Maine Community Health Options v. United States ( 2019 )

In the United States Court of Federal Claims
No. 17-2057C
(Filed: June 10, 2019)
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MAINE COMMUNITY HEALTH OPTIONS, *
*
Plaintiff, * Affordable Care Act; Cost-Sharing
* Reduction Payments; 42 U.S.C. § 18071;
v. * Statutory Violation; Implied-in-Fact
* Contract; Motion for Summary Judgment,
THE UNITED STATES, * RCFC 56
*
Defendant. *
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Stephen McBrady, Washington, DC, for plaintiff.
Christopher J. Carney, United States Department of Justice, Washington, DC, for defendant.
OPINION AND ORDER
SWEENEY, Chief Judge
Plaintiff Maine Community Health Options contends that the federal government ceased
making the cost-sharing reduction payments to which it and other insurers are entitled under the
Patient Protection and Affordable Care Act (“Affordable Care Act”), Pub. L. No. 111-148, 124
Stat. 119 (2010), and its implementing regulations. In its February 15, 2019 Opinion and Order,
the court determined that plaintiff was entitled to recover the cost-sharing reduction payments
that the government did not make for 2017. Plaintiff subsequently amended its complaint to add
claims for the payments that the government did not make for 2018 and moved for summary
judgment on those claims. For the reasons set forth below, the court grants plaintiff’s motion. 1
1
For simplicity, and to facilitate any appellate review, this decision includes the
background and analysis previously set forth in the court’s February 15, 2019 Opinion and
Order.
I. BACKGROUND
A. The Affordable Care Act
Congress enacted the Affordable Care Act as part of a comprehensive scheme of health
insurance reform. 2 See generally King v. Burwell, 135 S. Ct. 2480 (2015). Specifically, the Act
includes “a series of interlocking reforms designed to expand coverage in the individual health
insurance market.” Id. at 2485. In conjunction with these reforms, the Act provided for the
establishment of an American Health Benefit Exchange (“exchange”) in each state by January 1,
2014, to facilitate the purchase of “qualified health plans” by individuals and small businesses.
42 U.S.C. §§ 18031, 18041 (2012); accord King, 135 S. Ct. at 2485 (describing an exchange as
“a marketplace that allows people to compare and purchase insurance plans”). Qualified health
plans can be offered at four levels (bronze, silver, gold, and platinum) that differ based on how
much of a plan’s benefits an insurer must cover under the plan. 3 42 U.S.C. § 18022(d)(1).
Among the reforms included in the Affordable Care Act were two aimed at ensuring that
individuals have access to affordable insurance coverage and health care: the premium tax credit
enacted in section 1401 of the Act, 26 U.S.C. § 36B (2012), and the cost-sharing reduction
program enacted in section 1402 of the Act, 42 U.S.C. § 18071. “The premium tax credits and
the cost-sharing reductions work together: the tax credits help people obtain insurance, and the
cost-sharing reductions help people get treatment once they have insurance.” California v.
Trump, 267 F. Supp. 3d 1119, 1123 (N.D. Cal. 2017).
1. Premium Tax Credit
The first of these two reforms, the premium tax credit, is designed to reduce the insurance
premiums paid by individuals whose household income is between 100% and 400% of the
poverty line. See 26 U.S.C. § 36B(c)(1)(A); 42 U.S.C. § 18082(c)(2)(B)(i); accord 26 C.F.R.
§ 1.36B-2(a) to (b) (2017); 45 C.F.R. § 156.460(a)(1) (2017). The Secretary of the Department
of Health and Human Services (“Secretary of HHS”) is required to determine whether
individuals enrolling in qualified health plans on an exchange are eligible for the premium tax
credit and, if so, to notify the Secretary of the United States Department of the Treasury
(“Treasury Secretary”) of that fact. 42 U.S.C. § 18082(c)(1). The Treasury Secretary, in turn, is
required to make periodic advance payments of the premium tax credit to the insurers offering
the qualified health plans in which the eligible individuals enrolled. Id. § 18082(c)(2)(A). The
insurers are required to use these advance payments to reduce the premiums of the eligible
individuals. Id. § 18082(c)(2)(B)(i); see also 26 U.S.C. § 36B(f) (describing the process for
2
Seven days after enacting the Affordable Care Act, Congress enacted the Health Care
and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029, which included
additional provisions related to health insurance reform.
3
For example, for a silver-level qualified health plan, insurers are required to provide
coverage for 70% of the benefits offered under the plan. 42 U.S.C. § 18022(d)(1)(B). Insurers
offering qualified health plans on an exchange must offer at least one silver-level plan and one
gold-level plan. Id. § 18021(a)(1)(C)(ii).
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annually reconciling an individual’s actual premium tax credit with the advance payments of the
credit). To fund the premium tax credit, Congress amended a preexisting permanent
appropriation to allow for the payment of refunds arising from the credit. See 31 U.S.C. § 1324
(2012) (“Necessary amounts are appropriated . . . for refunding internal revenue collections as
provided by law . . . . Disbursements may be made from the appropriation made by this section
only for . . . refunds due from credit provisions of [26 U.S.C. § 36B].”).
2. Cost-Sharing Reductions
The other reform, cost-sharing reductions, is designed to reduce the out-of-pocket
expenses (such as deductibles, copayments, and coinsurance 4) paid by individuals whose
household income is between 100% and 250% of the poverty line. See 42 U.S.C.
§§ 18022(c)(3), 18071(c)(2); accord 45 C.F.R. §§ 155.305(g), 156.410(a). Insurers offering
qualified health plans are required to reduce eligible individuals’ cost-sharing obligations by
specified amounts, 5 42 U.S.C. § 18071(a), and the Secretary of HHS is required to reimburse the
insurers for the cost-sharing reductions they make, see id. § 18071(c)(3)(A) (“[T]he Secretary [of
HHS] shall make periodic and timely payments to the issuer equal to the value of the
reductions.”).
The Secretary of HHS is afforded some discretion in the timing of the reimbursements:
once he determines which individuals are eligible for cost-sharing reductions, he must notify the
Treasury Secretary “if an advance payment of the cost-sharing reductions . . . is to be made to the
issuer of any qualified health plan” and, if so, the time and amount of such advance payment. Id.
§ 18082(c)(3). Pursuant to this authority, the Secretary of HHS established a reimbursement
schedule by which the government “would make monthly advance payments to issuers to cover
projected cost-sharing reduction amounts, and then reconcile those advance payments at the end
of the benefit year to the actual cost-sharing reduction amounts.” Patient Protection and
Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014, 78 Fed. Reg.
15,410, 15,486 (Mar. 11, 2013) (to be codified at 45 C.F.R. § 156.430); see also 45 C.F.R.
§ 156.430(b)(1) (“A [qualified health plan] issuer will receive periodic advance payments [for
cost sharing reductions].”). The amount of the cost-sharing reduction payments owed to insurers
is based on information provided to HHS by the insurers. See 45 C.F.R. § 156.430(c) (requiring
insurers to report to HHS, “for each policy, the total allowed costs for essential health benefits
charged for the policy for the benefit year, broken down by . . . (i) [t]he amount the [insurer]
4
“The term ‘cost-sharing’ includes . . . deductibles, coinsurance, copayments, or similar
charges,” but not “premiums, balance billing amounts for non-network providers, or spending for
non-covered services.” 42 U.S.C. § 18022(c)(3).
5
To be eligible for cost-sharing reductions, an individual must enroll in a silver-level
qualified health plan. 42 U.S.C. § 18071(b)(1). Under a standard silver-level plan, insurers are
required to provide coverage for 70% of the benefits offered under the plan. Id.
§ 18022(d)(1)(B). However, for eligible individuals, that percentage increases to 73% (when
household income is between 200% and 250% of the poverty line), 87% (when household
income is between 150% and 200% of the poverty line), or 94% (when household income is
between 100% and 150% of the poverty line). Id. § 18071(c)(2).
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paid[,] (ii) [t]he amount the enrollee(s) paid[, and] (iii) [t]he amount the enrollee(s) would have
paid under the standard plan without cost-sharing reductions”).
The Affordable Care Act did not include any language appropriating funds to make the
cost-sharing reduction payments.
3. Requirements for Insurers
To offer a health insurance plan on an exchange in any given year––and become eligible
to receive payments for the premium tax credit and cost-sharing reductions––an insurer must
satisfy certain requirements established by the Secretary of HHS. See, e.g., 42 U.S.C.
§ 18041(a)(1) (authorizing the Secretary of HHS to “issue regulations setting standards for
meeting the requirements under [title I of the Affordable Care Act] with respect to––(A) the
establishment and operation of Exchanges . . . ; (B) the offering of qualified health plans through
such Exchanges; . . . and (D) such other requirements as the Secretary determines appropriate”).
The requirements include (1) obtaining certification that any plan it intends to offer is a qualified
health plan, see, e.g., 45 C.F.R. §§ 155.1000, .1010, 156.200; (2) submitting rate and benefit
information before the open enrollment period for the applicable year, see, e.g., id. §§ 155.1020,
156.210; and (3) executing a standard Qualified Health Plan Issuer Agreement (“QHPI
Agreement”) with the Centers for Medicare and Medicaid Services (“CMS”), an agency of
HHS, 6 for that year, 7 see id. § 155.260(b) (requiring exchanges to execute agreements with
entities that will gain access to personally identifiable information submitted to the exchanges
that address privacy and security standards and obligations); see also id. § 155.20 (defining
“exchange” to include exchanges established and operated by either a state or HHS).
With respect to the latter requirement, each QHPI Agreement includes the following
recitals:
6
The Secretary of HHS delegated to the Administrator of CMS (1) his authority––
granted in section 1301 of the Affordable Care Act––“pertaining to defining qualified health
plans”; (2) his authority––granted in section 1311 of the Affordable Care Act––“pertaining to
affordable choices of health benefit plans”; and (3) his authority––granted in section 1321 of the
Affordable Care Act––“pertaining to the State’s flexibility in operation and enforcement of
[exchanges] and related requirements.” Delegation of Authorities, 76 Fed. Reg. 53,903, 53,903
(Aug. 30, 2011); see also 42 U.S.C. §§ 18021 (codifying section 1301 of the Affordable Care
Act), 18031 (codifying section 1311 of the Affordable Care Act), 18041 (codifying section 1321
of the Affordable Care Act).
