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April 23, 2018

'Tens of billions' in damages? Why experts say a judge’s latest CSR decision could have big consequences.

Daily Briefing

    A federal judge on Tuesday granted health insurers class-action status in a lawsuit challenging the Trump administration's decision to stop paying insurers cost-sharing reductions (CSRs) called for under the Affordable Care Act.

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    Lawsuit details

    Common Ground Healthcare Cooperative (CGHC) in December 2017 filed a lawsuit against the administration over its decision to no longer make the CSR payments, as well as unpaid risk corridors funds. CGHC requested class-action status for the lawsuit.

    The federal government argued that insurers should not receive class-action status in the lawsuit because the health plans involved in the suit could have each incurred different damages as a result of losing the CSR payments. For instance, the federal government noted that some insurers raised premiums to offset losses caused by the federal government discontinuing CSR payments. As such, the federal government argued that it could be difficult to resolve claims for each insurer in a single lawsuit.

    Federal judge grants class-action status

    However, Judge Margaret Sweeney of the U.S. Court of Federal Claims on Tuesday granted CGHC's request for class-action status. In her decision, Sweeney wrote that the class-action status applies to all insurers that offered health plans through the ACA's exchanges for the 2017 or 2018 coverage years that made the CSRs to eligible enrollees but did not receive funding for the reductions from the federal government.

    Sweeney in her decision rejected the federal government's arguments against granting insurers class-action status, writing that "the calculation of each potential class member's unpaid [CSR] payments appears to be a rather straightforward process based on data provided to the government by the insurers." Further, Sweeney ruled that the ACA does not allow the federal government to use increases in premium subsidies that enrollees receive as a result of increased premiums to "offset its [CSR] payment obligations."

    Next steps

    According to Healthcare Finance News, attorneys must submit a list of potential class-action members to the court by May 18. However, if granted permission by the U.S. Court of Appeals for the Federal Circuit, the federal government can immediately file an appeal to reverse the judge's decision.

    One expert weighs in

    Nicholas Bagley, a health law professor at the University of Michigan, in a blog post wrote that, if the judge's decision and rationale for granting class-action status "stand[s] up on appeal, it suggests that the federal government [could] be liable for tens of billions of dollars in damages" if insurers ultimately are successful in the suit, "with the precise amount [of damages] growing every day" CSR payments are not made.

    However, Bagley wrote, "Congress could stop the bleeding by wiping out the statutory obligation to make [CSR] payments."

    Bagley added that he expects the federal government to appeal the decision to the Federal Circuit and, "if it loses there, it could take the question to the Supreme Court" (Baker, "Vitals," Axios, 4/20; Livingston, Modern Healthcare, 4/20; Morse, Healthcare Finance News, 4/20; Haefner, Becker's Hospital Review, 4/20; Bagley, "The Incidental Economist," 4/20).

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