues that Colorado law, by preventing offset here, inhib-
its the purposes of the 3Rs. It claims that forbidding offset
“would require HHS to siphon funds from insurers that are
still providing health coverage and instead direct them to
insurers that have failed—unsettling markets and com-
pounding losses across the insurance industry.” Appellant
Br. at 22. According to the government, Conway’s “inter-
pretation . . . would undermine the central purpose of the
risk adjustment program, which is to stabilize the insur-
ance markets in each State.” Appellant Reply Br. at 5.
These arguments are unpersuasive.
Fundamentally, the government overstates the statu-
tory scheme’s purposes. Though the ACA was aimed at
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18 CONWAY v. UNITED STATES
achieving broad purposes, like premium stabilization,
there is no indication these purposes are meant to apply “at
all costs.” Cf. Pac. Gas & Elec. Co. v. State Energy Res.
Conservation & Dev. Comm’n, 461 U.S. 190, 222 (1983)
(holding “that the promotion of nuclear power is not to be
accomplished ‘at all costs’”). Most poignantly, Congress ex-
pressed an intent to only preempt a narrow class of state
laws. See 42 U.S.C. § 18041(d). The government, on the
other hand, would place any debt incurred under the ACA
beyond the reach of state insolvency law. No evidence has
been presented that establishes congressional intent for
such expansive preemption. Ultimately, the ACA was
aimed at expanding quality health care in the individual
insurance market, King, 576 U.S. at 478–79, not supplant-
ing traditional state regulation of insurer insolvency.
Likewise, the purposes underlying the risk-mitigation
programs, the 3Rs, do not evidence a clear and manifest
intent to preempt state law. Most broadly, the 3Rs were
aimed at stabilizing premiums. 2014 Final Rule, 78 Fed.
Reg. at 15,411. Nothing about that purpose speaks directly
to insurer insolvency. And the government has not pointed
to evidence that purpose was to apply at all costs, for ex-
ample to the detriment of policyholders’ claims during in-
surer insolvency. See Colo. Rev. Stat. § 10-3-541 (only
placing administrative expenses and policyholders’ claims
before debts owed to the federal government for creditor
priority). For the risk adjustment program more specifi-
cally, according to HHS promulgations, that program was
“intended to provide increased payments to health insur-
ance issuers that attract higher-risk populations, such as
those with chronic conditions, and reduce the incentives for
issuers to avoid higher-risk enrollees.” 2014 Final Rule, 78
Fed. Reg. at 15,411. The government has not pointed to
any legislative or regulatory history that suggests risk ad-
justment’s purposes were to apply at all costs or to the det-
riment of state insolvency law. And the reinsurance
program, according to HHS, “[wa]s designed to protect
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CONWAY v. UNITED STATES 19
against issuers’ potential perceived need to raise premiums
due to the implementation of the 2014 market reform rules,
specifically, guaranteed availability.” Id. at 15,467. Again,
the government has not identified anything about that pur-
pose that speaks to state insolvency law or any legislative
history that suggests reinsurance’s purposes were in-
tended to supplant state insolvency law.
Indeed, although it is not conclusive, there is evidence
that Colorado’s priority framework is consistent with the
ACA’s ultimate goals. Cf. Int’l Paper Co. v. Ouellette, 479
U.S. 481, 494 (1987) (holding that sharing an “ultimate
goal” with federal law “is not enough” for state law to avoid
preemption). Other than administrative expenses, Colo-
rado’s priority structure only places policyholder-creditors
over the federal government. Colo. Rev. Stat. § 10-3-
541(a)–(c). Prioritizing policyholder-creditors increases
the likelihood individuals will receive payment on their
claims. This suggests the Colorado General Assembly had
a policy goal promoting the claims of insured individuals
above other debts. And that policy would be consistent
with the ACA’s policy goals. King v. Burwell, 576 U.S. at
478–79 (Congress adopted “a series of interlocking reforms
designed to expand coverage in the individual health insur-
ance market.”).
In fact, the ACA resembles the Atomic Energy Act of
1954, 42 U.S.C. § 2011 et seq., which the Supreme Court
addressed in Pacific Gas & Electric Co., 461 U.S. at 220–
23. The Court considered whether that Act preempted two
California statutes. One of those statutes, Cal. Pub. Res.
Code § 25524.2, “impose[d] a moratorium on the certifica-
tion of new nuclear plants” until an adequate means for
disposal of high-level nuclear waste was confirmed. Pac.