7
The QHPI Agreements for 2017 and 2018 include, as relevant in this case, identical
language. See Ctrs. for Medicare & Medicaid Servs., Dep’t of Health & Human Servs., Plan
Year 2017 QHP Issuer Agreement, https://www.cms.gov/CCIIO/Resources/Regulations-and-
Guidance/Downloads/Plan-Year-2017-QHP-Issuer-Agreement.pdf (last visited Feb. 1, 2019);
Ctrs. for Medicare & Medicaid Servs., Dep’t of Health & Human Servs., Plan Year 2018 QHP
Issuer Agreement, https://www.qhpcertification.cms.gov/s/PlanYear2018_
QHPIssuerAgreement_FFMSPM.pdf (last visited Feb. 1, 2019) (collectively, “Agreements”).
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WHEREAS:
1. Section 1301(a) of the Affordable Care Act . . . provides that [Qualified
Health Plans] are health plans that are certified by an Exchange and, among
other things, comply with the regulations developed by the Secretary of the
Department of Health and Human Services under section 1321(a) and other
requirements that an applicable Exchange may establish.
2. [Qualified Health Plan Issuer] is an entity licensed by an applicable State
Department of Insurance . . . as an Issuer and seeks to offer through the
[Federally-facilitated Exchange] in such State one or more plans that are
certified to be [Qualified Health Plans].
3. It is anticipated that periodic [Advance Payments of the Premium Tax Credit],
advance payments of [Cost-Sharing Reductions], and payments of [Federally-
facilitated Exchange] user fees will be due between CMS and [Qualified
Health Plan Issuer].
4. [Qualified Health Plan Issuer] and CMS are entering into this Agreement to
memorialize the duties and obligations of the parties, including to satisfy the
requirements under 45 CFR 155.260(b)(2).
Now, therefore, in consideration of the promises and covenants herein contained,
the adequacy of which the Parties acknowledge, [Qualified Health Plan Issuer]
and CMS agree as follows . . . .
Agreements 1. Section I of each agreement is titled “Definitions.” Id. at 1-3. Section II of each
agreement, titled “Acceptance of Standard Rules of Conduct,” addresses standards related to
personally identifiable information (as set forth in 45 C.F.R. § 155.260) and communications
with CMS’s Data Services Hub. Id. at 3-6. Section III of each agreement is titled “CMS
Obligations” and provides, in its entirety:
a. CMS will undertake all reasonable efforts to implement systems and processes
that will support [Qualified Health Plan Issuer] functions. In the event of a
major failure of CMS systems and/or processes, CMS will work with
[Qualified Health Plan Issuer] in good faith to mitigate any harm caused by
such failure.
b. As part of a monthly payments and collections reconciliation process, CMS
will recoup or net payments due to [Qualified Health Plan Issuer] against
amounts owed to CMS by [Qualified Health Plan Issuer] in relation to
offering of [Qualified Health Plans] or any entity operating under the same tax
identification number as [Qualified Health Plan Issuer] (including
overpayments previously made), including the following types of payments:
[Advance Payments of the Premium Tax Credit], advance payments of [Cost-
Sharing Reductions], and payment of Federally-facilitated Exchange user fees.
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Id. at 6. The remaining sections of the agreements contain various boilerplate provisions, see id.
at 6-9, including several related to the termination of the agreements, id. at 6-7. One
termination-related clause provides:
[Qualified Health Plan Issuer] acknowledges that termination of this Agreement
1) may affect its ability to continue to offer [Qualified Health Plans] through the
[Federally-facilitated Exchange]; 2) does not relieve [Qualified Health Plan
Issuer] of applicable obligations to continue providing coverage to enrollees; and
3) specifically does not relieve [Qualified Health Plan Issuer] of any obligation
under applicable State law to continue to offer coverage for a full plan year.
Id. at 7. Each agreement is to be executed by authorized representatives of the insurer and CMS.
Id. at 10-11 (2017 agreement), 9-10 (2018 agreement).
In addition, in most circumstances, insurers must make their qualified health plans
available on the exchanges for the entire year for which the plans were certified. 45 C.F.R.
§ 156.272(a).
B. Termination of Cost-Sharing Reduction Payments
On April 10, 2013, before the exchanges opened for business, President Barack H.
Obama submitted to Congress his budget for fiscal year 2014. See Office of Mgmt. & Budget,
Exec. Office of the President, Fiscal Year 2014 Budget of the United States Government to
Congress (2013). The budget included a request for a line-item appropriation for cost-sharing
reduction payments. See id. at App. 448; accord Ctrs. for Medicare & Medicaid Servs., Dep’t of
Health & Human Servs., Fiscal Year 2014 Justification of Estimates for Appropriations
Committees 184 (2013). However, Congress did not provide the requested appropriation. See
Consolidated Appropriations Act, 2014, Pub. L. No. 113-76, 128 Stat. 5; see also S. Rep. No.
113-71, at 123 (2013) (“The Committee recommendation does not include a mandatory
appropriation, requested by the administration, for reduced cost sharing assistance . . . as
provided for in sections 1402 and 1412 of the [Affordable Care Act].”). In fact, it is undisputed
by the parties that Congress has never specifically appropriated funds to reimburse insurers for
their cost-sharing reductions. 8 It is further undisputed that Congress has never (1) expressly
prevented––in an appropriations act or otherwise––the Secretary of HHS or the Treasury
Secretary from expending funds to make cost-sharing reduction payments or (2) amended the
Affordable Care Act to eliminate the cost-sharing reduction payment obligation.
Although Congress did not specifically appropriate funds for cost-sharing reduction
payments, the Obama administration began making advance payments to insurers for cost-
8
Whether Congress will appropriate funds for cost-sharing reduction payments in the
future is an open question. Cf. Patient Protection and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for 2020, 84 Fed. Reg. 227, 283 (Jan. 24, 2019) (“The
Administration supports a legislative solution that would appropriate [cost-sharing reduction]
payments . . . .”).
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sharing reductions in January 2014. See Ctrs. for Medicare & Medicaid Servs., Dep’t of Health
& Human Servs., Guidance Related to Reconciliation of the Cost-Sharing Reduction Component
of Advance Payments for Benefit Years 2014 and 2015 27 (2016). It made the payments from
“the same account from which the premium tax credit” advance payments were made––in other
words, from the permanent appropriation described in 31 U.S.C. § 1324. Letter from Sylvia M.
Burwell, Director of the Office of Mgmt. & Budget, to Ted Cruz and Michael S. Lee, U.S.
Senators 4 (May 21, 2014), http://www.cruz.senate.gov/files/documents/Letters/20140521_
Burwell_Response.pdf.
On November 21, 2014, the United States House of Representatives (“House”) sued the
Obama administration in the United States District Court for the District of Columbia (“D.C.
district court”) to stop the payment of cost-sharing reduction reimbursements to insurers. See
generally U.S. House of Representatives v. Burwell, No. 1:14-cv-01967-RMC (D.D.C. filed
Nov. 21, 2014). The D.C. district court ruled for the House, holding:
The Affordable Care Act unambiguously appropriates money for Section 1401
premium tax credits but not for Section 1402 reimbursements to insurers. Such an
appropriation cannot be inferred. None of Secretaries’ extra-textual arguments—
whether based on economics, “unintended” results, or legislative history—is
persuasive. The Court will enter judgment in favor of the House of
Representatives and enjoin the use of unappropriated monies to fund
reimbursements due to insurers under Section 1402. The Court will stay its
injunction, however, pending appeal by either or both parties.
U.S. House of Representatives v. Burwell, 185 F. Supp. 3d 165, 168 (D.D.C. 2016). The Obama
administration appealed the ruling. See generally U.S. House of Representatives v. Azar
(“Azar”), No. 16-5202 (D.C. Cir. filed July 6, 2016). However, the United States Court of
Appeals for the District of Columbia Circuit (“D.C. Circuit”) stayed the appeal to allow
President-elect Donald J. Trump and his future administration time to determine how to proceed.
See Mot. Hold Briefing Abeyance 1-2, Azar, No. 16-5202 (Nov. 21, 2016); Order, Azar, No. 16-
5202 (Nov. 21, 2016).
The Trump administration continued the previous administration’s practice of making
advance cost-sharing reduction payments to insurers. However, on October 11, 2017, the United
States Attorney General sent a letter to the Treasury Secretary and the Acting Secretary of HHS
advising that “the best interpretation of the law is that the permanent appropriation for ‘refunding
internal revenue collections,’ 31 U.S.C. § 1324, cannot be used to fund the [cost-sharing
reduction] payments to insurers authorized by 42 U.S.C. § 18071.” Letter from Jefferson B.
Sessions III, U.S. Attorney General, to Steven Mnuchin, Sec’y of the Treasury, and Don Wright,
M.D., M.P.H., Acting Sec’y of HHS 1 (Oct. 11, 2017), http://www.hhs.gov/sites/default/files/
csr-payment-memo.pdf. Based on this guidance, the Acting Secretary of HHS directed, the
following day, that “[cost-sharing reduction] payments to issuers must stop, effective
immediately,” and that such “payments are prohibited unless and until a valid appropriation
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exists.” Memorandum from Eric Hargan, Acting Sec’y of HHS, 9 to Seema Verma,
Administrator of the Ctrs. for Medicare & Medicaid Servs. (Oct. 12, 2017), http://www.hhs.gov/
sites/default/files/csr-payment-memo.pdf.
