If the "risk corridors" created under the Affordable Care Act don't immediately capture your attention, this likely will: $3.7 billion worth of recoveries obtained while working on contingency.

That's what a Quinn Emanuel Urquhart & Sullivan team led by partners Stephen Swedlow, J.D. Horton and Adam Wolfson secured in two judgments on July 23 from the U.S. Court of Federal Claims this week for 153 insurers participating in two class-actions against the federal government.

Quick back-story: The ACA created risk corridors essentially to keep premiums stable during the first three years for plans on the public exchanges created under the law. The government collected payments from insurers on plans that performed well and distributed funds to those who had high losses to protect insurers from taking a huge hit.

Alas, in 2016 Congress passed appropriations riders making the program budget-neutral, reneging on the deal. But after Quinn Emanuel and several other firms sued the government under the Tucker Act, the U.S. Supreme Court in April, in an 8-1 ruling, found that the plaintiffs had rightly sued under the act in the right venue. The federal government had to pay up.

The Lit Daily recently asked Swedlow, Horton, and Wolfson about the genesis of the case, about how those in the insurance industry who were initially reluctant of the claims eventually came around, and about that contingency fee.

Lit Daily: Who were your clients and what was at stake?  

Stephen Swedlow: The class representatives are Health Republic and Common Ground, Affordable Care Act CO-OPs from Oregon and Wisconsin. They began issuing qualified health plans on the ACA health exchanges in 2014. Since the ACA expanded health care coverage to cover so many Americans who never had health insurance before, issuers couldn't accurately predict how risky and expensive these new insurance customers would be. In order to encourage participation and ensure availability of insurance, the government promised to reduce Qualified Health Plan "QHP" issuers' initial risk by with these "risk corridor" payments. The way the program was constructed, if QHP issuers lost more in the initial years of the ACA exchanges than anticipated, the issuers would receive partial payments back from the government. In return, issuers promised to pay back a portion of certain profits.  

In effect, the risk was limited to a narrow "corridor," and health insurance companies relied upon this when deciding whether to participate in the health exchanges. In late 2014, however, Congress blocked the ability of HHS to pay the risk corridors, leaving QHP issuers throughout the country with billions in unanticipated losses. This forced many issuers (including Health Republic) into liquidation. Quinn Emanuel stepped in and developed a legal theory to sue the government in a class action with Health Republic as the class representative seeking unpaid risk corridor amounts for 2014 and 2015, and Common Ground later became the class representative for 2016 payments. By the time judgment was entered a few days ago, over 130 other QHP issuers had opted into each of the two class actions and participated in the final judgment. 

Lit Daily: What was the genesis of this case?  

J.D. Horton: I forwarded an article in the LA Times about the government's failure to pay the full amount owed under the risk corridors provisions of the ACA to Steve Swedlow and said, "Do you want to sue the government with me?" 

Lit Daily: What was your main theory of the case and whose idea was it to wield the Tucker Act the way you did?

Swedlow: It was a collaborative process with all of us. The theory was that the risk corridors provisions were money mandating. Even though Congress acted through spending bills to change the appropriations law, once the original promise was made it could not be undone through appropriations. 

Lit Daily: How did folks in the insurance industry initially react to the idea of suing the federal government?  

Swedlow: I flew around the country talking to different health insurance companies for a couple months, but everyone I met with was reluctant to be the named plaintiff against the government in a lawsuit, even if they thought a lawsuit was the correct move. The insurance industry was being crippled by the failure on the part of the government to pay its debts, but the government has enormous power over the industry because it is also its biggest customer. Then we spoke with Dawn Bonder at Health Republic [in Oregon]. She saw this as a moral obligation to hold the government to its promise, despite the fact that her peers at other companies thought she was crazy to sue the government. 

Lit Daily: At what point did you start seeing insurers opt into your case?  

Adam Wolfson: After we filed the case, we had to get the class certified. Then notice issued, and we spoke to dozens of class members explaining the process. However, not until the end of the opt-in period did we see significant movement in terms of opt-ins. It seemed as if everyone was waiting for others to decide what to do.  

Lit Daily: Who else, law firm-wise, ended up litigating these cases alongside you?  

Horton: We filed the first case several months before any other firms.  

After we filed, lawyers from Reed Smith contacted us, and we advised them on the strengths and weaknesses of various legal theories. They ultimately filed individual cases. Crowell & Moring, Sullivan & Cromwell, Kirkland & Ellis, Massey & Gail, and other firms also subsequently filed individual cases and/or participated in various appeals.  

Lit Daily: What role did you and your team play in Maine Community Health Options v. the United States, the risk corridors case that was ultimately taken up and decided by the U.S. Supreme Court?  

Wolfson: The theory being tested was our original Tucker Act theory. We helped develop the arguments and also participated as amici on behalf of our classes as well as counsel for a group of renowned health economists who filed a separate amicus brief both at the Federal Circuit and with the Supreme Court.  

Lit Daily: After Maine Community Health Options was decided, what was left to do in your case? 

Swedlow: After the Supreme Court decided the fundamental legal issues under section 1342 of the ACA and the Tucker Act, we still had to negotiate with government on behalf of over 150 clients the form of judgment, confirm the amount of judgment for each party, and seemingly endlessly negotiate with the government the scope of remaining disputes with class members. While we were able to resolve almost all of the remaining disputes, we still have unresolved dispute subclasses that will continue to litigate offset issues with the government. Those parties have not been included in the stipulated judgment. Quinn Emanuel will continue to litigate this case for each class member until every entity is satisfied with the result or we have exhausted every appellate opportunity.  

Lit Daily: I gather that the firm handled this matter on contingency. What's this recovery going to mean to the firm's bottom line in 2020? 

Swedlow: Although the Stipulated Judgment is entered, the fee has not yet been decided by the Court. As we indicated years ago in the class notice, we are seeking a 5% contingency. No matter what amount the court ultimately awards Quinn Emanuel, suffice it to say it will be a welcome boost to our bottom line in 2020. Quinn Emanuel is having a pretty good year to this point, all things considered.  

Lit Daily: What will you remember most about this case?  

Horton: I am proud of our firm for its willingness to commit (and remain committed) with resources and reputation on a full contingency to suing our sitting government on a theory that had never been tested and under a statute (ACA) that our current President has sought to repeal since taking office.  

Lit Daily: Is there anything else I should be asking about?  

Swedlow: In a few months hopefully you will be asking about our Cost Share Reduction class action (another circumstance where the government failed to pay an obligation under the Affordable Care Act) where the class has a judgment of $1.57 billion for 2017/2018 payments (currently on appeal) and we continue to pursue an additional class claim for 2019 payments.