The US Fifth Circuit Court of Appeals has overturned a decision that would have required the federal government to return more than $479 million to six states that argued that the federal government had illegally collected a fee from them under the Affordable Care Act (“ACA”).

Texas, Kansas, Louisiana, Indiana, Wisconsin, and Nebraska challenged the lawfulness of the ACA’s provisions that a state’s managed-care contracts must be approved by the Department of Health and Human Services (HHS) as “actuarially sound” in order to receive federal reimbursement and that it must pay an annual Provider Fee.

In its ruling Friday, the Fifth Circuit found that HHS did not unlawfully delegate its authority to the Actuarial Standards Board during the approval of their managed care contracts. The Actuarial Standards Board is an independent organization that sets the standards for actuarial practices. HHS gave authority to the Actuarial Board to make binding rules in 2015. The Fifth Circuit found that HHS’s delegation did not violate the nondelegation doctrine because HHS still retained the final review of the standards. While “rubber-stamping” is impermissible, the Fifth Circuit found that “[t]he contract approval process is closely ‘superintended by HHS in every respect.’”

The Fifth Circuit also determined that the ACA’s Provider Fee was a tax that did not violate the constitution’s Spending Clause or the Tenth Amendment’s Intergovernmental Tax Immunity doctrine, agreeing with the district court. The Fifth Circuit found that the Provider Fee did not violate the Intergovernmental Tax Immunity Doctrine because the tax does not discriminate against the states nor does the “legal incidence,” because “clear wording” in the statute determines who must pay the tax, of the Provider Fee fall on the states.

The Fifth Circuit agreed with the district court that the states had standing, but it reversed the district court’s decision that the states’ claims were not time-barred. The Fifth Circuit said that federal law provides that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” The appeals court decided that HHS published the rule guiding their approval of managed care contracts in 2002, predating the ACA. Therefore, the states were time-barred because the rule took effect more than six years before the state filed their complaint.

Ultimately, the court determined that HHS did not violate the nondelegation doctrine, and the Fifth Circuit also vacated the district court’s grant of equitable disgorgement to the states, which would have awarded them more the $479 million.