Case: 19-1633 Document: 73 Page: 1 Filed: 08/14/2020
United States Court of Appeals
for the Federal Circuit
______________________
COMMUNITY HEALTH CHOICE, INC.,
Plaintiff-Appellee
v.
UNITED STATES,
Defendant-Appellant
______________________
2019-1633
______________________
Appeal from the United States Court of Federal Claims
in No. 1:18-cv-00005-MMS, Chief Judge Margaret M.
Sweeney.
-----------------------------------------------------------------
MAINE COMMUNITY HEALTH OPTIONS,
Plaintiff-Appellee
v.
UNITED STATES,
Defendant-Appellant
______________________
2019-2102
______________________
Case: 19-1633 Document: 73 Page: 2 Filed: 08/14/2020
2 COMMUNITY HEALTH CHOICE v. UNITED STATES
Appeal from the United States Court of Federal Claims
in No. 1:17-cv-02057-MMS, Chief Judge Margaret M.
Sweeney.
______________________
Decided: August 14, 2020
______________________
WILLIAM LEWIS ROBERTS, Faegre Drinker Biddle &
Reath LLP, Minneapolis, MN, argued for plaintiff-appellee
in 19-1633. Also represented by JONATHAN WILLIAM
DETTMANN, NICHOLAS JAMES NELSON.
DANIEL WILLIAM WOLFF, Crowell & Moring, LLP,
Washington, DC, argued for plaintiff-appellee in 19-2102.
Also represented by STEPHEN JOHN MCBRADY, SKYE
MATHIESON, CHARLES BAEK, CLIFTON S. ELGARTEN.
ALISA BETH KLEIN, Appellate Staff, Civil Division,
United States Department of Justice, Washington, DC, ar-
gued for defendant-appellant. Also represented by MARK
B. STERN, ETHAN P. DAVIS.
STEPHEN A. SWEDLOW, Quinn Emanuel Urquhart &
Sullivan, LLP, Chicago, IL, for amicus curiae Common
Ground Healthcare Cooperative. Also represented by
DAVID COOPER, New York, NY; J. D. HORTON, ADAM
WOLFSON, Los Angeles, CA.
______________________
Before DYK, BRYSON, and TARANTO, Circuit Judges.
DYK, Circuit Judge.
Today in Sanford Health Plan v. United States (“San-
ford”), No. 19-1290, we hold that the United States failed
to comply with section 1402 of the Patient Protection and
Affordable Care Act (“ACA”), Pub. L. No. 111-148, 124 Stat.
119, 220–24 (2010) (codified at 42 U.S.C. § 18071)—which
Case: 19-1633 Document: 73 Page: 3 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 3
requires the government to reimburse insurers for “cost-
sharing reductions.” We hold that section 1402 “imposes
an unambiguous obligation on the government to pay
money and that the obligation is enforceable through a
damages action in the Court of Federal Claims [(‘Claims
Court’)] under the Tucker Act.” Sanford, No. 19-1290, slip
op. at 3.
In these cases, following our decision in Sanford, we
affirm the Claims Court’s decisions as to liability. As in
Sanford, we conclude that the government is not entitled
to a reduction in damages with respect to cost-sharing re-
ductions not paid in 2017. As to 2018, we address an issue
not presented in Sanford: the appropriate measure of dam-
ages. We hold that the Claims Court must reduce the in-
surers’ damages by the amount of additional premium tax
credit payments that each insurer received as a result of
the government’s termination of cost-sharing reduction
payments. We reverse and remand for further proceedings
with respect to damages.
BACKGROUND
I
In 2010, Congress enacted the ACA, which includes “a
series of interlocking reforms designed to expand coverage
in the individual health insurance market.” King v. Bur-
well,
135 S. Ct. 2480, 2485 (2015). “[T]he Act requires the
creation of an ‘[e]xchange’ in each State—basically, a mar-
ketplace that allows people to compare and purchase insur-
ance plans.”
Id. Insurance plans sold on the ACA
exchanges must provide a minimum level of “essential
health benefits” and are referred to as “qualified health
plans.” See 42 U.S.C. § 18031. The ACA defines four levels
of coverage: bronze, silver, gold, and platinum, which are
based on the percentage of essential health benefits that
the insurer pays for under each type of plan. Sanford, No.
19-1290, slip op. at 4. For example, under a silver-level
plan, the health insurance provider pays for 70 percent of
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4 COMMUNITY HEALTH CHOICE v. UNITED STATES
the actuarial value of the benefits, and either the insured
or the government pays the remaining 30 percent.
Id.
Under most health insurance plans, the insured indi-
vidual must bear two types of costs. First, the insured
must pay a monthly premium to maintain coverage. Sec-
ond, the insured must pay an additional fee—called “cost-
sharing”—when medical expenses are incurred. Deducti-
bles, coinsurance, and co-payments are examples of such
fees. See 42 U.S.C. § 18022(c)(3)(A)(i). The ACA includes
two sections, 1401 and 1402, that reduce the premiums and
cost-sharing for low-income insureds by government pay-
ments to the insurers. These sections “work together: the
[premium reductions] help people obtain insurance, and
the cost-sharing reductions help people get treatment once
they have insurance.” See Cmty. Health Choice, Inc. v.
United States,
141 Fed. Cl. 744, 750 (2019) (quoting Cali-
fornia v. Trump,
267 F. Supp. 3d 1119, 1123 (N.D. Cal.
2017)). These sections apply to taxpayers with a household
income of between 100 percent and 400 percent of the fed-
eral poverty line. See 42 U.S.C. § 18071(b)(2); 26
U.S.C. § 36B(c)(1)(A); Sanford, No. 19-1290, slip op. at 5, 7.
The statute refers to them as “applicable taxpayer[s]” in
the case of section 1401, 26 U.S.C. § 36B(c)(1)(A), and “eli-
gible insured[s]” in the case of section 1402, 42 U.S.C.
§ 18071(b).
Premium reductions. Under section 1401, each “appli-
cable taxpayer” enrolled in an ACA exchange plan at any
level of coverage is entitled to a “premium assistance credit
amount” (“premium tax credit”) to offset part of the
monthly premiums of the enrollee entitled to the premium
tax credit. 26 U.S.C. § 36B. The ACA specifies a formula
for determining the amount of premium tax credits, which
depends on the applicable taxpayer’s household income,
but not on the monthly premium or the coverage level for
the applicable taxpayer’s plan. The premium tax credit
cannot exceed the actual monthly premium for the individ-
ual’s plan. See
id. § 36B(b)(2). The government pays these
Case: 19-1633 Document: 73 Page: 5 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 5
premium tax credit amounts directly to insurers. See San-
ford, No. 19-1290, slip op. at 8; 31 U.S.C. § 1324. Thus, the
amount of the premiums charged by the insurers to the in-
sured is effectively reduced.
Premium review. The ACA includes various measures
for regulating insurance premiums. Section 1003 of the
ACA establishes a “premium review process” that requires
insurers to report their premium rate increases to the Sec-
retary of Health and Human Services (“the Secretary”) and
state regulators. See 42 U.S.C. § 300gg-94 (codifying ACA
section 1003). State authorities can review the proposed
rates. However, “[t]he rate review process does not estab-
lish federal authority to deny implementation of a proposed
rate increase; it is a sunshine provision designed to publicly
expose rate increases determined to be unreasonable.” See
Bernadette Fernandez, Vanessa C. Forsberg & Ryan J.
