Molina Healthcare of California, Inc. v. United States
133 Fed. Cl. 14
Fed. Cl.2017Background
- Molina Healthcare affiliates sold Qualified Health Plans on ACA Exchanges (2014–2016) and participated in the ACA §1342 risk-corridor program designed to reimburse insurers for extraordinary losses.
- Section 1342 directed HHS to establish a program and stated the Secretary “shall pay” formulaic amounts to unprofitable plans and collect from profitable plans; Congress did not appropriate a specific fund for these payments in the ACA.
- HHS promulgated rules and initially indicated annual payment schedules and that it expected to make full payments; later HHS announced it would administer the program “budget neutral” and adopt a pro rata reduction if collections fell short.
- Congress, after a GAO opinion, enacted FY2015 and FY2016 appropriation riders restricting use of certain CMS Program Management funds for §1342(b)(1) payments, and directed budget-neutrality in committee reports; HHS then paid only ~12.6% of 2014 obligations and nothing for 2015.
- Molina sued in the Court of Federal Claims seeking unpaid 2014–2015 risk-corridor payments (~$52.4M), declaratory relief as to 2016, and asserted statutory, express- and implied-contract, covenant-of-good-faith, and Fifth Amendment takings claims; the court granted partial summary judgment on statutory and implied-in-fact contract claims and denied dismissal of the implied-covenant claim, but dismissed the express-contract and takings claims and denied declaratory relief as premature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1342 is money-mandating and requires full annual payments | Molina: §1342 uses mandatory language (“shall pay”) and therefore obligates full annual payments irrespective of an express appropriation | U.S.: §1342 does not create a present obligation to pay beyond funds actually appropriated/collections (“payments in”); timing/annual payments discretionary | Court: §1342 requires full annual payments; claims for 2014–2015 are ripe; partial summary judgment for Molina on statutory claim |
| Whether appropriation riders (FY2015/2016) repealed or limited the statutory payment obligation | Molina: Riders only barred use of specific CMS funds; did not clearly manifest intent to rescind the prior statutory obligation | U.S.: Riders effectively capped liability to amounts collected (payments in) by eliminating one funding source | Court: Riders did not clearly and expressly repeal or limit the §1342 obligation; appropriation language insufficient to vitiate prior statutory promise |
| Whether an implied-in-fact contract existed between insurers and the Government | Molina: The statutory scheme was an offer (specified payments for participation) with no agency discretion, constituting an implied-in-fact contract which the Government breached by underpaying | U.S.: No clear congressional intent to contract; programmatic/statutory language is not a contractual promise | Court: An implied-in-fact contract existed (Radium Mines/N.Y. Airways framework); Molina entitled to recovery; summary judgment granted on implied-in-fact claim |
| Whether takings or express-contract claims survive | Molina: Contractual rights to payments support takings and express-contract claims | U.S.: No express contractual obligation in QHP agreements; remedies are contractual, so takings claim improper | Court: Dismissed express-contract claim (QHP agreements do not incorporate §1342) and dismissed Fifth Amendment takings claim (remedy is contract damages) |
Key Cases Cited
- Chevron U.S.A., Inc. v. Nat’l Res. Def. Council, Inc., 467 U.S. 837 (agency deference framework)
- National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451 (statutory enactments generally not intended to create private contractual rights absent clear intent)
- United States v. Dickerson, 310 U.S. 554 (appropriation language forbidding use of funds in “this or any other Act” can repeal prior obligations)
- United States v. Will, 449 U.S. 200 (same principle on appropriations negating statutory pay increases)
- New York Airways, Inc. v. United States, 369 F.2d 743 (Ct. Cl.) (statutory program promising payments can create enforceable obligations/contract-like rights)
- Radium Mines, Inc. v. United States, 153 F. Supp. 403 (Ct. Cl.) (statutory incentive program with mandatory terms may create implied-in-fact contract)
- Highland Falls-Fort Montgomery Cent. Sch. Dist. v. United States, 48 F.3d 1166 (Fed. Cir.) (appropriations that specifically earmark or limit funds can control agency payments; distinguishable on facts)
- Bath Iron Works Corp. v. United States, 20 F.3d 1567 (Judgment Fund and enforcement of federal liabilities)