C. Reaction to the Termination of Cost-Sharing Reduction Payments
The Trump administration’s termination of cost-sharing reduction payments did not come
as a surprise to insurers:
Anticipating that the Administration would terminate [cost-sharing reduction]
payments, most states began working with the insurance companies to develop a
plan for how to respond. Because the Affordable Care Act requires insurance
companies to offer plans with cost-sharing reductions to customers, the federal
government’s failure to meet its [cost-sharing reduction] payment obligations
meant the insurance companies would be losing that money. So most of the states
set out to find ways for the insurance companies to increase premiums for 2018
(with open enrollment beginning in November 2017) in a fashion that would
avoid harm to consumers. And the states came up with an idea: allow the
insurers to make up the deficiency through premium increases for silver plans
only. In other words, allow a relatively large premium increase for silver plans,
but no increase for bronze, gold, or platinum plans.
As a result, in these states, for everyone between 100% and 400% of the
federal poverty level who wishes to purchase insurance on the exchanges, the
available tax credits rise substantially. Not just for people who purchase the silver
plans, but for people who purchase other plans too.
California, 267 F. Supp. 3d at 1134-35 (footnote omitted). 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 payments. 10
9
Eric Hargan was named Acting Secretary of HHS on October 10, 2017. See Press
Release, The White House, President Donald J. Trump Announces Intent to Nominate Personnel
to Key Administration Posts (Oct. 10, 2017), https://www.whitehouse.gov/presidential-
actions/president-donald-j-trump-announces-intent-nominate-personnel-key-administration-
posts-22/.
10
Notably, increasing silver-level qualified health plan premiums would not harm most
consumers who qualify for the premium tax credit because the credit increases as the premium
increases. See California, 267 F. Supp. 3d at 1134 (“[T]he amount [of the premium tax credit] is
based on the cost of the second-cheapest silver plan available on the exchange in your
geographic area, and then adjusted based on your income (that is, based on where you fall on the
spectrum between 100% and 400% of the federal poverty level). So, if premiums for the second-
cheapest silver plan in your area go up, the amount of your tax credit will go up by a
corresponding amount. See 26 U.S.C. § 36B.”); see also id. at 1122 (“[M]ost state regulators
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Accord id. at 1139 (agreeing with the states “that the widespread increase in silver plan
premiums will qualify many people for higher tax credits, and that the increased federal
expenditure for tax credits will be far more significant than the decreased federal expenditure for
[cost-sharing reduction] payments”). This approach is commonly referred to as “silver loading,”
and many states appear to have endorsed it, see id. at 1137 (“Even before the Administration
announced its decision, 38 states accounted for the possible termination of [cost-sharing
reduction] payments in setting their 2018 premium rates. And now that the announcement has
been made, even more states are adopting [the] strategy [of increasing silver-level plan premiums
to obtain additional premium tax credit payments].” (footnote omitted)).
D. Other Litigation
While the states and insurers were working on ways to mitigate the loss of cost-sharing
reduction payments, the parties in the case on appeal at the D.C. Circuit began discussing that
case’s disposition. Joint Status Report 1-2, Azar, No. 16-5202 (Nov. 30, 2017). Ultimately, at
the request of the parties, the D.C. Circuit dismissed the appeal, Order, Azar, No. 16-5202 (May
16, 2018), and the D.C. district court vacated the portion of its ruling in which it provided that
“reimbursements paid to issuers of qualified health plans for the cost-sharing reductions
mandated by Section 1402 of the Affordable Care Act, Pub. L. 111-148, are ENJOINED pending
an appropriation for such payments,” Order, Azar, No. 1:14-cv-01967-RMC (May 18, 2018).
A separate lawsuit was filed by seventeen states and the District of Columbia in the
United States District Court for the Northern District of California (“California district court”) to
compel the Trump administration to continue making the advance cost-sharing reduction
payments to insurers. See generally California v. Trump, No. 3:17-cv-05895-VC (N.D. Cal.
filed Oct. 13, 2017). The California district court denied the states’ motion for a preliminary
injunction. California, 267 F. Supp. 3d at 1121-22, 1140. Eventually, the states requested a stay
of the proceedings or, alternatively, dismissal of the suit without prejudice, explaining:
[S]taying the proceedings is warranted to avoid disturbing the status quo given the
general success of the practice commonly referred to as “silver-loading” which
mostly curbed the harm caused by the federal government’s unjustified cessation
of cost-sharing reduction (CSR) subsidies mandated by Section 1402 of the
Patient Protection and Affordable Care Act (ACA). At the same time, because of
the real threat of the federal government taking action to prohibit silver-loading,
the Court should retain jurisdiction, thus allowing the Plaintiff States to
expeditiously seek appropriate remedies from this Court for the protection of their
citizens. Alternatively, if the Court determines that a stay is not appropriate at
this time, the Plaintiff States respectfully request that the Court dismiss the action
without prejudice.
Mot. for Order Staying Proceedings or, in the Alternative, Dismissing Action Without Prejudice
2, California, No. 3:17-cv-05895-VC (July 16, 2018); cf. HHS Notice of Benefit and Payment
have devised responses that give millions of lower-income people better health coverage options
than they would otherwise have had.”).
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Parameters for 2020, 84 Fed. Reg. at 283 (“The Administration supports a legislative solution
that would appropriate CSR payments and end silver loading. In the absence of Congressional
action, we seek comment on ways in which HHS might address silver loading, for potential
action in future rulemaking applicable not sooner than plan year 2021.”). The California district
court dismissed the case without prejudice on July 18, 2018. Order Dismissing Case Without
Prejudice, California, No. 3:17-cv-05895-VC (July 18, 2018).
E. Effect of Cost-Sharing Reduction Payment Termination on Plaintiff
Plaintiff is a nonprofit corporation, organized as a Consumer Operated and Oriented
Plan under section 1332 of the Affordable Care Act, that offers qualified health plans on Maine’s
exchange. 11 It began offering qualified health plans on the exchange in 2014, and continued to
offer such plans in 2015, 2016, 2017, and 2018. As of the end of 2017, plaintiff had the largest
number of exchange-insured individuals in Maine. Plaintiff began receiving monthly advance
cost-sharing reduction payments in January 2014 and, as with every other insurer offering
qualified health plans on the exchanges, stopped receiving these payments effective October 12,
2017. Plaintiff asserts that this cessation of payments has caused it to suffer large financial
losses.
F. Procedural History
Plaintiff filed a complaint in this court on December 28, 2017, to recover the cost-sharing
reduction payments that the government has not made for 2017. 12 It asserted two claims for
relief, contending that in failing to make the cost-sharing reduction payments to insurers, the
government violated the statutory and regulatory mandate and breached an implied-in-fact
contract. Plaintiff moved for summary judgment and defendant cross-moved to dismiss the
complaint. In its February 15, 2019 Opinion and Order, the court determined that plaintiff was
entitled to recover the unpaid cost-sharing reduction reimbursements for 2017 under both the
violation-of-statute and breach-of-an-implied-in-fact-contract claims, and directed the parties to
11
It appears that the facts in this subsection, which are derived from the allegations in
plaintiff’s complaint, are undisputed.
12
A number of other insurers have filed suit in this court seeking to recover unpaid cost-
sharing reduction reimbursements. See, e.g., Common Ground Healthcare Coop. v. United
States, No. 17-877C (Chief Judge Sweeney); Local Initiative Health Auth. for L.A. Cty. v.
United States, No. 17-1542C (Judge Wheeler); Cmty. Health Choice, Inc. v. United States, No.
18-5C (Chief Judge Sweeney); Sanford Health Plan v. United States, Nos. 18-136C and 19-569C
(Judge Kaplan); Mont. Health Co-op v. United States, Nos. 18-143C and 19-568C (Judge
Kaplan); Molina Healthcare of Cal., Inc. v. United States, No. 18-333C (Judge Wheeler); Health
Alliance Med. Plans, Inc. v. United States, No. 18-334C (Judge Campbell-Smith); Blue Cross &
Blue Shield of Vt. v. United States, No. 18-373C (Judge Horn); Guidewell Mut. Holding Corp.
v. United States, No. 18-1791C (Judge Griggsby); Harvard Pilgrim Health Care, Inc. v. United
States, No. 18-1820C (Judge Smith); Blue Cross & Blue Shield of N.D. v. United States, No. 18-
1983C (Judge Horn).
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file a joint status report indicating the amount due to plaintiff. 13 See generally Me. Cmty. Health
Options v. United States, 142 Fed. Cl. 53 (2019).
The court also issued decisions in two other cost-sharing reduction cases on February 15,
2019. See generally Common Ground Healthcare Coop. v. United States, 142 Fed. Cl. 38
(2019); Cmty. Health Choice, Inc. v. United States, 141 Fed. Cl. 744 (2019), appeal docketed,
No. 19-1633 (Fed. Cir. Mar. 8, 2019). In both of those decisions, the court determined that the
plaintiffs were entitled to recover unpaid cost-sharing reduction reimbursements for 2018. See
Common Ground, 142 Fed. Cl. at 53; Cmty. Health Choice, 141 Fed. Cl. at 770. Consequently,
with the court’s approval, plaintiff filed an amended complaint in which it alleges that in failing
to make the cost-sharing reduction payments to insurers for 2018, the government violated the
statutory and regulatory mandate and breached an implied-in-fact contract. Plaintiff then filed a
motion for summary judgment in which it adopts all of the arguments it advanced in support of
its claims for 2017 and all of the arguments advanced by the plaintiffs in Common Ground and
Community Health Choice. Similarly, in its response in opposition to plaintiff’s motion,
defendant adopts all of the arguments it advanced in opposition to plaintiff’s claims for 2017 and
the claims for 2018 asserted by the plaintiffs in Common Ground and Community Health
Choice. Finally, in a joint status report filed on June 7, 2019, the parties represented that the
amount due to plaintiff for 2017––in accordance with the court’s February 15, 2019 Opinion and
Order––is $846,493.02, and the amount due to plaintiff for 2018––in the event that the court
rules in plaintiff’s favor on its claim for 2018––is $18,384,382.25. The court is now prepared to
rule.
II. STANDARD OF REVIEW
Plaintiff moves for summary judgment pursuant to Rule 56 of the Rules of the United
States Court of Federal Claims (“RCFC”). Summary judgment is appropriate when there is no
genuine issue of material fact and the moving party is entitled to a judgment as a matter of law.