Rosso, Cong. Rsch. Serv., R45146, Federal Requirements
on Private Health Insurance Plans 9 (2018). If a state reg-
ulator finds that an insurer’s premium rate increases are
“excessive or unjustified,” it is required to recommend that
the Secretary “exclude[] [the insurer] from participation in
the [state] [e]xchange.” 42 U.S.C. § 300gg-94(b)(1)(B).
Following the enactment of the ACA, states have taken
a varied approach to premium rate review programs.
Some, but not all, states have reserved the express author-
ity to approve or deny premium rate increases. See Mark
Newsom & Bernadette Fernandez, Cong. Rsch. Serv.,
R41588, Private Health Insurance Premiums and Rate Re-
views 15 (2011) (“There is substantive variation in state
regulation of health insurance rates.”). In states where
there is no express approval requirement, insurers are still
required to notify state regulators of premium increases
above a certain threshold. See 42 U.S.C. § 300gg-94(a)(2);
Fernandez et al., Federal Requirements on Private Health
Insurance Plans at 9. The damages issue here does not
turn on whether the states have required express approval
of premium increases.
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6 COMMUNITY HEALTH CHOICE v. UNITED STATES
Cost-sharing reductions. Section 1402 of the ACA re-
quires insurers to reduce the insured’s “cost-sharing” pay-
ments and requires the Secretary to “make periodic and
timely payments to the [insurer] equal to the value of the
[cost-sharing] reductions.” 42 U.S.C. § 18071(c)(3)(A). The
section applies to “eligible insured[s]” enrolled in silver-
level plans offered on the exchanges.
Id. § 18071(a), (b).
Eligibility under section 1402 is tied to eligibility under
section 1401, and the amount of cost-sharing reductions is
directly tied to the household income of the eligible insured.
See
Id. § 18071(c), (f)(2); Sanford, No. 19-1290, slip op. at 7
n.2.
II
On October 12, 2017, the Secretary announced that the
government would cease payment of cost-sharing reduction
reimbursements. Sanford, No. 19-1290, slip op. at 11–12.
The suspension of cost-sharing reduction reimbursements
did not relieve the insurers of their statutory obligation to
“offer plans with cost-sharing reductions to customers,”
meaning that “the federal government’s failure to meet its
[cost-sharing reduction] payment obligations meant the in-
surance companies would be losing that money.” Califor-
nia, 267 F. Supp. 3d at 1134. The solution for the insurers
was to increase premiums. These states “began working
with the insurance companies to develop a plan for how to
respond” “in a fashion that would avoid harm to consum-
ers.” See
id. The resulting plan involved the tax credit pro-
vision of section 1401 of the ACA.
Under section 1401, the government is required to sub-
sidize an amount equal to the lesser of (1) the monthly pre-
mium for the applicable taxpayer’s plan and (2) the
difference between the monthly premium for the “applica-
ble second lowest cost silver plan [(the ‘benchmark plan’)]
with respect to the taxpayer” and a statutorily-defined per-
centage of the eligible taxpayer’s monthly household in-
come. 26 U.S.C. § 36B(b)(2) (codifying ACA section
Case: 19-1633 Document: 73 Page: 7 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 7
1401(b)(2)). This percentage generally varies from 2% to
9.5% based on the eligible taxpayer’s income relative to the
federal poverty line.
Id. § 36B(b)(3)(A). These payments
are guaranteed since, unlike the cost-sharing reduction
payments situation, there is a permanent appropriation for
premium tax credits. See Sanford, No. 19-1290, slip op. at
8.
In effect, if the insurers increased the monthly pre-
mium for their benchmark silver plans, each insurer would
receive an additional dollar-for-dollar increase in the
amount of the premium tax credit for each applicable tax-
payer under its silver plans, all while keeping the out-of-
pocket premiums paid by each applicable taxpayer the
same. See Califor
nia, 267 F. Supp. 3d at 1134. But pre-
mium increases for silver-level plans would have an effect
on other plans as well: the insurers would also receive ad-
ditional tax credits for applicable taxpayers that were en-
rolled in bronze, gold, and platinum plans, whether or not
the premiums for those plans were increased.
Id. at 1135.
Even if the insurers kept premiums the same for those
other plans, they would receive additional tax credits. See
id.
Because of the government’s refusal to make cost-shar-
ing reduction payments, most states agreed to allow insur-
ers to raise premiums for silver-level health plans, but not
for other plans.
Cmty., 141 Fed. Cl. at 755; Me. Cmty.
Health Options v. United States,
143 Fed. Cl. 381, 390
(2019). “As a result, in these states, for everyone between
100% and 400% of the federal poverty level who wishe[d] to
purchase insurance on the exchanges, the available tax
credits r[o]se substantially. Not just for people who pur-
chase[d] the silver plans, but for people who purchase[d]
other plans too.” Cmty., 141 Fed Cl. at 755 (quoting Cali-
fornia, 267 F. Supp. 3d at 1135). And the insurers received
“more money from the premium tax credit program, . . .
mitigat[ing] the loss of the cost-sharing reduction
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8 COMMUNITY HEALTH CHOICE v. UNITED STATES
payments.”
Id. This practice was referred to as “silver
loading.”
Id.
This was, however, not a perfect solution. The pre-
mium tax credits could only offset premium increases for
applicable taxpayers, i.e., insureds with a household in-
come of between 100 percent and 400 percent of the federal
poverty line. Thus, people having a higher household in-
come would be paying significantly more in premiums for
their silver-level plans since they did not receive premium
tax credits. See
California, 267 F. Supp. 3d at 1137. States
took a varied approach to this issue. Although this does
not appear to be the case in Texas or Maine, some states
negotiated with insurers to offer off-exchange, silver-equiv-
alent plans at the pre-silver-load premium rates.
Id. Such
off-exchange policies were not subject to the ACA’s pre-
mium tax credits or cost-sharing reduction requirements.
In other states, non-eligible individuals could still switch
to bronze, gold, or platinum plans (which did not have pre-
mium rate increases).
Id.
III
Community Health Choice, Inc. (“Community”) and
Maine Community Health Options (“Maine Community”)
are health insurance providers that sell qualified health
plans in Texas and Maine, respectively. See
Cmty., 141
Fed. Cl. at 756; Me.
Cmty., 143 Fed. Cl. at 391. 1 Both in-
surers offered cost-sharing reductions, as required under
section 1402, to insured individuals, 2 and “as with every
1 Unless otherwise noted, the Claims Court’s deci-
sions in Community and Maine Community contain identi-
cal language. For convenience, we limit our citations to
Community.
2 For example, the record shows that “approximately
58% of [Community]’s insured population—over 80,000
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COMMUNITY HEALTH CHOICE v. UNITED STATES 9
other insurer offering qualified health plans on the ex-
changes, stopped receiving these payments effective Octo-
ber 12, 2017.”
Cmty., 141 Fed. Cl. at 756.
The two insurers involved here filed separate actions
in the Claims Court, asserting that they were entitled to
recover the unpaid cost-sharing reduction reimbursements
for 2017 and 2018. 3 The insurers asserted two theories of
liability. 4 First, the insurers alleged that “in failing to
individuals—received cost-sharing reductions.”