Gas & Elec. Co., 461 U.S. at 198. PG&E claimed that
“§ 25524.2 frustrate[d] the Atomic Energy Act’s purpose to
develop the commercial use of nuclear power.” Id. at 220.
But the Supreme Court disagreed. Although acknowledg-
ing the promotion of nuclear power was the federal act’s
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20 CONWAY v. UNITED STATES
chief purpose, the Supreme Court held that purpose “is not
to be accomplished ‘at all costs.’” Id. at 222. The Atomic
Energy Act’s “elaborate licensing and safety provisions”
and “preservation of state regulation in traditional areas”
prevented any such reading. Id. Since “Congress has left
sufficient authority in the states to allow the development
of nuclear power to be slowed or even stopped for economic
reasons,” the Court held that “it is for Congress to rethink
the division of regulatory authority in light of its possible
exercise by the states to undercut a federal objective.” Id.
at 223.
Analogously, the government claims the statutory
scheme’s general purposes preempt Colorado law that fixes
creditor priority during insolvency. But Congress has “left
sufficient authority in the states” to regulate insolvent in-
surers, as evidenced by the broader structure of the statu-
tory scheme. Nothing in the purposes of the ACA shows a
“clear and manifest” intent to preempt state creditor prior-
ity law.
The ACA is silent regarding its effect on state law fix-
ing creditor priority during insolvency. That silence stands
in stark contrast to other federal provisions addressing
creditor priority. See, e.g., 31 U.S.C. § 3713 (assigning the
government’s super priority during insolvency 5); 11 U.S.C.
§§ 507, 553 (fixing creditor priority during bankruptcy and
establishing an offset provision). Combined with the pre-
sumption against preemption, Congress’ silence “is power-
ful evidence that Congress did not intend” to preempt state
law fixing creditors’ rights during insolvency. See Wyeth,
555 U.S. at 575.
5 Unlike the ACA, however, § 3713 does not relate to
the business of insurance. See U.S. Dept. of the Treasury
v. Fabe, 508 U.S. 491, 501 (1993) (noting parties’ agree-
ment on that point).
Case: 20-1292 Document: 48 Page: 21 Filed: 05/17/2021
CONWAY v. UNITED STATES 21
3
Continuing our analysis of preemptive intent, we turn
to the HHS regulations. We start with the text of the reg-
ulatory scheme. We also look to the broader regulatory
structure for evidence of HHS’ intent, which strongly sug-
gests an intent to leave state insolvency law undisturbed.
Finally, we consider the purposes of the regulatory scheme,
which are circumscribed. Like the statutory scheme, noth-
ing in the regulatory scheme suggests a clear intent to
preempt state law setting creditor priority during insol-
vency.
Nothing in the text of HHS’ regulations governs credi-
tor priority or offset during insurer insolvency. See 45
C.F.R. subch. B. At no point does HHS place government
debts, or any other debts, outside the state-fixed creditor
priority scheme. Nor is there any HHS regulation that cre-
ates an exception to state priority frameworks. More spe-
cifically, there is no HHS regulation that discusses offset
during insolvency. To be sure, the Netting Regulation does
relate to countervailing obligations:
HHS may net payments owed to issuers and their
affiliates operating under the same tax identifica-
tion number against amounts due to the Federal or
State governments from the issuers and their affili-
ates under the same taxpayer identification number
for . . . risk adjustment [and] reinsurance . . . pay-
ments and charges.
45 C.F.R. § 156.1215(b). But it says nothing about insol-
vency or creditor priority. The words “priority,” “offset,”
“insolvency,” and “liquidation” are notably absent. HHS
did not, even implicitly, place the government’s debts above
those of an ordinary creditor during insolvency. Instead,
the Netting Regulation refers to netting of payments with-
out regard for creditor priority. Ultimately, the Netting
Regulation is silent on the relevant point.