RCFC 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material if it “might
affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). An issue is genuine if it “may reasonably be resolved in favor of either
party.” Id. at 250. Entry of summary judgment is mandated against a party who fails to establish
“an element essential to that party’s case, and on which that party will bear the burden of proof at
trial.” Celotex Corp., 477 U.S. at 322. Statutory construction and contract interpretation “are
questions of law amenable to resolution through summary judgment.” Stathis v. United States,
120 Fed. Cl. 552, 561 (2015); accord Varilease Tech. Group, Inc. v. United States, 289 F.3d 795,
798 (Fed. Cir. 2002) (“Contract interpretation is a question of law generally amenable to
13
The court had the benefit of full briefing and oral argument in three cost-sharing
reduction cases: Common Ground Healthcare Cooperative v. United States, No. 17-877C,
Maine Community Health Options v. United States, No. 17-2057C, and Community Health
Choice, Inc. v. United States, No. 18-5C. The plaintiffs in all three cases alleged that the
government violated the cost-sharing reduction statutes and regulations, and the plaintiffs in two
of the cases alleged a breach of an implied-in-fact contract. Thus, in ruling on the parties’
motions in this case, the court, when applicable, considered the parties’ arguments in all three
cases.
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summary judgment.”); Anderson v. United States, 54 Fed. Cl. 620, 629 (2002) (“The plaintiff’s
entitlement . . . rests solely upon interpretation of the cited statute and is thus amenable to
resolution by summary judgment.”), aff’d, 70 F. App’x 572 (Fed. Cir. 2003) (unpublished
opinion).
III. DISCUSSION
As noted above, in seeking to recover the cost-sharing reduction payments not made by
the government, plaintiff asserts two claims for relief. The court addresses each in turn.
A. Violation of Statute
Plaintiff first contends that the government’s failure to make the payments was a
violation of the cost-sharing reduction provisions of the Affordable Care Act and its
implementing regulations. Plaintiff further contends that Congress’s failure to specifically
appropriate funds for cost-sharing reduction payments does not suspend or terminate the
government’s obligation to make the payments. Defendant disagrees, arguing that Congress
expressed its intent that cost-sharing reduction payments should not be made absent a specific
appropriation for that purpose by not appropriating funds for cost-sharing reductions in the
Affordable Care Act or thereafter. Consequently, defendant contends, monetary damages––
payable from the Judgment Fund––are unavailable from this court.
1. The Government Is Obligated to Make Cost-Sharing Reduction Payments to Plaintiff
Notwithstanding the Absence of a Specific Appropriation for That Purpose
To determine whether Congress intended the government to make cost-sharing reduction
payments to insurers, the court first turns to the language of the Affordable Care Act. See Lamie
v. U.S. Tr., 540 U.S. 526, 534 (2004) (“The starting point in discerning congressional intent is
the existing statutory text.”); see also Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54 (1992)
(“[C]ourts must presume that a legislature says in a statute what it means and means in a statute
what it says there.”). In addition to evaluating the specific provision of the Affordable Care Act
establishing the cost-sharing reduction program, the court must read that provision in the context
of the Affordable Care Act as a whole. See King v. St. Vincent’s Hosp., 502 U.S. 215, 221
(1991) (following “the cardinal rule that a statute is to be read as a whole, since the meaning of
statutory language, plain or not, depends on context” (citation omitted)); Crandon v. United
States, 494 U.S. 152, 158 (1990) (“In determining the meaning of the statute, we look not only to
the particular statutory language, but to the design of the statute as a whole and to its object and
policy.”); Kokoszka v. Belford, 417 U.S. 642, 650 (1974) (“When ‘interpreting a statute, the
court will not look merely to a particular clause in which general words may be used, but will
take in connection with it the whole statute (or statutes on the same subject) and the objects and
policy of the law, as indicated by its various provisions, and give to it such a construction as will
carry into execution the will of the Legislature . . . .’” (quoting Brown v. Duchesne, 60 U.S. 183,
194 (1856))); see also Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843
n.9 (1984) (“If a court, employing traditional tools of statutory construction, ascertains that
Congress had an intention on the precise question at issue, that intention is the law and must be
given effect.”); Kilpatrick v. Principi, 327 F.3d 1375, 1384 (Fed. Cir. 2003) (“[I]n determining
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whether Congress has directly spoken to the point at issue, a court should attempt to discern
congressional intent either from the plain language of the statute or, if necessary, by resort to the
applicable tools of statutory construction[.]”). If congressional intent regarding the obligation to
make cost-sharing reduction payments can be ascertained from evaluating the text of the
Affordable Care Act, then the court’s inquiry on this issue is complete. See Conn. Nat’l Bank,
503 U.S. at 254.
The statutory provision governing cost-sharing reductions sets forth an unambiguous
mandate: “the Secretary [of HHS] shall make periodic and timely payments” to insurers “equal
to the value of the reductions” made by the insurers. 42 U.S.C. § 18071(c)(3)(A); accord Local
Initiative Health Auth. for L.A. Cty. v. United States, 142 Fed. Cl. 1, 11 (2019) (“That provision
can only mean one thing: the Government must repay [Qualified Health Plans] for their [cost-
sharing reduction] expenses. The unambiguous ‘shall make’ language indicates a binding
obligation to pay that the Court is powerless to construe any differently.”); Mont. Health Co-op
v. United States, 139 Fed. Cl. 213, 218 (2018) (“[T]he statutory language clearly and
unambiguously imposes an obligation on the Secretary of HHS to make payments to health
insurers that have implemented cost-sharing reductions on their covered plans as required by the
[Affordable Care Act].”), 14 appeal docketed, No. 19-1302 (Fed. Cir. Dec. 12, 2018); see also
SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1354 (2018) (“The word ‘shall’ generally imposes a
nondiscretionary duty.”); Gilda Indus., Inc. v. United States, 622 F.3d 1358, 1364 (Fed. Cir.
2010) (“When a statute directs that a certain consequence ‘shall’ follow from specified
contingencies, the provision is mandatory and leaves no room for discretion.”); cf. Moda Health
Plan, Inc. v. United States, 892 F.3d 1311, 1320 (2018) (concluding that similar language in
section 1342 of the Affordable Care Act––indicating that the Secretary of HHS “shall establish”
a risk corridors program pursuant to which the Secretary of HHS “shall pay” risk corridors
payments––is “unambiguously mandatory”), petition for cert. filed, 87 U.S.L.W. 3330 (U.S. Feb.
4, 2019). Moreover, the mandatory payment obligation fits logically within the statutory scheme
established by Congress. The cost-sharing reduction payments were meant to reimburse insurers
for paying an increased share of their insureds’ cost-sharing obligations, 42 U.S.C.
§ 18071(a)(2), (c)(3)(A), and the reduction of insureds’ cost-sharing obligations was meant to
make obtaining health care more affordable, see, e.g., id. § 18071(c)(1)(A) (describing how cost-
sharing reductions would be achieved by reducing insureds’ out-of-pocket limits). In short, the
plain language, structure, and purpose of the Affordable Care Act reflect the intent of Congress
to require the Secretary of HHS to make cost-sharing reduction payments to insurers.
Defendant does not dispute this conclusion. Rather, it contends that the cost-sharing
reduction payment obligation is unenforceable because Congress never specifically appropriated
funds––either in the Affordable Care Act or thereafter––to make cost-sharing reduction
payments.
14
The judge who decided Montana Health Co-op––the Honorable Elaine D. Kaplan––
subsequently issued a substantively identical ruling in another case. See Sanford Health Plan v.
United States, 139 Fed. Cl. 701 (2018), appeal docketed, No. 19-1290 (Fed. Cir. Dec. 11, 2018).
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a. The Lack of Specific Appropriating Language in the Affordable Care Act
As defendant observes, the Affordable Care Act does not include any language
specifically appropriating funds for cost-sharing reduction payments. Defendant also correctly
observes that the Act’s cost-sharing reduction provision lacks any appropriating language, while
its companion provision––the premium tax credit––included an explicit funding mechanism. 15
Compare Affordable Care Act § 1401(d) (amending the permanent appropriation set forth in 31
U.S.C. § 1324 to allow for the payment of the premium tax credit), with id. § 1402 (containing
no appropriating language). According to defendant, the absence of any funding mechanism for
cost-sharing reduction payments, and Congress’s decision to provide a funding mechanism for
premium tax credit payments and not cost-sharing reduction payments, reflect the intent of
Congress, when enacting the Affordable Care Act, to preclude liability for cost-sharing reduction
payments. Defendant is mistaken for several reasons.
First, it is well settled that the government can create a liability without providing for the
means to pay for it. See, e.g., Moda Health Plan, 892 F.3d at 1321 (“[I]t has long been the law
that the government may incur a debt independent of an appropriation to satisfy that debt, at least
in certain circumstances.”); Collins v. United States, 15 Ct. Cl. 22, 35 (1879) (“[T]he legal
liabilities incurred by the United States under . . . the laws of Congress . . . may be created where
there is no appropriation of money to meet them . . . .”). Thus, the absence of a specific
appropriation for cost-sharing reduction payments in the Affordable Care Act does not, on its
own, extinguish the government’s obligation to make the payments.
Second, that Congress provided a funding mechanism for premium tax credit payments
and not for cost-sharing reduction payments does not reflect congressional intent to foreclose
liability for the latter. Defendant relies on the proposition that when “Congress includes
particular language in one section of a statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and purposely in the disparate inclusion or
exclusion.” Russello v. United States, 464 U.S. 16, 23 (1983) (quoting United States v. Wong
Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972)); accord Digital Realty Trust, Inc. v. Somers, 138 S.
Ct. 767, 777 (2018). Here, although Congress may have acted intentionally by treating the two
related provisions differently, 16 it is difficult to discern what that intent might be. In addition to
the intent inferred by defendant, there are other reasonable explanations for the disparity. One
possible explanation is that it was a simple matter to add the premium tax credit to a preexisting
permanent appropriation in the Internal Revenue Code for the payment of tax credits, whereas no
such permanent appropriation existed that would apply to cost-sharing reduction payments.