Cmty., 141
Fed. Cl. at 756.
3 Community’s complaint also claimed damages re-
lated to unpaid payments under the ACA’s risk corridors
program for 2014, 2015, and 2016.
Cmty., 141 Fed. Cl.
at 756. Those claims were addressed by the Supreme
Court’s decision in Maine Community Health Options v.
United States,
140 S. Ct. 1308 (2020). Maine Community’s
complaint in this case did not assert a claim under the risk
corridors program.
4 Community asserted a third theory of liability: that
the government’s failure to pay cost-sharing reduction re-
imbursements constituted a breach of so-called “Qualified
Health Plan Issuer” agreements between Community and
the government, which “require[d] [the government], as
part of a monthly reconciliation process, to make payments
to insurers that underestimated their cost-sharing obliga-
tions and collect payments from insurers who overesti-
mated their cost-sharing obligations.”
Cmty., 141 Fed. Cl.
at 764–65. The Claims Court held that the obligation to
reconcile payments was different from the obligation to
make cost-sharing reduction payments and that the insur-
ers “ha[d] not established that the . . . [a]greements obli-
gated the government to make cost-sharing reduction
payments,” and dismissed Community’s claim for breach of
an express contract.
Id. at 765–66.
Community does not
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10 COMMUNITY HEALTH CHOICE v. UNITED STATES
make the cost-sharing reduction payments . . . , the gov-
ernment violated the statutory and regulatory mandate” of
the ACA.
Id. Second, the insurers alleged that the govern-
ment’s nonpayment constituted a “breach[] [of] an implied-
in-fact contract.”
Id.
On the insurers’ motions for summary judgment, the
Claims Court “conclude[d] that the government’s failure to
make cost-sharing reduction payments to [the insurers] vi-
olate[d] 42 U.S.C. § 18071 [(codifying ACA section 1402)]
and constitute[d] a breach of an implied-in fact contract.”
Id. at 770.
The Claims Court concluded that each insurer
was entitled to recover as damages the full amount of un-
paid cost-sharing reduction reimbursements for both 2017
and 2018. The Claims Court was “unpersuaded by the
[government]’s . . . contention that [the] insurers’ ability to
increase premiums for their silver-level qualified health
plans to obtain greater premium tax credit payments, and
thus offset any losses from the government’s nonpayment
of cost-sharing reduction reimbursements,” precluded or
reduced the insurers’ damages.
Id. at 760.
The government appealed the Claims Court’s decisions
to this court, challenging the decisions as to both liability
and damages. We have jurisdiction under 28 U.S.C.
§ 1295(a)(3).
On April 27, 2020, the Supreme Court issued its deci-
sion in Maine Community Health Options v. United States,
140 S. Ct. 1308 (2020), holding that section 1342 of the
ACA (“[t]he Risk Corridors statute,”
id. at 1329), which
states that the government “shall pay” money to insurers
offering “unprofitable plans” on the ACA exchanges
, id. at
1316, created a “money-mandating obligation requiring the
Federal Government to make payments under
cross-appeal the Claims Court’s dismissal, and we need not
address it.
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COMMUNITY HEALTH CHOICE v. UNITED STATES 11
[section] 1342’s formula,”
id., at 1331, and that health in-
surance providers were entitled to “seek to collect [such]
payment through a damages action in the [Claims Court],”
id.
Today in Sanford, following the Supreme Court’s deci-
sion in Maine Community, we hold that the government vi-
olated its obligation to make cost-sharing reduction
payments under section 1402; “that the cost-sharing-reduc-
tion reimbursement provision imposes an unambiguous ob-
ligation on the government to pay money[;] and that the
obligation is enforceable through a damages action in the
[Claims Court] under the Tucker Act.” Sanford, No. 19-
1290, slip op. at 3.
DISCUSSION
I
As noted, the government argues that section 1402 did
not create a statutory obligation on the part of the govern-
ment to pay cost-sharing reduction reimbursements and
that its failure to make payments did not violate the stat-
ute. Our decision in Sanford resolves these issues in favor
of the insurers here. Sanford, No. 19-1290, slip op. at 18.
Because we affirm the Claims Court’s decisions as to stat-
utory liability, and the damages are the same under either
theory of liability (as discussed below), we need not address
the insurers’ implied-in-fact contract theory.
II
The government nonetheless argues that, even if sec-
tion 1402 created a statutory obligation, the insurers are
not entitled to recover the full amount of the unpaid 2017
and 2018 cost-sharing reduction payments as damages.
We find no merit to the government’s argument that the
insurers’ 2017 damages should be reduced. Like the insur-
ers in Sanford, Community and Maine Community did not
raise their silver-level plan premiums in 2017 or receive
increased tax credits for that year from the elimination of
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12 COMMUNITY HEALTH CHOICE v. UNITED STATES
the cost-sharing reduction payments. Here, as in Sanford,
we see no basis for a 2017 damages offset and affirm the
Claims Court’s award of 2017 damages. See Sanford, No.
19-1290, slip op. at 9, 12.
III
We turn to the 2018 cost-sharing payments. Neither
the Supreme Court in Maine Community nor our decision
in Sanford resolves this question. The government asserts
that, beginning in 2018, both insurers raised the premiums
for their silver-level plans “to account for the absence of di-
rect reimbursement for cost-sharing reductions,” resulting
in the receipt of increased premium tax credits. See Gov’t
Suppl. Damages Br. 12–14. It argues that the Claims
Court erred when it failed to credit the government with
“economic benefits” flowing from the increased tax credits
when awarding damages.
Id. at 15.
The government’s theory is based on an analogy to con-
tract law—specifically, the rule that “a non-breaching
party is not entitled, through the award of damages, to
achieve a position superior to the one it would reasonably
have occupied had the breach not occurred.” LaSalle Tal-
man Bank, F.S.B. v. United States,
317 F.3d 1363, 1371
(Fed. Cir. 2003). The government argues that silver load-
ing was a direct result of the insurers’ mitigation efforts,
i.e., increasing premiums for silver-level plans, and that
the insurers’ recovery must be reduced by the additional
payments the insurers received in the form of tax credits.
The Claims Court rejected these arguments in both
cases on the same ground, holding that there was no “stat-
utory provision permitting the government to use premium
tax credit payments to offset its cost-sharing reduction pay-
ment obligation,” and that “[t]he increased amount of pre-
mium tax credit payments that insurers receive[d]” was
not a “substitute[]” for its “cost-sharing reduction pay-
ments.”
Cmty., 141 Fed. Cl. at 760. At oral argument, the
parties agreed that the Claims Court’s decisions rejected
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COMMUNITY HEALTH CHOICE v. UNITED STATES 13
the government’s mitigation theory on the merits. On ap-
peal, the insurers similarly argue that the “[g]overment
cannot invoke deductions not set forth in the statute itself.”
Appellees’ Suppl. Damages Br. 4–5.
