Montana Health Co-op notches a victory in lawsuit over cost-sharing subsidies

Legal and regulatory issues
A federal judge ruled HHS was obligated to pay Montana Health the $5 million in CSR payments owed last year. (iStock/BCFC)

While most of the country was focused on legal arguments over the fate of the Affordable Care Act in Texas, one small insurer notched an important legal victory over cost-sharing reduction (CSR) payments.

On Tuesday, a U.S. Federal Claims Court ruled that the Trump administration must make CSR payments to Montana Health Co-op, which sued the government in January to recover $5.3 million it was owed after President Trump ended the program last year.

The CSR subsidies, created under the Affordable Care Act, were implemented to help low-income Americans pay for insurance policies. The Trump administration cut off the payments to insurers in October in a move that many said would destabilize the individual exchanges.

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Insurers were owed an estimated $7 billion in CSR payments last year, and the change was made too late in the year for insurers to adjust premiums.

RELATED: 2 more health insurers sue over halted CSR payments

In her ruling (PDF) on Tuesday, Judge Elaine Kaplan denied the Department of Justice’s motion to dismiss the case, which argued that the Department of Health and Human Services (HHS) wasn’t required to make the payment because Congress didn’t appropriate the necessary funding. Instead, Kaplan said the government was required to reimburse insurers based on the “the payment obligation spelled out by the plain language” of the ACA.

“[The Court] agrees that the government violated a statutory obligation created by Congress in the ACA when it failed to provide Montana Health its full cost-sharing reduction payments for 2017, and that Congress’s failure to appropriate funds to make those payments did not vitiate that obligation,” she wrote.

RELATED: 19 states file lawsuit against Trump administration in defense of cost-sharing reduction payments

The Department of Justice is expected to file an appeal, according to one industry expert, which would kick the case up to the Federal Circuit Court of Appeals, the same court that said HHS didn’t have to make risk corridor payments because of an appropriations rider from Congress. The Montana Health cases didn’t involve any such riders.

“This decision is an important win for Montana Health and the healthcare industry, generally, which has a significant stake in the CSR cases,” Crowell & Moring partner Stephen J. McBrady, who served as lead counsel to Montana Health Co-op, said in a statement.

CSR payments have been the subject of numerous legal challenges dating back to the Obama administration when the Republican-controlled House sued HHS, arguing the payments were unconstitutional. Montana Health is one of six CSR cases making its way through the court following Trump’s decision to do away with the payments, and it marks the first ruling involving payments made through that specific program.

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