Another possible explanation is that Congress understood that other funds available to HHS
15
Both provisions appear in subpart A of part I of subtitle E of the Affordable Care Act,
which is titled “Premium Tax Credits and Cost-Sharing Reductions.” 124 Stat. at 213-24.
16
Alternatively, it is possible that the disparate treatment does not reflect any intent at
all. As the United States Supreme Court (“Supreme Court”) recognized in King, “[t]he
Affordable Care Act contains more than a few examples of inartful drafting.” 135 S. Ct. at 2492.
Thus, Congress’s failure to include any appropriating language in the cost-sharing reduction
provision may simply have been an oversight.
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could be used to make the cost-sharing reduction payments; indeed, the cost-sharing reduction
provision lacks any language, such as “subject to the availability of appropriations,” reflecting
Congress’s recognition that appropriations were unavailable, see Greenlee Cty., Ariz. v. United
States, 487 F.3d 871, 878 (Fed. Cir. 2007) (observing that “in some instances the statute creating
the right to compensation . . . may restrict the government’s liability . . . to the amount
appropriated by Congress” with language such as “subject to the availability of appropriations”).
A third possible explanation is that Congress intended to defer appropriating funds for cost-
sharing reduction payments until 2014, when insurers began to offer qualified health plans on the
exchanges and incur cost-sharing reduction liabilities. Because it is unclear which of these
explanations––if any––is correct, the court declines to ascribe any particular intent to Congress
based on Congress’s disparate treatment of the two provisions.
Third, the court is unpersuaded by defendant’s related contention that 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, is evidence that Congress did not intend to provide a statutory
damages remedy for the government’s failure to make the cost-sharing reduction payments.
Accord Local Initiative, 142 Fed. Cl. at 15; Mont. Health Co-op, 139 Fed. Cl. at 221. Defendant
does not identify any statutory provision permitting the government to use premium tax credit
payments to offset its cost-sharing reduction payment obligation (even if insurers intentionally
increased premiums to obtain larger premium tax credit payments to make up for lost cost-
sharing reduction payments). Nor does defendant identify any evidence in the Affordable Care
Act’s legislative history suggesting that Congress intended to limit its liability to make cost-
sharing reduction payments by increasing its premium tax credit payments. That insurers and
states discovered a way to mitigate the insurers’ losses from the government’s failure to make
cost-sharing reduction payments does not mean that Congress intended this result. Moreover,
defendant’s concern that Congress could not have intended to allow a double recovery of cost-
sharing reduction payments is not well taken. The increased amount of premium tax credit
payments that insurers receive from increasing silver-level plan premiums are still premium tax
credit payments, not cost-sharing reduction payments. Indeed, under the statutory scheme as it
exists, even if the government were making the required cost-sharing reduction payments,
insurers could (to the extent permitted by their state insurance regulators) increase their silver-
level plan premiums; in such circumstances, it could not credibly be argued that the insurers
were obtaining a double recovery of cost-sharing reduction payments. While the premium tax
credit and cost-sharing reduction provisions were enacted to reduce an individual’s health-care-
related costs (to obtain insurance and to obtain health care, respectively), they are not substitutes
for each other. 17
17
The California district court’s decision in California v. Trump does not assist
defendant. Although the court described how insurers are coping with the lost cost-sharing
reduction payments by raising silver-level qualified health plan premiums to obtain larger
premium tax credit payments, nowhere in its decision does the court hold that the government’s
liability for cost-sharing reduction payments is lessened or eliminated by the government making
larger premium tax credit payments to insurers. Indeed, the court very clearly emphasized that
the premium tax credit program and the cost-sharing reduction program were separate and
distinct. See California, 267 F. Supp. 3d at 1131. Moreover, the court’s discussion of the
-15-
Fourth, it would defy common sense to conclude that Congress obligated the Secretary of
HHS to reimburse insurers for their mandatory cost-sharing reductions without intending to
actually reimburse the insurers. If Congress did not intend to create such an obligation, it would
not have included any provision for reimbursing cost-sharing reductions in the Act.
In sum, Congress’s failure to include any appropriating language in the Affordable Care
Act does not reflect congressional intent to preclude liability for cost-sharing reduction
payments. This conclusion, however, does not end the court’s analysis because defendant also
argues that Congress’s subsequent failure to appropriate funds to make cost-sharing reduction
payments through annual appropriations acts or otherwise signals congressional intent to
foreclose liability.
b. The Lack of Specific Appropriating Language in Subsequent Appropriations Acts
The Appropriations Clause of the United States Constitution provides that “[n]o Money
shall be drawn from the Treasury, but in Consequence of Appropriations made by Law[.]” U.S.
Const. art. I, § 9, cl. 7. The statute commonly referred to as the Antideficiency Act further
provides that “[a]n officer or employee of the United States Government . . . may not . . . make
or authorize an expenditure or obligation exceeding an amount available in an appropriation or
fund for the expenditure or obligation[.]” 31 U.S.C. § 1341(a)(1)(A). These directives are
unambiguous: disbursements from the United States Treasury require an appropriation from
Congress. However, “the mere failure of Congress to appropriate funds, without further words
modifying or repealing, expressly or by clear implication, the substantive law, does not in and of
itself defeat a Government obligation created by statute.” N.Y. Airways, Inc. v. United States,
369 F.2d 743, 748 (Ct. Cl. 1966) (per curiam), cited in Moda Health Plan, 892 F.3d at 1321-22;
cf. Moda Health Plan, 892 F.3d at 1322 (recognizing that the Supreme Court “rejected the notion
that the Anti-Deficiency Act’s requirements somehow defeat the obligations of the
government”).
Defendant does not contend that any appropriations acts––or, indeed, any statutes at all––
enacted after the Affordable Care Act contain language that “expressly or by clear implication”
modifies or repeals the Act’s cost-sharing reduction payment obligation. Rather, it relies on
Congress’s complete failure to appropriate funds for cost-sharing reduction payments as
evidence that Congress intended to suspend the cost-sharing reduction payment obligation.
Defendant’s reliance is misplaced. None of the appropriations acts enacted after the Affordable
Care Act expressly or impliedly disavowed the payment obligation; they were completely silent
on the issue. Thus, this case is distinguishable from those relied upon by defendant––Mitchell v.
United States, 109 U.S. 146 (1883), Dickerson v. United States, 310 U.S. 554 (1940), and United
States v. Will, 449 U.S. 200 (1980)––that concerned situations in which Congress made
approach taken by insurers to obtain increased premium tax credit payments was included within
its analysis of “whether the absence of a preliminary injunction would harm the public and
impede the objectives of health care reform.” Id. at 1133. In other words, the court’s focus was
on how the increase in premiums would affect the public, and not on the government’s obligation
to make payments to insurers.
-16-
affirmative statements in appropriations acts that reflected an intent to suspend the underlying
substantive law. Accord Local Initiative, 142 Fed. Cl. at 14.
Here, Congress has had ample opportunity to modify, suspend, or eliminate the statutory
obligation to make cost-sharing reduction payments but has not done so. Congress’s inaction
stands in stark contrast to its treatment of the Affordable Care Act’s risk corridors program.
Under that program, which was established in section 1342 of the Affordable Care Act, the
Secretary of HHS was required to make annual payments to insurers pursuant to a statutory
formula. 42 U.S.C. § 18062; Moda Health Plan, 892 F.3d at 1320. However, Congress included
riders in two appropriations acts enacted after the Affordable Care Act that prohibited
appropriated funds from being used to make risk corridors payments. See Consolidated
Appropriations Act, 2016, Pub. L. No. 114-113, div. H, tit. II, § 225, 129 Stat. 2242, 2624;
Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, div. G, tit.
II, § 227, 128 Stat. 2130, 2491. These riders have been interpreted to suspend the government’s
obligation to make risk corridors payments from appropriated funds. Moda Health Plan, 892
F.3d at 1322-29. Congress has never enacted any such appropriations riders with respect to cost-
sharing reductions payments, even when cost-sharing reduction payments were being made––
during both the Obama and Trump administrations––from the permanent appropriation for tax
credits described in 31 U.S.C. § 1324. Thus, the congressional inaction in this case may be
interpreted, contrary to defendant’s contention, as a decision not to suspend or terminate the
government’s cost-sharing reduction payment obligation. 18
In short, Congress’s failure to appropriate funds to make cost-sharing reduction payments
through annual appropriations acts or otherwise does not reflect a congressional intent to
foreclose, either temporarily or permanently, the government’s liability to make those payments.
2. Plaintiff Can Recover Unpaid Cost-Sharing Reduction Reimbursements in the United
States Court of Federal Claims
Plaintiff asserts that because the government has breached its statutory obligation to make
cost-sharing reduction payments, recovery is available in the United States Court of Federal
Claims (“Court of Federal Claims”) under the Tucker Act. The Tucker Act, the principal statute
governing the jurisdiction of this court, waives sovereign immunity for claims against the United
States, not sounding in tort, that are founded upon the United States Constitution, a federal
statute or regulation, or an express or implied contract with the United States. 28 U.S.C.
§ 1491(a)(1) (2012). It is merely a jurisdictional statute and “does not create any substantive
right enforceable against the United States for money damages.” United States v. Testan, 424
U.S. 392, 398 (1976). Instead, the substantive right must appear in another source of law, such
as a “money-mandating constitutional provision, statute or regulation that has been violated, or
18
The court recognizes that drawing inferences from congressional inaction can be
highly problematic. See Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 650 (1990)
(“Congressional inaction lacks ‘persuasive significance’ because ‘several equally tenable
inferences’ may be drawn from such inaction . . . .” (quoting United States v. Wise, 370 U.S.
405, 411 (1962)); Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 306 (1988) (“This Court
generally is reluctant to draw inferences from Congress’ failure to act.”).
-17-
an express or implied contract with the United States.” Loveladies Harbor, Inc. v. United States,
27 F.3d 1545, 1554 (Fed. Cir. 1994) (en banc). It is well accepted that a statute “is money-
mandating for jurisdictional purposes if it ‘can fairly be interpreted as mandating compensation
for damages sustained as a result of the breach of the duties [it] impose[s].’” Fisher v. United
States, 402 F.3d 1167, 1173 (Fed. Cir. 2005) (panel portion) (quoting United States v. Mitchell,
463 U.S. 206, 219 (1983)). Under this rule, “[i]t is enough . . . that a statute creating a Tucker
Act right be reasonably amenable to the reading that it mandates a right of recovery in damages.