A
In addressing the mitigation issue, it is important to
distinguish between two different types of statutes provid-
ing for the grant of federal funds: those that impose an “af-
firmative obligation[]” or “condition[]” in exchange for
federal funding, and those that do not. Pennhurst State
Sch. & Hosp. v. Halderman,
451 U.S. 1, 17, 24 (1981). The
Supreme Court has previously “characterized . . . [the for-
mer category of] Spending Clause legislation as ‘much in
the nature of a contract: in return for federal funds, the
[recipients] agree to comply with federally imposed condi-
tions.” Barnes v. Gorman,
536 U.S. 181, 186 (2002) (third
alteration in original) (quoting
Pennhurst, 451 U.S. at 17).
On the other hand, the latter category of statutes does not
involve contract-like obligations. See
id. at 186; Pennhurst,
451 U.S. at 17; Sossamon v. Texas,
563 U.S. 277, 290
(2011).
Section 1402 belongs in the first category of Spending
Clause legislation because it imposes contract-like obliga-
tions: in exchange for federal funds, the insurers must
“‘participat[e] in the healthcare exchanges’ under the stat-
utorily specified conditions.” Sanford, No. 19-1290, slip op.
at 18 (quoting Me.
Cmty., 140 S. Ct. at 1320); see also Nat’l
Fed’n of Indep. Bus. v. Sebelius,
567 U.S. 519, 576 (2012)
(analyzing the Medicaid provisions of the ACA as Spending
Clause legislation). Specifically, in exchange for “the [in-
surer] . . . reduc[ing] the cost-sharing under [silver plans]
in the manner specified in [section 1402(c)]” and “no-
tify[ing] the Secretary of such reductions,” “the Secretary
shall make periodic and timely payments to the issuer
equal to the value of the reductions.” 42 U.S.C.
§§ 18071(a)(2), (c)(3)(A); see also
Cmty., 141 Fed. Cl. at 768
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14 COMMUNITY HEALTH CHOICE v. UNITED STATES
(“[T]he cost-sharing reduction program is less of an incen-
tive program and more of a quid pro quo.”).
Under these contract-like Spending Clause statutes—
where the statute itself does not provide a remedial frame-
work—a contract-law “analogy applies . . . in determining
the scope of damages remedies” in a suit by the government
against the recipient of federal funds or by a third-party
beneficiary standing in the government’s shoes.
Barnes,
536 U.S. at 186–87; see also Gebser v. Lago Vista Indep.
Sch. Dist.,
524 U.S. 274, 287 (1998) (“Title IX’s contractual
nature has implications for our construction of the scope of
available remedies.”). In Barnes, the Court considered the
government’s damages remedies available under Title VI
in a suit charging the federal funds recipient with failure
to comply with its obligations. The Court explained that,
when the statute “contains no express remedies, a recipient
of federal funds is nevertheless subject to suit for compen-
satory damages . . . and injunction . . . forms of relief tradi-
tionally available in suits for breach of contract.”
Barnes,
536 U.S. at 187 (citations omitted). Thus, “[w]hen a fed-
eral-funds recipient violates conditions of Spending Clause
legislation, the wrong done is the failure to provide what
the contractual obligation requires; and that wrong is
‘made good’ when the recipient compensates the Federal
Government or a third-party beneficiary (as in this case)
for the loss caused by that failure.”
Id. at 189.
On the other
hand, forms of relief that are “generally not available for
breach of contract,” such as punitive damages, are not
available in suits under such Spending Clause legislation.
Id. at 187–89. 5
5
This contract-law analogy does not apply where the
statute does not impose contract-like obligations. See, e.g.,
Heinzelman v. Sec’y of HHS,
681 F.3d 1374, 1379–80 (Fed.
Cir. 2012) (holding that, with respect to a damages award
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COMMUNITY HEALTH CHOICE v. UNITED STATES 15
The same, we think, is true when an action for damages
is brought against the government, under this type of
Spending Clause legislation. The available remedy is de-
fined by analogy to contract law where the statute does not
provide its own remedies for government breach. 6 We have
under the National Childhood Vaccine Injury Act, 42
U.S.C. §§ 300aa-1–300aa-34, the government was not enti-
tled to an offset due to Social Security Disability Insurance
(“SSDI”) benefits because the Vaccine Act “provides for off-
sets where compensation is made via one of the enumer-
ated programs,” and SSDI was not identified in the
statute); Modoc Lassen Indian Hous. Auth. v. United States
HUD,
881 F.3d 1181, 1194 (10th Cir. 2017) (noting that
“rules that traditionally govern contractual relationships
don’t necessarily apply in the context of federal grant pro-
grams” that do not impose contract-like obligations such as
the Native American Housing Assistance and Self-Deter-
mination Act, 25 U.S.C. § 4101 et seq.); Md. Dep’t of Hu-
man Res. v. Dep’t of Health & Human Servs.,
762 F.2d 406,
408–09 (4th Cir. 1985) (declining to infer a “contractual”
relationship in the Aid to Families with Dependent Chil-
dren program, 42 U.S.C. § 601 et seq., a “grant in aid” pro-
gram); Mem’l Hosp. v. Heckler,
706 F.2d 1130, 1136 (11th
Cir. 1983) (noting that hospitals participating in the Medi-
care program did not receive a “contractual right” because
the statute did not “obligate the [government] to provide
reimbursement for any particular expenses”); PAMC, Ltd.
v. Sebelius,
747 F.3d 1214, 1221 (9th Cir. 2014) (citing
Mem’l Hospital).
6 The amicus argues that the insurers are not seek-
ing “compensation for the failure to pay,” but are instead
seeking “specific relief” under section 1402. Common
Ground Healthcare Cooperative Suppl. Damages Amicus
Br. 5. As the Supreme Court held in Bowen v. Massachu-
setts,
487 U.S. 879 (1988), “the Court of Claims has no
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16 COMMUNITY HEALTH CHOICE v. UNITED STATES
indeed previously applied the contract-law analogy to limit
damages in suits against the government under the Back
Pay Act, 5 U.S.C. § 5596, another money-mandating stat-
ute. 7 Our predecessor court held that in suits brought for
improper discharge for federal employment, damages had
to be reduced by the amount earned by the federal em-
ployee in the private sector under a mitigation theory. 8 See
Craft v. United States,
589 F.2d 1057, 1068 (Ct. Cl. 1978)
(“Unless there is a regulation or a statute that provides
otherwise, cases in this court routinely require the deduc-
tion of civilian earnings [from a back pay award] on an
analogy to the principle of mitigation of damages.”); Lan-
ingham v. United States,
5 Cl. Ct. 146, 158 (Ct. Cl. 1984)
[general] power to grant equitable relief.”
Id. at 905
(quot-
ing Richardson v. Morris,
409 U.S. 464, 465 (1973) (per cu-
riam)). Furthermore, the Supreme Court made clear that
the type of relief that the insurers are seeking is best char-
acterized as “specific sums, already calculated, past due,
and designed to compensate for completed labors.” Me.
Cmty., 140 S. Ct. at 1330–31.
7 See
Bowen, 487 U.S. at 905 n.42 (“To construe stat-
utes such as the Back Pay Act . . . as ‘mandating compen-
sation by the Federal Government for the damage
sustained,’ . . . one must imply from the language of such
statutes a cause of action.” (quoting Eastport S.S. Corp. v.