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22 CONWAY v. UNITED STATES
Indeed, the parties agree the Netting Regulation is si-
lent regarding insolvency, even if they disagree about the
implications of that silence. The government argues that
insolvent insurers are subject to netting because “neither
the ACA nor the Netting Regulation exempts insolvent in-
surers.” Appellant Reply Br. at 6. That is, the government
argues the Netting Regulation’s general rule, which admit-
tedly does not address state insolvency proceedings, sup-
plants state law. Conway, on the other hand, argues HHS
lacked authority to offset in liquidation because “the net-
ting rule does not purport to” allow such offsets. Appellee
Br. at 34. Again, Conway effectively asserts the regulatory
scheme is silent, and that silence is strong evidence mili-
tating against a clear intent to preempt state law. See Wy-
eth, 555 U.S. at 575. That silence undermines any “clear
and manifest” intent to preempt state law and, thus, un-
dermines the presence of any preemptive intent. See id.Beyond the text of the Netting Regulation, the broader
regulatory scheme evidences an absence of clear preemp-
tive intent. For example, in its data validation regulation,
HHS suggests state law controls. That regulation defines
“liquidation”:
For purposes of this paragraph (g)(3), liquidation
means that a State court has issued an order of liq-
uidation for the issuer that fixes the rights and lia-
bilities of the issuer and its creditors, policyholders,
shareholders, members, and all other persons of in-
terest.
45 C.F.R. § 153.630(g)(3)(iii). If a “State court . . . order”
fixes creditors’ rights, then the implication is state insol-
vency law ordinarily defines those rights. See, e.g., Colo.
Rev. Stat. § 10-3-517 (“Upon issuance of [a liquidation] or-
der, the rights and liabilities of any such insurer and of its
creditors, policyholders, shareholders, members, and all
other persons interested in its estate shall become fixed.”).
And the government concedes HHS is a “creditor” in the
Case: 20-1292 Document: 48 Page: 23 Filed: 05/17/2021
CONWAY v. UNITED STATES 23
relevant sense. See, e.g., Appellant Reply Br. at 1 (“CMS is
also a creditor of the estate.”). This is strong evidence HHS
understood that state law would control creditor priority
during insolvency, belying any clear and manifest intent to
preempt state law.
As another example, HHS preserved state insolvency
law for repayment of CO-OP program loans. Congress del-
egated HHS authority to promulgate regulations regarding
loan repayment “in a manner that is consistent with State
solvency regulations and other similar State laws that may
apply.” 42 U.S.C. § 18042(b)(3); see also 45 C.F.R.
§ 156.520(b). By requiring consistency with state priority
law, Congress preserved state creditor priority statutes. In
fact, Colorado Health’s loan documents recognize Congress’
intent, subordinating “any HHS claim for repayment of the
[CO-OP] loan amounts . . . to the claims of policyholders
and other claimants.” J.A. 36. But nowhere in HHS’ regu-
lations did it expressly preempt state insolvency law, even
on unrelated points. HHS’ explicit treatment of state sol-
vency law is only aimed at preserving that state law from
preemption, and that too undermines any clear and mani-
fest intent to preempt state law fixing creditor priority.
Likewise, nothing about the purposes of the Netting
Regulation, or any other HHS regulation, provide a clear
and manifest intent to supplant state law fixing creditor
priority during insolvency. The government argues
“[n]etting enabled HHS to accelerate the distribution of
payments to insurers and thus advanced the ACA’s pur-
pose of stabilizing the insurance markets.” Appellant Br.
at 1; accord Appellant Reply Br. at 1. And it argues that
disallowing offset would undermine the “purpose of the
(permanent) risk adjustment program by enabling defunct
insurers to siphon off funds that are needed to pay insurers
still operating, thus jeopardizing the financial stability of
the functional insurers.” Appellant Reply Br. at 2; accord
id. at 1, 5–6; Appellant Br. at 22. This is particularly prob-
lematic, the government argues, because the 3Rs are
Case: 20-1292 Document: 48 Page: 24 Filed: 05/17/2021
24 CONWAY v. UNITED STATES
budget neutral. Appellant Br. 20–22. Based on those pur-
poses, the government argues the Netting Regulation must
preempt state law.
But that conclusion does not follow. As with the ACA,
the government overstates the purposes of the Netting
Regulation. There is no evidence that the Netting Regula-
tion is anything more than an administrative payment con-
venience. It does not use the terms typically found in
statutes that create a substantive right, like “offset” or “set-
off.” See, e.g., Colo. Rev. Stat. § 10-3-529. Nor is it paired
with a priority-setting statute, like substantive offset pro-
visions codified in state law. See, e.g., id. §§ 10-3-529 (set-
off), 10-3-541 (priority). Indeed, HHS itself recognized the
narrow purpose of the Netting Regulation. That regulation
was designed “[t]o streamline payment and charge flows
from all of” ACA programs. 2015 Final Rule, 79 Fed. Reg.
at 13,817. HHS hoped, by promulgating the Netting Reg-
ulation, it would be able “to operate a monthly payment cy-
cle that will be efficient for both issuers and HHS.” Id.