While the premise to a Tucker Act claim will not be ‘lightly inferred,’ a fair inference will do.”
United States v. White Mountain Apache Tribe, 537 U.S. 465, 473 (2003) (citation omitted).
The cost-sharing reduction provision of the Affordable Care Act, codified at 42 U.S.C.
§ 18071, is a money-mandating statute for Tucker Act purposes: the Secretary of HHS is
required to reimburse insurers for their mandatory cost-sharing reductions, 42 U.S.C.
§ 18071(c)(3)(A), and his failure to make such payments is a violation of that duty that deprives
the insurers of money to which they are statutorily entitled. Accord Local Initiative, 142 Fed. Cl.
at 10; Mont. Health Co-op, 139 Fed. Cl. at 217; see also Moda Health Plan, 892 F.3d at 1320 n.2
(holding that the statute providing for risk corridors payments “is money-mandating for
jurisdictional purposes”). Consequently, an insurer that establishes that the government failed to
make the cost-sharing reduction payments to which the insurer was entitled can recover the
amount due in this court. 19
Moreover, the lack of a specific appropriation for cost-sharing reduction payments does
not preclude such a recovery. Appropriations merely constrain government officials’ ability to
obligate or disburse funds. See Moda Health Plan, 892 F.3d at 1322 (“The Anti-Deficiency Act
simply constrains government officials. . . . Budget authority is not necessary to create an
obligation of the government; it is a means by which an officer is afforded that authority.”);
19
Defendant appears to contend that for plaintiffs to recover under a money-mandating
statute, they must separately establish that the statute authorizes a damages remedy for its
violation. Defendant is incorrect. Although some money-mandating statutes include a separate
provision authorizing a damages remedy, see, e.g., 41 U.S.C. § 7104(b) (2012) (allowing
contractors to bring claims arising under the Contract Disputes Act of 1978 in the Court of
Federal Claims), other money-mandating statutes pursuant to which the Court of Federal Claims
can enter judgment do not, see, e.g., 5 U.S.C. § 5942 (2012) (governing federal employees’
entitlement to a remote duty allowance); 37 U.S.C. § 204 (2012) (governing military service
members’ entitlement to basic pay). Indeed, “[t]o the extent that the Government would demand
an explicit provision for money damages to support every claim that might be brought under the
Tucker Act, it would substitute a plain and explicit statement standard for the less demanding
requirement of fair inference that the law was meant to provide a damages remedy for breach of
a duty.” White Mountain Apache Tribe, 537 U.S. at 477; accord Fisher, 402 F.3d at 1173 (en
banc portion) (“[T]he determination that the source is money-mandating shall be determinative
both as to the question of the court’s jurisdiction and thereafter as to the question of whether, on
the merits, plaintiff has a money-mandating source on which to base his cause of action.”); Mont.
Health Co-op, 139 Fed. Cl. at 217 n.5 (“Plaintiffs have never been required to make some
separate showing that the money-mandating statute that establishes this court’s jurisdiction over
their monetary claims also grants them an express (or implied) cause of action for damages.”).
-18-
Ferris v. United States, 27 Ct. Cl. 542, 546 (1892) (“An appropriation per se merely imposes
limitations upon the Government’s own agents; it is a definite amount of money intrusted to
them for distribution; but its insufficiency does not pay the Government’s debts, nor cancel its
obligations, nor defeat the rights of other parties.”). Thus, the lack of an appropriation, standing
alone, does not constrain the court’s ability to entertain a claim that the government has not
discharged the underlying statutory obligation or to enter judgment for the plaintiff on that claim.
See Slattery v. United States, 635 F.3d 1298, 1321 (Fed. Cir. 2011) (en banc) (“[T]he
jurisdictional foundation of the Tucker Act is not limited by the appropriation status of the
agency’s funds or the source of funds by which any judgment may be paid.”); N.Y. Airways, 369
F.2d at 752 (“[T]he failure of Congress or an agency to appropriate or make available sufficient
funds does not repudiate the obligation; it merely bars the accounting agents of the Government
from disbursing funds and forces the carrier to a recovery in the Court of Claims.”); Collins, 15
Ct. Cl. at 35 (remarking that a legal liability “incurred by the United States under . . . the laws of
Congress,” such as “[t]he compensation to which public officers are legally entitled . . . , exists
independently of the appropriation, and may be enforced by proceedings in this court”).
In fact, judgments of this court are payable from the Judgment Fund, see 31 U.S.C.
§ 1304(a)(3)(A), which “is a permanent, indefinite appropriation . . . available to pay many
judicially and administratively ordered monetary awards against the United States,” 31 C.F.R.
§ 256.1 (2016); accord Bath Iron Works Corp. v. United States, 20 F.3d 1567, 1583 (Fed. Cir.
1994) (stating that 31 U.S.C. § 1304 “was intended to establish a central, government-wide
judgment fund from which judicial tribunals administering or ordering judgments, awards, or
settlements may order payments without being constrained by concerns of whether adequate
funds existed at the agency level to satisfy the judgment”). Indeed, as applicable here, “funds
may be paid out [of the Judgment Fund] only on the basis of a judgment based on a substantive
right to compensation based on the express terms of a specific statute.” Office of Pers. Mgmt. v.
Richmond, 496 U.S. 414, 432 (1990); accord Moda Health Plan, 892 F.3d at 1326 (“[A]ccess to
the Judgment Fund presupposes liability.”); cf. 31 U.S.C. § 1304(a)(1) (indicating that the
Judgment Fund is available when “payment is not otherwise provided for”). Because plaintiff’s
claim arises from a statute mandating the payment of money damages in the event of its
violation, the Judgment Fund is available to pay a judgment entered by the court on that claim. 20
20
Defendant acknowledged this possibility in other litigation. See Defs.’ Mem. Supp.
Mot. Summ. J. 20, Burwell, 185 F. Supp. 3d at 165 (No. 1:14-cv-01967-RMC) (“The
[Affordable Care] Act requires the government to pay cost-sharing reductions to issuers. The
absence of an appropriation would not prevent the insurers from seeking to enforce that statutory
right through litigation. Under the Tucker Act, a plaintiff may bring suit against the United
States in the Court of Federal Claims to obtain monetary payments based on statutes that impose
certain types of payment obligations on the government. If the plaintiff is successful, it can
receive the amount to which it is entitled from the permanent appropriation Congress has made
in the Judgment Fund. The mere absence of a more specific appropriation is not necessarily a
defense to recovery from that Fund.” (citations omitted)); Defs.’ Mem. Opp’n Pl.’s Mot. Summ.
J. 12-13, Burwell, 185 F. Supp. 3d at 165 (No. 1:14-cv-01967-RMC) (“Indeed, had Congress not
permanently funded the cost-sharing reductions, it would have exposed the government to
litigation by insurers, who could bring damages actions under the Tucker Act premised on the
government’s failure to make the mandatory cost-sharing reduction payments that the Act
-19-
3. Plaintiff Is Entitled to Recover Unpaid Cost-Sharing Reduction Reimbursements
Plaintiff seeks to recover the cost-sharing reduction payments it did not receive for 2017
and 2018. As noted above, plaintiff has established that the government is obligated to
reimburse it for its cost-sharing reductions pursuant to 42 U.S.C. § 18071(c)(3)(A) and that the
government stopped making such reimbursements in October 2017. Accordingly, as the court
determined in its February 15, 2019 Opinion and Order, plaintiff is entitled to recover the cost-
sharing reduction payments that the government did not make for 2017.
With respect to 2018, defendant contends––as discussed above, albeit in the course of
arguing that the structure of the Affordable Care Act reflects a congressional intent to preclude
cost-sharing reduction payments absent an appropriation for that purpose––that plaintiff’s ability
to increase the premiums for its silver-level qualified health plans to obtain greater premium tax
credit payments precludes recovery under the Act’s cost-sharing reduction provision.
Specifically, defendant asserts that the statutory scheme enacted by Congress permits insurers to
make up any lost cost-sharing reduction payments by increasing silver-level plan premiums,
which would prevent monetary injury to insurers. Defendant also expresses concern that
allowing insurers to both obtain greater premium tax credits and obtain a judgment for their lost
cost-sharing reduction payments would provide an unwarranted windfall for insurers. As noted
above, the court is not convinced by defendant’s arguments. Accordingly, it finds that plaintiff
may recover the cost-sharing reduction payments that the government did not make for 2018.
B. Breach of an Implied-in-Fact Contract
In addition to alleging that the government violated its statutory obligation to make cost-
sharing reduction payments, plaintiff contends that the government’s failure to make such
payments amounts to a breach of an implied-in-fact contract. “An agreement implied in fact is
‘founded upon a meeting of minds, which, although not embodied in an express contract, is
inferred, as a fact, from conduct of the parties showing, in the light of the surrounding
circumstances, their tacit understanding.’” Hercules, Inc. v. United States, 516 U.S. 417, 424
(1996) (quoting Balt. & Ohio R. Co. v. United States, 261 U.S. 592, 597 (1923)). To establish
the existence of an implied-in-fact contract with the United States, a plaintiff must demonstrate
“(1) mutuality of intent to contract, (2) consideration, (3) lack of ambiguity in offer and
acceptance, and (4) authority on the part of the government agent entering the contract.” Suess
requires.”); Defs.’ Reply Mem. Supp. Mot. Summ. J. 9, Burwell, 185 F. Supp. 3d at 165 (No.
1:14-cv-01967-RMC) (“[T]he House’s interpretation of the [Affordable Care Act]—under which
the Act would require the government to make the cost-sharing payments but provide no
appropriation for doing so directly—would invite potentially costly lawsuits under the Tucker
Act. The House asserts that insurers could not prevail in such suits ‘[a]bsent a valid
appropriation.’ But courts have held that the absence of an appropriation does not necessarily
preclude recovery from the Judgment Fund in a Tucker Act suit. The House does not explain
how, given this precedent, the government could avoid Tucker Act litigation by insurers in the
wake of a ruling that the ACA did not permanently fund the cost-sharing reduction payments that
the Act directs the government to make.” (citations omitted)).