United States,
372 F.2d 1002, 1009 (Ct. Cl. 1967))); Hamb-
sch v. United States,
848 F.2d 1228, 1231 (Fed. Cir. 1988)
(“By the Back Pay Act’s own terms, a tribunal must also
look for an ‘applicable law, rule, regulation, or collective
bargaining agreement’ as the source of an employee enti-
tlement which an ‘unjustified or unwarranted personnel
action’ has denied or impaired.”).
8 The Back Pay Act was later amended to expressly
provide for such offsets. See 5 U.S.C. § 5596(b)(1). That
amendment to the statute, however, does not change the
principles underlying the previous decisions.
Case: 19-1633 Document: 73 Page: 17 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 17
(“This rule has been utilized as an analog to the private
contract law principle of mitigation of damages.”); see also
Motto v. United States,
360 F.2d 643, 645 (Ct. Cl. 1966);
Borak v. United States,
78 F. Supp. 123, 125 (Ct. Cl. 1948).
Here the contract-law analogy applies because the stat-
ute “contains no express remedies” at all with respect to
the government’s obligation.
Barnes, 536 U.S. at 187.
While the ACA provides specific remedies for failure of the
insurers or insured to comply with their obligations, see 42
U.S.C. §§ 300gg-22, 18081(h), “the [ACA] did not establish
a [statutory] remedial scheme” for the government’s non-
compliance, Me.
Cmty., 140 S. Ct. at 1330. Section 1402’s
silence as to remedies in this respect suggests that “forms
of relief traditionally available in suits for breach of con-
tract” are appropriate.
Barnes, 536 U.S. at 187; see also
Me.
Cmty., 140 S. Ct. at 1330. We therefore look to govern-
ment contract law to determine the scope of the insurers’
damages remedy.
With respect to contract claims, the government is “to
be held liable only within the same limits that any other
defendant would be in any other court,” and “its rights and
duties . . . are governed generally by the law applicable to
contracts between private individuals.” United States v.
Winstar Corp.,
518 U.S. 839, 892, 895 (1996) (first quoting
Horowitz v. United States,
267 U.S. 458, 461 (1925), and
then quoting Lynch v. United States,
292 U.S. 571, 579
(1934)).
B
The traditional damages remedy under contract law is
compensatory in nature. Restatement (Second) of Con-
tracts § 347 (1981); Barnes v.
Gorman, 536 U.S. at 187–90.
The fundamental principle that underlies the
availability of contract damages is that of compen-
sation. That is, the disappointed promisee is gen-
erally entitled to an award of money damages in an
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18 COMMUNITY HEALTH CHOICE v. UNITED STATES
amount reasonably calculated to make him or her
whole and neither more nor less; any greater sum
operates to punish the breaching promisor and re-
sults in an unwarranted windfall to the promisee,
while any lesser sum rewards the promisor for his
or her wrongful act in breaching the contract and
fails to provide the promisee with the benefit of the
bargain he or she made.
24 Samuel Williston & Richard A. Lord, Williston on Con-
tracts § 64:1 (4th ed. 2020); see also 11 Joseph M. Perillo &
Helen Hadjiyannakis Bender, Corbin on Contracts § 55.3
(2020) (“[I]t is a basic tenet of contract law that the ag-
grieved party will not be placed in a better position than it
would have occupied had the contract been fully per-
formed.”).
Thus, courts have uniformly held—as a matter of both
state and federal law—that a plaintiff suing for breach of
contract is not entitled to a windfall, i.e., the non-breaching
party “[i]s not entitled to be put in a better position by the
recovery than if the [breaching party] had fully performed
the contract.” Miller v. Robertson,
266 U.S. 243, 260 (1924);
Bluebonnet Sav. Bank, F.S.B. v. United States,
339 F.3d
1341, 1345 (Fed. Cir. 2003) (“[T]he non-breaching party
should not be placed in a better position through the award
of damages than if there had been no breach.”);
LaSalle,
317 F.3d at 1372 (“[T]he non-breaching party is not enti-
tled, through the award of damages, to achieve a position
superior to the one it would reasonably have occupied had
the breach not occurred.” (citing 3 E. Allan Farnsworth,
Farnsworth on Contracts 193 (2d ed. 1998)). 9
9 See, e.g., John Hancock Life Ins. Co. v. Abbott
Labs.,
863 F.3d 23, 44 (1st Cir. 2017) (same under Illinois
law); VICI Racing, LLC v. T-Mobile USA, Inc., 763 F.3d
Case: 19-1633 Document: 73 Page: 19 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 19
This concern to limit contract damages to compensa-
tory amounts is embodied, in part, in the doctrine of miti-
gation, which ensures that the non-breaching party will not
benefit from a breach. The mitigation doctrine has two as-
pects. First, the non-breaching party is expected to take
reasonable steps to mitigate his or her damages. Restate-
ment (Second) of Contracts § 350 cmt. b (“Once a party has
reason to know that performance by the other party will
not be forthcoming, . . . he is expected to take such affirm-
ative steps as are appropriate in the circumstances to avoid
loss by making substitute arrangements or otherwise.”).
Under common-law principles, the injured party may not
recover damages for any “loss that the injured party could
have avoided without undue risk, burden or humiliation.”
Id. § 350(1); 3 Dan B. Dobbs, Law of Remedies § 12.6(1), at
127 (2d ed. 1993) (“[T]he damage recovery is reduced to the
extent that the plaintiff could reasonably have avoided
damages he claims and is otherwise entitled to.”); Roehm
v. Horst,
178 U.S. 1, 11 (1900) (explaining that a plaintiff
for breach of contract is entitled to “damages as would have
arisen from the nonperformance of the contract at the ap-
pointed time, subject, however, to abatement in respect of
any circumstances which may have afforded him the
means of mitigating his loss” (quoting Frost v. Knight, L.R.
7 Exch. 111 (1872))). We need not determine whether this
first aspect of the mitigation doctrine applies here—such
273, 303 (3d Cir. 2014) (same under Delaware law); Hess
Mgmt. Firm, LLC v. Bankston (In re Bankston),
749 F.3d
399, 403 (5th Cir. 2014) (same under Louisiana law);
Westlake Petrochemicals, L.L.C. v. United Polychem, Inc.,
688 F.3d 232, 243–44 (5th Cir. 2012) (same under the Uni-
form Commercial Code); Ed S. Michelson, Inc. v. Neb. Tire
& Rubber Co.,
63 F.2d 597, 601 (8th Cir. 1933) (treating the
issue as a general matter of contract law).
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20 COMMUNITY HEALTH CHOICE v. UNITED STATES
that the insurers were obligated to increase premiums to
secure increased premium credits.
Rather, here we look to a second aspect of the mitiga-
tion doctrine, which recognizes that there must be a reduc-
tion in damages equal to the amount of benefit that
resulted from the mitigation efforts that the non-breaching
party in fact undertook. 10 Kansas Gas & Elec. Co. v.
