Land of Lincoln Mutual Health Insurance Co. v. United States, No. 17-1224 (Fed. Cir. 2018)

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A three-year “risk corridors” program described in the Patient Protection and Affordable Care Act, 42 U.S.C. 18001, implemented by the Department of Health and Human Services (HHS), was intended to promote participation in insurance exchanges. Participating insurers, whose costs of providing coverage exceeded the premiums received (using a statutory formula) were to be paid a share of their excess costs while participating plans whose premiums exceeded their costs would pay in a share of their profits. The program “permit[ted] issuers to lower [premiums] by not adding a risk premium" for uncertainties in the 2014-2016 markets. The actual total "payments in"were less than requested "payments out" and Congress prohibited HHS from using its appropriations for the program. Prorated payments were issued. The insurer filed suit. The Federal Circuit affirmed summary judgment in favor of the government. The statute created an obligation of the government to pay exchange participants the amount indicated by the statutory formula but riders in the FY 2015 and 2016 appropriations bills repealed or suspended the obligation to make payments out in an aggregate amount exceeding payments in. Congress made the policy choice to cap payments. No statement or action by the government evinced an intention to form a contract; the risk corridors program was simply an incentive program. Because there was no contract, the insurer’s “takings” claim also failed.

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United States Court of Appeals for the Federal Circuit ______________________ LAND OF LINCOLN MUTUAL HEALTH INSURANCE COMPANY, AN ILLINOIS NONPROFIT MUTUAL INSURANCE CORPORATION, Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee ______________________ 2017-1224 ______________________ Appeal from the United States Court of Federal Claims in No. 1:16-cv-00744-CFL, Judge Charles F. Lettow. ______________________ Decided: June 14, 2018 ______________________ JONATHAN MASSEY, Massey & Gail LLP, Washington, DC, argued for plaintiff-appellant. Also represented by DANIEL P. ALBERS, Barnes & Thornburg LLP, Chicago, IL; SCOTT E. PICKENS, Washington, DC. ALISA BETH KLEIN, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by CHAD A. READLER, AUGUST E. FLENTJE, MARK B. STERN, CARLEEN MARY ZUBRZYCKI. 2 LAND OF LINCOLN MUTUAL HEALTH v. UNITED STATES BARAK BASSMAN, Pepper Hamilton LLP, Philadelphia, PA, for amicus curiae National Alliance of State Health CO-Ops. Also represented by MARC D. MACHLIN, Washington, DC. LAWRENCE SHER, Reed Smith LLP, Washington, DC, for amici curiae Highmark Inc., Highmark BCBSD Inc., Highmark West Virginia Inc., Blue Cross and Blue Shield of North Carolina, Blue Cross of Idaho Health Service, Inc., Blue Cross and Blue Shield of Kansas City. Also represented by KYLE RICHARD BAHR, CONOR MICHAEL SHAFFER, COLIN E. WRABLEY, Pittsburgh, PA. DANIEL GORDON JARCHO, McKenna Long & Aldridge, LLP, Washington, DC, for amici curiae Avera Health Plans, DAKOTACARE. STEVEN ROSENBAUM, Covington & Burling LLP, Washington, DC, for amicus curiae Moda Health Plans, Inc. Also represented by CAROLINE BROWN. LESLIE BERGER KIERNAN, Akin, Gump, Strauss, Hauer & Feld, LLP, Washington, DC, for amicus curiae Americas Health Insurance Plans. Also represented by ROBERT K. HUFFMAN; RUTHANNE MARY DEUTSCH, HYLAND HUNT, Deutsch Hunt PLLC, Washington, DC. STEPHEN A. SWEDLOW, Quinn Emanuel Urquhart & Sullivan, LLP, Chicago, IL, for amici curiae Health Republic Insurance Company, Alliance of Community Health Plans. Also represented by J. D. HORTON, ADAM WOLFSON, Los Angeles, CA. ANKUR GOEL, McDermott, Will & Emery LLP, Washington, DC, for amici curiae Blue Cross and Blue Shield of South Carolina, BlueChoice HealthPlan of South Caroli- LAND OF LINCOLN MUTUAL HEALTH v. UNITED STATES 3 na, Inc. Also represented by M. MILLER BAKER, JOSHUA DAVID ROGACZEWSKI. THOMAS G. HUNGAR, Office of General Counsel, United States House of Representatives, Washington, DC, for amicus curiae United States House of Representatives. Also represented by KIMBERLY HAMM, TODD B. TATELMAN. ______________________ Before PROST, Chief Judge, NEWMAN and MOORE, Circuit Judges. Opinion for the court filed by Chief Judge PROST. Dissenting opinion filed by Circuit Judge NEWMAN. PROST, Chief Judge. For the reasons stated in our decision in the companion case, Moda Health Plan, Inc. v. United States, No. 171994, the statutory and contract claims of appellant Land of Lincoln Mutual Health fail. Additionally, because Land of Lincoln cannot state a contract claim, its takings claim fails to the extent it relies on the existence of a contract. What remains is Land of Lincoln’s takings claim to the extent that claim arises from its statutory entitlement to full payments. We have previously held that “no statutory obligation to pay money, even where unchallenged, can create a property interest within the meaning of the Takings Clause.” Adams v. United States, 391 F.3d 1212, 1225 (Fed. Cir. 2004) (citing Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1340 (Fed. Cir. 2001) (en banc)). Land of Lincoln offers no basis for departing from that rule, and we see none. Accordingly, Land of Lincoln’s takings claim fails. Because we hold that the trial court correctly granted judgment for the government as a matter of law, we need not address whether the trial court properly reached that conclusion via judgment on the administrative record. 4 LAND OF LINCOLN MUTUAL HEALTH AFFIRMED COSTS The parties shall bear their own costs. v. UNITED STATES United States Court of Appeals for the Federal Circuit ______________________ LAND OF LINCOLN MUTUAL HEALTH INSURANCE COMPANY, AN ILLINOIS NONPROFIT MUTUAL INSURANCE CORPORATION, Plaintiff-Appellant v. UNITED STATES, Defendant-Appellee ______________________ 2017-1224 ______________________ Appeal from the United States Court of Federal Claims in No. 1:16-cv-00744-CFL, Judge Charles F. Lettow. ______________________ NEWMAN, Circuit Judge, dissenting. For the reasons stated in my dissent in the concurrently heard case, Moda Health Plan, Inc. v. United States, No. 17-1994, the ruling of the Court of Federal Claims should be reversed. The panel majority concedes that the government has a statutory obligation to make risk corridors payments to Land of Lincoln Mutual Health Insurance Company. That obligation has not been altered by statute or regulation. The Court of Federal Claims erred in its statutory interpretation, and in its conclusion that the government 2 LAND OF LINCOLN MUTUAL HEALTH v. UNITED STATES need not meet the obligations by which it induced the nation’s health insurers to implement the Affordable Care Act. I respectfully dissent from my colleagues’ endorsement of this flawed ruling.

Primary Holding

Federal Circuit rejects an insurer's claim under the ACA "risk corridors" program.

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