Conway v. United States, No. 20-1292 (Fed. Cir. 2021)Annotate this Case
When a Colorado court ordered Colorado Health Insurance Cooperative into liquidation, the government owed Colorado Health $24,489,799 for reinsurance debts under the Patient Protection and Affordable Care Act (ACA), 42 U.S.C. 18061. The reinsurance program, which only lasted three years, collected yearly payments from all insurers and made payments to insurers of particularly costly individuals that year. Colorado Health owed the Department of Health and Human Services $42,000,000 for debts under ACA’s risk adjustment program, which charges insurers of individuals who had below-average actuarial risk and pays insurers of individuals who had above-average actuarial risk. The government attempted to leapfrog other insolvency creditors through offset, rather than paying its debt and making a claim against Colorado Health’s estate as an insolvency creditor.
The Federal Circuit affirmed the Claims Court in ordering the government to pay. Neither state nor federal law affords the government a right to offset. Colorado law concerning the liquidation of insurance companies is limited to offsetting debts and credits in contractual obligations. ACA does not preempt Colorado insolvency law; a “Netting Regulation” is directed to an ancillary issue, payment convenience. The government has not shown a “significant conflict between an identifiable federal policy or interest and the operation of state law.”