United States,
685 F.3d 1361, 1366 (Fed. Cir. 2012) (“[M]it-
igation efforts may result in direct savings that reduce the
damages claim.”); Restatement (Second) of Contracts § 350
cmt. h (explaining that the calculation of mitigation should
reflect “[a]ctual efforts to mitigate damages”); 11 Corbin on
10 A related principle is that, when the non-breaching
party indirectly benefits from the defendant’s breach, “in
order to avoid overcompensating the promisee, any savings
realized by the plaintiff as a result of the . . . breach . . .
must be deducted from the recovery.” 24 Williston on Con-
tracts § 64:3; 11 Corbin on Contracts § 57.10 (“A breach of
contract may prevent a loss as well as cause one. In so far
as it prevents loss, the amount will be credited in favor of
the wrongdoer.”); Charles T. McCormick, Handbook on the
Law of Damages 146 (1935) (“Where the defendant’s wrong
or breach of contract has not only caused damage, but has
also conferred a benefit upon [the] plaintiff . . . which he
would not otherwise have reaped, the value of this benefit
must be credited to [the] defendant in assessing the dam-
ages.”);
LaSalle, 317 F.3d at 1372 (citing McCormick); Kan-
sas Gas &
Elec., 685 F.3d at 1367 (same); Stern v. Satra
Corp.,
539 F.2d 1305, 1312 (2d Cir. 1976) (same); see also
DPJ Co. P’ship v. F.D.I.C.,
30 F.3d 247, 250 (1st Cir. 1994)
(holding that, with respect to reliance damages for breach
of contract, “a ‘deduction’ is appropriate ‘for any benefit re-
ceived [by the claimant] for salvage or otherwise’” (altera-
tion in original) (quoting A. Farnsworth, Contracts § 12.16
(2d ed. 1990))).
Case: 19-1633 Document: 73 Page: 21 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 21
Contracts § 57.11 (explaining that, in the case of a buyer
breaching a contract for the sale of goods, the rule
“measures the seller’s damages by the contract price less
the market price—the price actually obtained . . . by a new
sale”).
For example, in Kansas Gas and Electric, the govern-
ment breached a contract to dispose of the plaintiff utility
companies’ nuclear waste. Kansas Gas &
Elec., 685 F.3d
at 1364. Anticipating that the government would breach
the contract, the utility companies began a “rerack project”
to increase its storage capacity and mitigate the effects of
a government breach.
Id. We held that the plaintiffs were
entitled to the costs of its rerack project taken in mitigation
of the government’s breach.
Id. at 1365, 1371.
We also
held, however, that the plaintiffs’ recovery was to be re-
duced by the “real-world benefit” realized by the plaintiff’s
rerack project.
Id. at 1367–68.
Namely, “[w]hile conduct-
ing the rerack, the [plaintiffs] both . . . used racks that
could support higher enrichment fuel assemblies,” which
“allowed [them] to achieve the same energy output from
[their] reactor with fewer fuel assemblies,” thereby increas-
ing the efficiency of their plant.
Id. at 1364.
The plaintiffs argued that the efficiency benefits of the
rerack project were “too remote and not directly related to
the breach because the decision to ‘pursue more highly en-
riched fresh nuclear fuel’ was an ‘independent business de-
cision’ and influenced by . . . market price[s].”
Id. at 1367.
We rejected that argument, holding that the rerack project
was “part and parcel of the [plaintiffs]’ mitigation efforts.”
Id. We stated that “[t]he long-term benefit of fuel cost sav-
ings [influenced by market forces] does not sever its con-
nection to the [plaintiffs]’ mitigation efforts,” and that the
appropriate inquiry was whether, “[b]y enhancing the
racks to accommodate high-enrichment fuel assemblies,
the [plaintiffs] mitigated the [g]overnment’s breach in a
way that produced a benefit.”
Id. at 1368.
We concluded
that the plaintiffs’ damages were correctly reduced “by the
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22 COMMUNITY HEALTH CHOICE v. UNITED STATES
amount of the benefit received in mitigating the [g]overn-
ment’s partial breach of the . . . [c]ontract.”
Id.
Here, each insurer mitigated the effects of the govern-
ment’s breach by applying for increased premiums and, as
a result, received additional premium tax credits in 2018
as a direct result of the government’s nonpayment of cost-
sharing reduction reimbursements. Notably, the govern-
ment does not argue that it is entitled to offset the pre-
mium increases in the damages calculation, but it does
argue that it is entitled to offset the additional payments
made by the government in the form of premium tax cred-
its.
The insurers appear not to dispute that if the elimina-
tion of cost sharing-reduction payments directly triggered
increased premium tax credits, an offset would be appro-
priate under a contract theory. But they argue that the
premium tax credits were not “direct benefits” of the breach
because they depend on actions by the insurers—the deci-
sion to pursue increased premiums. These payments were
not, in the appellees’ phrasing, received in the “first step.”
We think the relationship is no less direct because the in-
sured’s tax credits did not automatically flow from the
elimination of cost sharing reduction payments, and the in-
surers played a role by securing the increased premiums
that in turn resulted in the increased tax credits.
There is thus a direct relationship between cost-shar-
ing reductions and premiums, and between premiums and
tax credits. The text of the ACA recognizes the relationship
between premiums and cost-sharing reductions. Section
1412 of the ACA provides for the “[a]dvance determination
and payment of premium tax credits and cost-sharing re-
ductions.” 42 U.S.C. § 18082 (codifying ACA section 1412).
Section 1412(a)(3) states: “the Secretary of the Treasury
makes advance payments of [premium tax] credits or [cost-
sharing] reductions to the [insurers] . . . in order to reduce
the premiums payable by individuals eligible for such
Case: 19-1633 Document: 73 Page: 23 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 23
credit.”
Id. § 18082(a)(3). As we noted in Sanford, this sec-
tion may be understood to indicate that the statute recog-
nizes that, without cost-sharing reduction
reimbursements, “insurers might otherwise seek higher
premiums to enable them to pay healthcare providers the
amounts enrollees are not paying due to cost-sharing re-
ductions.” Sanford, No. 19-1290, slip op. at 22.
The Claims Court’s findings show that the premium
tax credits flowed directly from the insurers’ mitigation ef-
forts. As the Claims Court found, the plaintiffs themselves
recognized this connection. They negotiated for increased
premiums (leading to the increased tax credits) in direct
response to the cessation of cost-sharing reduction pay-
ments:
The Trump administration’s termination of cost-
sharing reduction payments did not come as a sur-
prise to insurers: “Anticipating that the Admin-
istration would terminate [cost-sharing reduction]
payments, most states began working with the in-
surance companies to develop a plan for how to re-
spond. . . . And the states came up with an idea:
allow the insurers to make up the deficiency
through premium increases . . . .” Califor
nia, 267
F. Supp. 3d at 1134–35 . . . . In other words, by
raising premiums for silver-level qualified health
plans, the insurers would obtain more money from
the premium tax credit program, which would help
mitigate the loss of the cost-sharing reduction pay-
ments.
Cmty., 141 Fed. Cl. at 754–55 (first alteration in original);
id. at 755 n.10 (noting that “increasing silver-level quali-
fied health plan premiums would not harm most consum-
ers who qualify for the premium tax credit because the
credit increases as the premium increases”).
The practice of silver loading—and the resulting pre-
mium tax credits received by each insurer—“was a direct
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24 COMMUNITY HEALTH CHOICE v. UNITED STATES
consequence of the government’s breach” of its obligations,
and “indeed was an extreme measure forced” by the gov-
ernment’s nonpayment.
LaSalle, 317 F.3d at 1372. The
government’s payment of the premium tax credits is di-
rectly traceable to the premium increase, and the premium
increase is directly traceable to the government’s breach.