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v. United States, 535 F.3d 1348, 1359 (Fed. Cir. 2008); accord Trauma Serv. Grp. v. United
States, 104 F.3d 1321, 1326 (Fed. Cir. 1997). Here, plaintiff generally alleges that the promise
of cost-sharing reduction payments set forth in 42 U.S.C. § 18071(c)(3)(A) induced it to offer
qualified health plans on the exchange, and that by offering such plans, it accepted the
government’s offer and entered into unilateral contract. Alternatively, plaintiff contends that it
entered into bilateral contracts with the government, culminating in the execution of the QHPI
Agreements, in which the parties agreed that plaintiff was required to offer cost-sharing
reductions to its eligible insureds. 21 In response, defendant argues that plaintiff has not
established the existence of a valid implied-in-fact contract with the government for three
reasons: the Affordable Care Act did not create an implied-in-fact contract to make cost-sharing
reduction payments, HHS lacks the authority to enter into a contract to make cost-sharing
reduction payments, and the QHPI Agreements preclude the existence of an implied-in-fact
contract to make cost-sharing reduction payments.
The court first addresses plaintiff’s contention that 42 U.S.C. § 18071(c)(3)(A) is an offer
to make cost-sharing reduction payments to insurers that offered qualified health plans on the
exchanges. The Supreme Court has provided the following guidance:
[A]bsent some clear indication that the legislature intends to bind itself
contractually, the presumption is that “a law is not intended to create private
contractual or vested rights but merely declares a policy to be pursued until the
legislature shall ordain otherwise.” This well-established presumption is
grounded in the elementary proposition that the principal function of a legislature
is not to make contracts, but to make laws that establish the policy of the state.
Policies, unlike contracts, are inherently subject to revision and repeal, and to
construe laws as contracts when the obligation is not clearly and unequivocally
expressed would be to limit drastically the essential powers of a legislative body.
. . . Thus, the party asserting the creation of a contract must overcome this well-
founded presumption, and we proceed cautiously both in identifying a contract
within the language of a regulatory statute and in defining the contours of any
contractual obligation.
Nat’l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66
(1985) (citations omitted) (quoting Dodge v. Bd. of Educ., 302 U.S. 74, 79 (1937)); accord Moda
21
The difference between unilateral and bilateral contracts was explained in the
Restatement (First) of Contracts: “A unilateral contract is one in which no promisor receives a
promise as consideration for his promise. A bilateral contract is one in which there are mutual
promises between two parties to the contract; each party being both a promisor and a promisee.”
Restatement (First) of Contracts § 12 (Am. Law Inst. 1931). However, that terminology was
removed from the Restatement (Second) of Contracts. See Restatement (Second) of Contracts
§ 1 cmt. f (Am. Law Inst. 1981) (“Section 12 of the original Restatement defined unilateral and
bilateral contracts. It has not been carried forward because of doubt as to the utility of the
distinction, often treated as fundamental, between the two types.”). Given the court’s resolution
of plaintiff’s claim, the distinction is not relevant in this case.
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Health Plan, 892 F.3d at 1329; Brooks v. Dunlop Mfg. Inc., 706 F.3d 624, 630-31 (Fed. Cir.
2012).
To determine whether 42 U.S.C. § 18071(c)(3)(A) “gives rise to a contractual obligation,
‘it is of first importance to examine the language of the statute.’” Nat’l R.R. Passenger Corp.,
470 U.S. at 466 (quoting Dodge, 302 U.S. at 78); accord Brooks, 706 F.3d at 631. Plaintiff does
not, and cannot, contend that the statute alone contains language manifesting an intent to
contract. Rather, it asserts that the combination of the statute, the implementing regulations, and
the government’s conduct in making cost-sharing reduction payments until October 2017 reflects
the parties’ intent to contract. In support of its position, plaintiff relies primarily on Radium
Mines, Inc. v. United States, 153 F. Supp. 403 (Ct. Cl. 1957). In that case, the United States
Atomic Energy Commission issued a regulation titled “Ten Year Guaranteed Minimum Price,”
which provided:
To stimulate domestic production of uranium and in the interest of the common
defense and security the United States Atomic Energy Commission hereby
establishes the guaranteed minimum prices specified in paragraph (b) of this
section, for the delivery to the Commission, in accordance with the terms of this
section during the ten calendar years following its effective date . . . , of domestic
refined uranium, high-grade uranium-bearing ores and mechanical concentrates,
in not less than the quantity and grade specified in paragraph (e) of this section.
Id. at 404 (quoting 10 C.F.R. § 60.1(a) (1949)). The court rejected the defendant’s contention
that the regulation was “a mere invitation to the industry to make offers to the Government” and
instead agreed with the plaintiff that the regulation “was an offer, which ripened into a contract
when it was accepted by the plaintiff’s putting itself in a position to supply the ore or the refined
uranium described in it.” Id. at 405.
The argument raised by plaintiff here is similar to the one advanced by the plaintiff in
Moda Health Plan with respect to the risk corridors program. The risk corridors program was
one of three programs established in the Affordable Care Act to mitigate the risk faced by
insurers “and discourage insurers from setting higher premiums to offset that risk,” Moda Health
Plan, 892 F.3d at 1314, pursuant to which the Secretary of HHS was required to make annual
payments to insurers in accordance with a statutory formula, id. at 1320; 42 U.S.C. § 18062. The
United States Court of Appeals for the Federal Circuit concluded in Moda Health Plan that “the
overall scheme of the risk corridors program lacks the trappings of a contractual arrangement
that drove the result in Radium Mines,” explaining:
[In Radium Mines], the government made a “guarantee,” it invited uranium
dealers to make an “offer,” and it promised to “offer a form of contract” setting
forth “terms” of acceptance. Not so here.
The risk corridors program is an incentive program designed to encourage
the provision of affordable health care to third parties without a risk premium to
account for the unreliability of data relating to participation of the exchanges—
not the traditional quid pro quo contemplated in Radium Mines. Indeed, an
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insurer that included that risk premium, but nevertheless suffered losses for a
benefit year as calculated by the statutory and regulatory formulas would still be
entitled to seek risk corridors payments.
892 F.3d at 1330 (citations omitted). It further observed that the dispute in Radium Mines was
distinguishable:
[T]he parties in Radium Mines, one of which was the government, never disputed
that the government intended to form some contractual relationship at some time
throughout the exchange. The only question there was whether the regulations
themselves constituted an offer, or merely an invitation to make offers. Radium
Mines is only precedent for what it decided.
Id. Accordingly, it concluded that “no statement by the government evinced an intention to form
a contract” to make risk corridors payments, and that “[t]he statute, its regulations, and HHS’s
conduct all simply worked towards crafting an incentive program.” Id.
The risk corridors program differs from the cost-sharing reduction program in one
significant manner: in the risk corridors program, insurers receive payments as an incentive to
lower their premiums, while in the cost-sharing reduction program, insurers are reimbursed by
the government for cost-sharing reductions that they are statutorily required to make. In other
words, the cost-sharing reduction program is less of an incentive program and more of a quid pro
quo. Accordingly, that aspect of Moda Health Plan’s analysis is inapplicable in this case. 22
Accord Local Initiative, 142 Fed. Cl. at 17.
In fact, although 42 U.S.C. § 18071(c)(3)(A) and its implementing regulation (45 C.F.R.
§ 156.430) do not include language traditionally associated with contracting, such as “offer,”
“acceptance,” “consideration,” or “contract,” the parties’ intent to enter into a contractual
relationship can be implied from the quid pro quo nature of the cost-sharing reduction program,
plaintiff’s offering of qualified health plans on the exchange with the mandated cost-sharing
reductions, and the government’s reimbursement of plaintiff’s cost-sharing reductions from
January 2014, when the payments first became due, until October 2017. Accord Aycock-
Lindsey Corp. v. United States, 171 F.2d 518, 521 (5th Cir. 1948) (holding that when the head of
the pertinent agency “published bulletins and promulgated rules providing for the payment of
subsidies to those . . . who accepted the offer by voluntarily coming under, and complying with,
the [relevant] Act, there was revealed the traditional essentials of a contract, namely, an offer and
an acceptance, to the extent that we should hesitate to hold that there was not at least an implied
contract to pay subsidies,” and further holding that “[i]n view of the numerous requirements for
the [plaintiff] to put himself in position to receive the payments, we regard the subsidies not as
gratuities but as compensatory in nature”), cited in Army & Air Force Exch. Serv. v. Sheehan,
456 U.S. 728, 740 n.11 (1982) (identifying Aycock-Lindsey as a decision in which a contract
22
Nevertheless, Moda Health Plan precludes the court from relying on Radium Mines
because, unlike in Radium Mines, the parties in this case dispute whether the government
intended to form a contractual relationship for the reimbursement of insurers’ cost-sharing
reductions.
-23-
was “inferred from regulations promising payment”). In other words, the government offered to
reimburse insurers for their mandated cost-sharing reductions, plaintiff accepted that offer by
offering the qualified health plans with reduced cost-sharing obligations, and consideration was
exchanged (plaintiff supplied qualified health plans that helped the government reduce the
number of uninsured individuals, and the government made cost-sharing reduction payments to
plaintiff). 23
Moreover, contrary to defendant’s contention, the Secretary of HHS and his delegate, the
Administrator of CMS, possessed the authority to enter into a contract with insurers to make
cost-sharing reduction payments. Implied-in-fact contracts with the United States can only be
made by “an authorized agent of the government.” Trauma Serv. Grp., 104 F.3d at 1326; accord
Kania v. United States, 650 F.2d 264, 268 (Ct. Cl. 1981) (“The claimant for money damages for
breach of an express or implied in fact contract must show that the officer who supposedly made
the contract had authority to obligate appropriated funds.”). Specifically, “the Government
representative ‘whose conduct is relied upon must have actual authority to bind the government
in contract.’” City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990) (quoting
Juda v. United States, 6 Cl. Ct. 441, 452 (1984)). Actual authority may be express or implied.
