On Friday, the Justice Department filed a motion to dismiss the risk corridor suits brought by Moda Health Plans and Blue Cross Blue Shield of North Carolina. To grossly summarize, Congress passed a statute that required the risk corridors to be budget neutral. Because there was far less paid into the fund than expected, insurers were not paid as much as they expected. The government argued (as expected) that the claims are not yet ripe and there are no claims for “presently due money damages” under the Tucker Act.
However, the government goes on to argue that the pro-rata payments “are rational” and HHS has no contractual obligation to make additional payments. These arguments are somewhat surprising in light of recent reports that the Obama administration is looking to settle these cases using the judgment fund. Why is the government offering such a full-throated defense if they are planning on settling the cases anyway?
Perhaps the institutional constraints within the Justice Department are leery of assuming away that a contractual obligation has been made. Such a decision could open the floodgates to many more claims from other government contractors. In this case, once a court refuses to dump the case and holds that there is a contract, that paves the way for a settlement from the judgment fund. Although, things get quirky if the court dismisses the case. If the government loses, could it still offer a settlement?
I frankly don’t understand this strategy, but there are a lot of moving parts here.