The insurers “received a benefit as a direct result of their
mitigation activity.” Kansas Gas &
Elec., 685 F.3d at 1368.
The argument for an offset is particularly strong here be-
cause the insurers received direct payments (rather than
indirect benefits, such as efficiency gains) from the govern-
ment due to their mitigation efforts.
The insurers argue, however, that there are two excep-
tions to the mitigation principle that defeat the govern-
ment’s claim to an offset: (1) the prohibition on so-called
“pass-through” defenses and (2) the collateral source rule.
As to the “pass-through” defense, the insurers argue that
the government, as a breaching party, may not claim miti-
gation of damages when the non-breaching party “passe[s]
through” its losses to its customers. Appellees’ Suppl.
Damages. Br. 15 (citing Hughes Commc’ns Galaxy, Inc. v.
United States,
271 F.3d 1060, 1072 (Fed. Cir. 2001)). 11 The
insurers assert that the cases stand for the proposition that
mitigation may only be considered in the “first step,” and
that “later-step” recoveries such as pass-through are “irrel-
evant” to the calculation of damages.
Id. at 10.
But this is
not a case where a third-party customer pays for the
11 In addition to Hughes, the appellees also rely on
cases arising under antitrust law, see Hanover Shoe, Inc. v.
United Shoe Mach. Corp.,
392 U.S. 481 (1968), RICO, see
Carter v. Berger,
777 F.2d 1173 (7th Cir. 1985), and utility
overcharges, see S. Pac. Co. v. Darnell-Taenzer Lumber Co.,
245 U.S. 531 (1918).
Case: 19-1633 Document: 73 Page: 25 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 25
insurers’ losses, as was the case in Hughes. 12 The complex-
ity of the process cannot obscure the underlying economic
reality that the government is paying at least some of the
increased costs that the insurers incurred as a result of the
government’s failure to make cost-sharing reduction pay-
ments. See Gov’t Suppl. Damages Br. 24 (“[T]he govern-
ment is not urging that [the] plaintiffs’ damages should be
reduced merely because [the] plaintiffs passed on their
cost-sharing reduction expenses to customers. The crucial
point is that [the] plaintiffs . . . passed these expenses on to
the government itself, which by virtue of the ACA’s struc-
ture is paying the cost-sharing reduction expenses . . . in
the form of higher premium tax credits.”).
The government’s claim is not that damages should be
reduced because the insurers passed on the increased costs
to their customers, but that “the insurers . . . obtain[ed]
more money from the premium tax credit program, which
would help mitigate the loss of the cost-sharing reduction
payments.”
Cmty., 141 Fed. Cl. at 755 & n.10. The pass-
through exception, to the extent that it is applicable to con-
tract damages, does not apply here.
Second, the insurers invoke the collateral source rule,
arguing that the additional premium tax credits were col-
lateral benefits that should not be credited against their
damages. The collateral source rule is a generally recog-
nized principle of tort law that “bars a tortfeasor from
12 The antitrust, RICO, and utility cases too are dis-
tinguishable because they concern situations where costs
are passed to a third-party. See, e.g., S.
Pac., 245 U.S. at
534 (explaining that the pass-through doctrine is con-
cerned with the lack of privity between the defendant rail-
road company and the “consumer who . . . paid [the]
increased price”); Adams v. Mills,
286 U.S. 397, 407 (1932)
(similar); Hanover
Shoe, 392 U.S. at 490 (similar in the an-
titrust context).
Case: 19-1633 Document: 73 Page: 26 Filed: 08/14/2020
26 COMMUNITY HEALTH CHOICE v. UNITED STATES
reducing the damages it owes to a plaintiff ‘by the amount
of recovery the plaintiff receives from other sources of com-
pensation that are independent of (or collateral to) the tort-
feasor.’” Johnson v. Cenac Towing, Inc.,
544 F.3d 296, 304
(5th Cir. 2008) (quoting Davis v. Odeco, Inc.,
18 F.3d 1237,
1243 (5th Cir. 1994)); see, e.g., Chisholm v. UHP Projects,
Inc.,
205 F.3d 731, 737 (4th Cir. 2000); Fitzgerald v. Ex-
pressway Sewerage Constr., Inc.,
177 F.3d 71, 73 (1st Cir.
1999). Thus, the collateral source rule bars a reduction of
damages due to “insurance policies and other forms of pro-
tection purchased by [the] plaintiff,”
Johnson, 544 F.3d at
305, or unemployment benefits in the case of a wrongful-
discharge case, Craig v. Y & Y Snacks, Inc.,
721 F.2d 77, 83
(3d Cir. 1983).
As with the insurers’ pass-through argument, their col-
lateral source rule argument fails. We are aware of no au-
thority, and the insurers cite none, holding that the
collateral source rule applies to contract damages, and the
prevailing authority rejects any such limitation. See, e.g.,
United States v. Twin Falls,
806 F.2d 862, 873 (9th Cir.
1986) (“We have found no authority to support the applica-
tion of the collateral source rule in the contracts field.” (col-
lecting cases rejecting the application of the collateral
source rule to contract-based damages)), overruled on other
grounds as recognized by Ass’n of Flight Attendants v. Hori-
zon Air Indus., Inc.,
976 F.2d 541, 551–52 (9th Cir. 1992);
Star Ins. Co. v. Sunwest Metals Inc., 691 F. App’x 358, 361
(9th Cir. 2017) (noting that “California courts have de-
clined to extend the collateral source rule to contract-based
claims” and that contract damages rules are “[u]nlike”
those in tort damages);
LaSalle, 317 F.3d at 1372 (declin-
ing to apply the collateral source rule to government con-
tracts). In any event, even if that rule applied here, the
“source of compensation” is the not “independent” of the
government. The source is the government itself. See Phil-
lips v. W. Co. of N. Am.,
953 F.2d 923, 931 (5th Cir. 1992)
(“The [collateral source] rule is intended to ensure that the
Case: 19-1633 Document: 73 Page: 27 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 27
availability of outside sources of income does not diminish
the plaintiff’s recovery, not make the tortfeasor pay
twice.”). The collateral source rule does not bar the reduc-
tion in damages.
We conclude that additional premium tax credits were
received by Community and Maine Community in 2018 as
a direct consequence of their mitigation efforts following
the government’s nonpayment of 2018 cost-sharing reduc-
tion reimbursements, and the Claims Court was required
to credit the government with such tax credit payments in
determining damages.
IV
Determining the amount of premium tax credits paid
to each insurer is necessarily a fact-intensive task. Be-
cause the Claims Court rejected the government’s mitiga-
tion theory on a limited summary judgment record, it did
not address these calculation issues. And as the insurers
conceded in their briefing before the Claims Court, to the
extent that the insurers’ premium changes are “relevant
. . . to [the] quantum,” they involve “factual questions that
cannot be resolved on [the existing motion for summary
judgment].” Community Reply in Supp. of Mot. for Summ.