Nothing about those purposes suggests the Netting Regu-
lation was meant to affect creditor priority during insol-
vency. Nor do they suggest the Netting Regulation was
intended to preserve budget neutrality. That regulation
creates a mere payment convenience, without giving the
government priority over policyholders during insolvency.
Therefore, the Netting Regulation is identical to the same
right of every creditor to offset. It allows netting for con-
venience purposes only, reducing the administrative bur-
den of the voluminous transactions involved in
administering the 3Rs. Given the presumption against
preemption, especially when state law has traditionally
played a role in govern insolvency, the government has not
shown that HHS promulgated the Netting Regulation to
upset the traditional balance between the state and federal
systems in this space.
Given this parallel, Cook County National Bank v.
United States, 107 U.S. 445 (1883), is particularly on point.
Case: 20-1292 Document: 48 Page: 25 Filed: 05/17/2021
CONWAY v. UNITED STATES 25
There, the Court held that the federal super-priority stat-
ute (§ 3466 at the time) did not apply. Id. at 450. As an
ordinary creditor, then, the government was not entitled to
offset once the bank in question became insolvent. Id. at
452–53 (citing Sawyer v. Hoag, 84 U.S. 610, 622 (1873)).
Analogously, the Netting Regulation does not promote the
government to super-priority status. Like any other credi-
tor, therefore, the government lacks a right to offset in Col-
orado state court during insolvency proceedings.
In sum, the regulatory scheme—just like the statutory
scheme on which it depends—is silent regarding state law
that fixes creditor priority during insolvency. And that si-
lence is notable, given HHS’ recognition of other issues sur-
rounding insolvency. See, e.g., 45 C.F.R. § 153.630(g)
(excluding liquidators from certain reporting requirements
necessary to administer the risk adjustment program).
That silence, combined with the presumption against
preemption, “is powerful evidence that [HHS] did not in-
tend” to preempt state law fixing creditors’ rights during
insolvency. See Wyeth, 555 U.S. at 575.
4
To “discern Congress’ intent,” we have “examine[d] the
explicit statutory [and regulatory] language and the struc-
ture and purpose of the” federal scheme. Ingersoll-Rand
Co., 498 U.S. at 138. The text is silent, providing powerful
evidence of an absence of preemptive intent; the structure
suggests state law will control; and the purposes do not ev-
idence a preemptive intent absent from the text and struc-
ture of the federal scheme. Collectively, the federal scheme
does not evidence a “clear and manifest” intent to preempt
Colorado law fixing creditors’ rights during insolvency.
Medtronic, 518 U.S. at 485. Therefore, applying the pre-
sumption against preemption, we hold the federal scheme
does not preempt Colorado’s creditor priority framework.
Notably, because we hold that HHS did not promulgate a
regulation that preempts state law fixing creditor priority
Case: 20-1292 Document: 48 Page: 26 Filed: 05/17/2021
26 CONWAY v. UNITED STATES
during insolvency, we need not decide whether HHS has
authority to promulgate such a regulation.
That holding is consistent with other circuits’ interpre-
tations of the federal scheme’s preemptive effect. While
other circuits have held that the ACA preempts state law,
each of those cases involved a clear textual conflict. Unit-
edHealthcare of N.Y., Inc. v. Lacewell, 967 F.3d 82, 91–96
(2d Cir. 2020); St. Louis Effort for AIDS v. Huff, 782 F.3d
1016 (8th Cir. 2015); Coons v. Lew, 762 F.3d 891 (9th Cir.
2014). Here, as detailed, there is no such conflict. Also,
those cases involved substantive issues underpinning the
ACA’s objectives, like the methodology used to calculate
risk adjustment payments. See UnitedHealthcare, 967
F.3d at 91–96. In this case, the Netting Regulation is di-
rected to an ancillary issue, payment convenience. Thus,
those cases are distinguishable.
