January 09, 2020

Tenth Circuit Reverses District Court in ACA Risk Adjustment Case

The ACA created three programs – risk adjustment, reinsurance, and risk corridors – that were intended to stabilize health insurance marketplaces.  On December 31, the U.S. Court of Appeals for the Tenth Circuit reversed the U.S. District Court for the District of New Mexico and upheld  the  budget neutral risk adjustment program methodology promoted by HHS. The District Court held that HHS had acted arbitrarily and capriciously in deciding to construct a budget neutral methodology. The Court of Appeals reversed, determining that “HHS did not violate the APA when it designed the risk adjustment program as budget neutral. It lacked funding to do otherwise. The APA’s requirement that an agency explain its decision applies when the agency exercises its discretion. Here, there was no exercise of discretion to explain.”