J. 15, Cmty. Health Choice, Inc. v. United States, No. 18-cv-
00005,
141 Fed. Cl. 744, ECF No. 20 (Nov. 30, 2018); Maine
Community Mot. for Summ. J. 1, Me. Cmty Health Options
v. United States, No. 17-cv-02057,
143 Fed. Cl. 381, ECF
No. 31 (Apr. 8, 2019) (adopting “all of the arguments re-
garding benefit year 2018 raised by . . . Community . . . in
[its] brief[]”). We therefore remand to the Claims Court for
a determination of the amount of premium increases (and
resultant premium tax credits) attributable to the govern-
ment’s failure to make cost-sharing reduction payments.
This will require either new summary judgment motions or
a trial.
We note that three principles will govern the remand
proceedings.
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28 COMMUNITY HEALTH CHOICE v. UNITED STATES
First, as the insurers argue, some of the silver-level
premium increases (and resulting tax credits) may be
caused by other factors, such as market forces or increased
medical costs. To the extent that this is the case, the gov-
ernment’s liability is not reduced by the tax credits at-
tributable to these other factors.
Second, as previously mentioned, increasing the pre-
mium rates for silver plans resulted in an increase in pre-
mium tax credits for all plans on the exchange. In some
states, state regulators have also allowed insurers to re-
coup part of their lost cost-sharing reduction reimburse-
ments by increasing premiums for other, non-silver plans
on the exchange. In these circumstances, the tax credits
for these other plans (attributable to the silver plan pre-
mium increase) are still caused by the elimination of cost-
sharing reduction payments and will, of course, reduce the
government’s liability. But we do not address whether in
situations where, as here, there have been no premium in-
creases for other plans, the government’s liability should
be reduced for the increased tax credit payments with re-
spect to other plans. We leave that issue to the Claims
Court in the first instance.
Finally, the insurers will bear the burden of persuasion
with respect to the amount of the tax-credit increase at-
tributable to the loss of cost-sharing reduction reimburse-
ments. Other circuit courts and state courts applying state
law are inconsistent as to which party bears the burden of
persuasion with respect to the amount of mitigation. 13 But
13 Compare VICI Racing, LLC v. T-Mobile USA, Inc.,
763 F.3d 273, 301 (3d Cir. 2014) (holding that, under Dela-
ware law, “[a] defendant need not provide an accounting of
the costs a plaintiff should have avoided, but the burden is
properly on a defendant to articulate the actions that would
have been reasonable under the circumstances to mitigate
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COMMUNITY HEALTH CHOICE v. UNITED STATES 29
in the federal context the rule is clear. The plaintiffs bear
the burden of proof:
[A] non-breaching plaintiff bears the burden of per-
suasion to establish both the costs that it incurred
and the costs that it avoided as a result of a breach
of contract. The breaching party may be responsi-
ble for affirmatively pointing out costs that were
avoided, but once such costs have been identified,
the plaintiff must incorporate them into a plausible
model of the damages that it would have incurred
absent the breach.
Bos. Edison Co. v. United States,
658 F.3d 1361, 1369 (Fed.
Cir. 2011) (citing S. Nuclear Operating Co. v. United
States,
637 F.3d 1297, 1304 (Fed. Cir. 2011)); see also Sys.
Fuels, Inc. v. United States,
666 F.3d 1306, 1312 (Fed. Cir.
2012) (collecting cases). Here, the government has affirm-
atively pointed out the insurers’ avoided costs (due to in-
creased premium tax credits). Therefore, it was the
insurers burden to incorporate those benefits into their
damages calculations. Energy Nw. v. United States,
641
F.3d 1300, 1309 (Fed. Cir. 2011) (explaining that, to estab-
lish damages, “a plaintiff [must] show what it would have
loss”), with John Morrell & Co. v. Local Union 304A of
United Food & Commercial Workers, AFL-CIO,
913 F.2d
544, 557 (8th Cir. 1990) (“[T]he breaching party[] ha[s] the
burden of proving that ‘the breach resulted in a direct and
immediate savings to the plaintiff,’ . . . . [T]he defendant
must prove the amount of the offset with reasonable cer-
tainty.”); Amigo Broad., LP v. Spanish Broad. Sys., Inc.,
521 F.3d 472, 486 (5th Cir. 2008) (holding that, under
Texas law, “it is the burden of [the defendants], not [the
plaintiff], to show that [the plaintiff] received a benefit
from its expenditures that reduce or offset the amount of
reliance damages to which [the plaintiff] claims it is enti-
tled”).
Case: 19-1633 Document: 73 Page: 30 Filed: 08/14/2020
30 COMMUNITY HEALTH CHOICE v. UNITED STATES
done in the non-breach world, and what it did post-
breach”). We think that this allocation of the burden of
proof is particularly appropriate here because the insurers
were already required by section 1003 of the ACA to pro-
vide “justification[s]” for premium rate increases. 42
U.S.C. § 300gg-94(a)(2). Thus, Community and Maine
Community—having previously justified their silver-level
premium increases—are “in the best position to adduce and
establish such proof.” S.
Nuclear, 637 F.3d at 1304 (quot-
ing 11 Corbin on Contracts § 57.10 n.15 (2005)).
According to the insurers, they cannot be expected to
bear this burden of proof by comparing “each insurer’s fi-
nancial picture now in relation to what it hypothetically
might have been if [the cost-sharing reduction reimburse-
ments] had been timely paid.” Appellees’ Suppl. Damages
Br. 9. Specifically, the insurers argue that they cannot
“submit a hypothetical model establishing what their costs
would have been in the absence of breach.”
Id. at n.9 (quot-
ing Gov’t Suppl. Damages Br. 8). Given the explicit argu-
ments that the insurers here have made for rate increases,
we doubt that proof will be as difficult as the insurers’
claim. In any event, as we have discussed, our cases make
clear that the plaintiff seeking to recover damages must
“prov[e] causation by comparing a hypothetical ‘but for’
world to a plaintiff’s actual costs.” Energy
Nw., 641 F.3d at
1306 (quoting Yankee Atomic Elec. Co. v. United States,
536
F.3d 1268, 1273–74 (Fed. Cir. 2008)). The insurers here
cannot avoid their burden to prove damages.
V
Although we do not address the Claims Court’s holding
with respect to the insurers’ implied-in-fact contract the-
ory, the same damages analysis would apply to that claim
as well, since, as the Claims Court recognized, a claim for
breach of an implied-in-fact contract is subject to the same
damages limitations as an ordinary contract. See Cmty.,
141 Fed Cl. at 767–70 (analyzing damages for breach of an
Case: 19-1633 Document: 73 Page: 31 Filed: 08/14/2020
COMMUNITY HEALTH CHOICE v. UNITED STATES 31
implied-in-fact contract under “[t]he general rule in com-
mon law breach of contract cases” (quoting Estate of Berg
v. United States,
687 F.2d 377, 379 (Ct. Cl. 1982)); see, e.g.,
Lindquist Ford, Inc. v. Middleton Motors, Inc.,
557 F.3d
469, 481 (7th Cir. 2009), as amended (Mar. 18, 2009) (“[A]n
implied-in-fact contract is governed by general contract
principles.”); Hill v. Waxberg,
237 F.2d 936, 939 (9th Cir.
1956) (explaining that “the general contract theory of com-
pensatory damages should be applied” in an action for
breach of an implied-in-fact contract). There is thus no
need on remand to separately address the insurers’ im-
plied-in-fact contract claim.
AFFIRMED IN PART, REVERSED AND
REMANDED IN PART
COSTS
No costs.