II. Federal Common Law
In the alternative, the government asserts that federal
common law affords it a right to offset ACA debts during
insurer insolvency. But the Supreme Court has never sug-
gested the government has a common-law right to offset
broader than that of an ordinary creditor. Instead, “the
government has the same right which belongs to every
creditor” to offset. United States v. Munsey Trust Co., 332
U.S. 234, 239 (1947) (emphasis added). In Colorado, an or-
dinary creditor would not be permitted to offset noncon-
tractual debts. See supra § A. And the government’s right
to offset is generally subject to state priority schemes, as a
matter of federal common law, absent a statute to the con-
trary. See, e.g., Cook Cty. Nat. Bank, 107 U.S. at 445; cf.
United States v. Kimbell Foods, Inc., 440 U.S. 715, 740
(1979). So the government’s right to offset is likewise lim-
ited.
And we will not create a new rule of federal common
law that would allow HHS to offset. Even when federal
common law controls, “[i]t does not follow, . . . that the
Case: 20-1292 Document: 48 Page: 27 Filed: 05/17/2021
CONWAY v. UNITED STATES 27
content of such a rule must be wholly the product of a fed-
eral court’s own devising.” Kamen v. Kemper Fin. Servs.,
Inc., 500 U.S. 90, 98 (1991). Often, “the prudent course is
to adopt the readymade body of state law as the federal rule
of decision until Congress strikes a different accommoda-
tion.” Kimbell Foods, 440 U.S. at 740. For the same rea-
sons that the ACA does not preempt Colorado insolvency
law, the government has not shown a “significant conflict
between an identifiable federal policy or interest and the
operation of state law.” Boyle v. United Techs. Corp., 487
U.S. 500, 507 (1988); see supra § B.I. Thus, there is no rea-
son to invoke federal common law to override Colorado’s
liquidation priority scheme. See supra § A.
III. Other Federal Statutes
Without a right of offset and facing state law that sur-
vives preemption, the government is left to argue that the
Claims Court’s money judgment was improper. It does so
in a two-pronged attack.
First, the government argues two provisions of the
Tucker Act, 28 U.S.C. §§ 1503 and 2508, preclude any
money judgment. Though not framed as such, the govern-
ment essentially looks to those provisions for a right to off-
set that it could not find in either Colorado law or federal
law. See, e.g., Appellant Br. at 31 (“The Supreme Court
and this Court’s predecessor have recognized that these
statutes impose a mandatory duty to give effect to the gov-
ernment’s offsets.”). But the Tucker Act does not create
substantive rights. Cf. United States v. Testan, 424 U.S.
392, 398 (1976) (“The Tucker Act, of course, is itself only a
jurisdictional statute; it does not create any substantive
right enforceable against the United States for money dam-
ages.”). Congress merely required that the Claims Court
“hear and determine” offset demands:
Upon the trial of any suit in the United States Court
of Federal Claims in which any setoff, counterclaim,
claim for damages, or other demand is set up on the
Case: 20-1292 Document: 48 Page: 28 Filed: 05/17/2021
28 CONWAY v. UNITED STATES
part of the United States against any plaintiff mak-
ing claim against the United States in said court, the
court shall hear and determine such claim or de-
mand both for and against the United States and
plaintiff.
If upon the whole case it finds that the plaintiff is
indebted to the United States it shall render judg-
ment to that effect, and such judgment shall be final
and reviewable.
28 U.S.C. § 2508; see also id. § 1503 (conferring jurisdiction
over setoff claims). Here, the Claims Court “hear[d]” the
government’s offset demand and “determine[d]” it was not
meritorious because neither state nor federal law affords
the government a right to offset. In doing so, the Claims
Court fulfilled its § 2508 obligations.
Second, the government argues any judgment would be
futile under 31 U.S.C. § 3728:
The Secretary of the Treasury shall withhold paying
that part of a judgment against the United States
Government presented to the Secretary that is equal
to a debt the plaintiff owes the Government.
See also Greene v. United States, 124 Fed. Cl. 636 (2015)
(noting, in dicta, futility under § 3728 supported not
awarding a money judgment). But that argument is self-
defeating. By its terms, § 3728 only applies if “a judgment”
has been entered. It may prevent Conway from enforcing
his judgment against the government, and we do not reach
that issue here. But § 3728 does not prevent the Claims
Court from entering judgment.
CONCLUSION
For the foregoing reasons, we hold that the government
did not have a right to offset ACA obligations during Colo-
rado Health’s insolvency proceedings and that the Claims
Court’s money judgment was proper.
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CONWAY v. UNITED STATES 29
AFFIRMED
COSTS
Costs to Conway.