See Salles v. United States, 156 F.3d 1383, 1384 (Fed. Cir. 1998); H. Landau & Co. v. United
States, 886 F.2d 322, 324 (Fed. Cir. 1989). “Authority to bind the [g]overnment is generally
implied when such authority is considered to be an integral part of the duties assigned to a
[g]overnment employee.” H. Landau & Co., 886 F.2d at 324 (quoting John Cibinic, Jr. & Ralph
C. Nash, Jr., Formation of Government Contracts 43 (1982)) (alteration in original); see also
United States v. Winstar Corp., 518 U.S. 839, 890 n.36 (1996) (“The authority of the executive
to use contracts in carrying out authorized programs is . . . generally assumed in the absence of
express statutory prohibitions or limitations[.]” (quoting 1 Ralph C. Nash, Jr. & John Cibinic, Jr.,
Federal Procurement Law 5 (3d ed. 1977))).
There can be no doubt that making cost-sharing reduction payments is an integral part of
the duties assigned to the Secretary of HHS because the Secretary of HHS is required to make
such payments pursuant to 42 U.S.C. § 18071(c)(3)(A). Defendant contends, however, that in
accordance with the Antideficiency Act, the Secretary of HHS lacks actual authority to contract
for the reimbursement for cost-sharing reductions. The court is not persuaded. The
Antideficiency Act provides that a government “officer or employee . . . may not . . . involve
[the] government in a contract or obligation for the payment of money before an appropriation is
made unless authorized by law[.]” 31 U.S.C. § 1341(a)(1)(B). The reimbursement of cost-
sharing reductions is authorized by law––42 U.S.C. § 18071(c)(3)(A). Thus, the Antideficiency
Act’s prohibition is inapplicable in this case. Accord N.Y. Airways, 369 F.2d at 752 (“Since it
has been found that the [agency’s] action created a ‘contract or obligation (which) is authorized
by law’, obviously the statute [prohibiting contract obligations in excess of appropriated funds]
has no application to the present situation . . . .”); Local Initiative, 142 Fed. Cl. at 18-19. In
short, the Secretary of HHS possesses at least the implied actual authority to contractually bind
the government to make cost-sharing reduction payments.
23
Defendant does not contend that there was a lack of consideration.
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Defendant further contends that the QHPI Agreements executed by plaintiff and CMS
preclude the existence of an implied-in-fact contract to make cost-sharing reduction payments.
As defendant notes, “[t]he existence of an express contract precludes the existence of an implied
contract dealing with the same subject, unless the implied contract is entirely unrelated to the
express contract.” Atlas Corp. v. United States, 895 F.2d 745, 754-55 (Fed. Cir. 1990), cited in
Schism v. United States, 316 F.3d 1259, 1278 (Fed. Cir. 2002) (en banc); see also Klebe v.
United States, 263 U.S. 188, 192 (1923) (“A contract implied in fact is one inferred from the
circumstances or acts of the parties; but an express contract speaks for itself and leaves no place
for implications.”). However, the QHPI Agreements only address the reconciliation of cost-
sharing reduction payments, and do not create any duties or obligations to make cost-sharing
reduction payments in the first instance. 24 The relevant provision set forth under the “CMS
Obligations” heading––“As part of a monthly payments and collections reconciliation process,
CMS will recoup or net payments due to [plaintiff] against amounts owed to CMS by [plaintiff]
in relation to offering of [Qualified Health Plans] . . . including . . . advance payments of [Cost-
Sharing Reductions],” Agreements 6––merely requires CMS, as part of a monthly reconciliation
process, to make payments to insurers that underestimated their cost-sharing obligations and
collect payments from insurers that overestimated their cost-sharing obligations. See Nw. Title
Agency, Inc. v. United States, 855 F.3d 1344, 1347 (Fed. Cir. 2017) (“When the contract’s
language is unambiguous it must be given its ‘plain and ordinary’ meaning . . . .” (quoting Coast
Fed. Bank, FSB v. United States, 323 F.3d 1035, 1040 (Fed. Cir. 2003) (en banc))). Indeed,
CMS could not “recoup or net payments” to an insurer unless the government had already made
an advance cost-sharing reduction payment to the insurer.
Moreover, the relevant provision in the QHPI Agreements’ recitals––“[i]t is anticipated
that periodic . . . advance payments of [Cost-Sharing Reductions] . . . will be due between CMS
and [plaintiff],” Agreements 1–– is not a promise to make advanced cost-sharing reduction
payments but is merely an expression that such payments were expected. See Nat’l By-Prod.,
Inc. v. United States, 405 F.2d 1256, 1263 (Ct. Cl. 1969) (“Before a representation can be
contractually binding, it must be in the form of a promise or undertaking . . . and not a mere
statement of intention, opinion, or prediction.”). In fact, it forms the factual predicate for the
provision describing CMS’s reconciliation obligations.
Furthermore, the QHPI Agreements mostly address the privacy and security obligations
set forth in 45 C.F.R. § 155.260. Accordingly, the QHPI Agreements concern a subject entirely
unrelated to the purported implied-in-fact contract, and therefore do not preclude the finding of
an implied-in-fact contract.
In sum, plaintiff has established the existence of an implied-in-fact contract to make cost-
sharing reduction payments. Thus, the court also must determine whether plaintiff has
established that the government has breached the implied-in-fact contract. “To recover for
breach of contract, a party must allege and establish: (1) a valid contract between the parties, (2)
an obligation or duty arising out of the contract, (3) a breach of that duty, and (4) damages
24
Defendant ultimately concedes this point in its reply brief. See Def.’s Reply 10 (“The
Government agrees with plaintiff that the QHP[I] Agreements do not establish a contract for the
payment of [cost-sharing reductions].”).
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caused by the breach.” San Carlos Irrigation & Drainage Dist. v. United States, 877 F.2d 957,
959 (Fed. Cir. 1989); accord Trauma Serv. Grp., 104 F.3d at 1325 (“To prevail, [plaintiff] must
allege facts showing both the formation of an express contract and its breach.”). Plaintiff has
established the existence of a valid contract, a government obligation to make cost-sharing
reduction payments, and the government’s failure to make such payments, leaving only the issue
of damages.
“The general rule in common law breach of contract cases is to award damages that will
place the injured party in as good a position as he or she would have been [in] had the breaching
party fully performed.” Estate of Berg v. United States, 687 F.2d 377, 379 (Ct. Cl. 1982). Thus,
the injured party “must show that but for the breach, the damages alleged would not have been
suffered.” San Carlos Irrigation & Drainage Dist., 111 F.3d at 1563; accord Boyajian v. United
States, 423 F.2d 1231, 1235 (Ct. Cl. 1970) (per curiam) (“Recovery of damages for a breach of
contract is not allowed unless acceptable evidence demonstrates that the damages claimed
resulted from and were caused by the breach.”). “One way the law makes the non-breaching
party whole is to give him the benefits he expected to receive had the breach not occurred.”
Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374, 1380 (Fed. Cir. 2001). These
expected benefits––expectancy damages––“are recoverable provided they are actually foreseen
or reasonably foreseeable, are caused by the breach of the promisor, and are proved with
reasonable certainty.” Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1355 (Fed.
Cir. 2001); accord Fifth Third Bank v. United States, 518 F.3d 1368, 1374-75 (Fed. Cir. 2008).
The injured party has the burden of proving damages caused by the breach of contract.
See Northrop Grumman Computing Sys., Inc. v. United States, 823 F.3d 1364, 1368 (Fed. Cir.
2016); accord Bluebonnet Sav. Bank FSB v. United States, 67 Fed. Cl. 231, 238 (2005)
(explaining that a plaintiff has the burden to prove expectancy damages by demonstrating what
would have happened but for defendant’s breach of contract), aff’d, 466 F.3d 1349 (Fed. Cir.
2006). The burden then shifts to the breaching party to establish “that plaintiff’s damages claims
should be reduced or denied.” Duke Energy Progress, Inc. v. United States, 135 Fed. Cl. 279,
287 (2017). Here, plaintiff has shown that but for the government’s breach, it would have
received the full amount of the cost-sharing reduction payments to which it was entitled; there is
no dispute that plaintiff’s damages were foreseen, caused by the government’s breach, and can
be determined with reasonable certainty. Defendant has not attempted to rebut plaintiff’s claim
of breach-of-contract damages, either through argument or evidence. 25 Accordingly, plaintiff
has established its entitlement to breach-of-contract damages in the amount of the unpaid cost-
sharing reduction reimbursements.
25
In arguing that the government did not violate 42 U.S.C. § 18071(c)(3)(A), defendant
asserts that insurers’ ability to increase premiums for their silver-level qualified health plans to
obtain greater premium tax credit payments, and thus offset any losses resulting from the
nonpayment of cost-sharing reduction reimbursements, is evidence that Congress did not intend
to provide a statutory damages remedy for the government’s failure to make the cost-sharing
reduction payments. However, defendant did not advance a similar argument in responding to
plaintiff’s breach-of-contract claim.
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IV. CONCLUSION
For the reasons set forth above, the court concludes that the government’s failure to make
cost-sharing reduction payments to plaintiff violates 42 U.S.C. § 18071 and constitutes a breach
of an implied-in-fact contract. Therefore, it GRANTS plaintiff’s motion for summary judgment
with respect to the cost-sharing reduction payments it did not receive for 2018. Based on this
ruling and the ruling set forth in the court’s February 15, 2019 Opinion and Order, plaintiff is
entitled to recover damages in the amount of $19,230,875.27, which represents $846,493.02 in
unpaid cost-sharing reduction reimbursements for 2017 and $18,384,382.25 in unpaid cost-
sharing reduction reimbursements for 2018. No costs. The clerk shall enter judgment
accordingly.
IT IS SO ORDERED.
s/ Margaret M. Sweeney
MARGARET M. SWEENEY
Chief Judge
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