Attacks on Health Reform and Developing Litigation Issues ...
Transcript of Attacks on Health Reform and Developing Litigation Issues ...
Attacks on Health Reform and DevelopingLitigation Issues in Managed Care
Chris FlynnJeff Poston
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Overview
• Current Constitutional Challenges toPPACA– The Florida Action– The Virginia Action
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Overview (cont’d)
• Current litigation issues in state healthreform models that were the genesis ofFederal Health Care Reform
• Maine
• Massachusetts
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TWO LAWSUITS CHALLENGINGPPACA
• Commonwealth of Virginia v. Sebelius
(C.A. No.: 3:10-cv-188) (E.D. VA)
• State of Florida v. United States Departmentof Health and Human Services
(C.A. No.: 3:10-cv-91-RV/EMT) (N.D. FLA)
• Both cases challenge constitutionality ofPPACA
• Some shared arguments; some distinct
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COMMONWEALTH OF VIRGINIA
• Brought by Attorney General,
Kenneth Cuccinelli
• VA is sole plaintiff
• VA did not join FLA action
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2010 VA General Assembly EnactsVirginia Code §38.2 – 3430.1:1
• “No Resident. . . shall be required toobtain or maintain a policy of individualinsurance coverage. . . .”
• “No provision of this title shall render aresident liable for any penalty,assessment, fee or fine as a result ofhis failure to procure or obtain healthinsurance coverage. . . .”
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Allegations in the FLA. Complaint
• Congress lacks “political will” to fundhealthcare through tax and spendingpowers
• Forces healthy young adults and otherrationally uninsured individuals tocross-subsidize older and less healthycitizens
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Alleged Violation of Commerce Clause
• Art. 1, Section 8 grants Congress power to regulate “Commerce… among the several states …”
• Broadly enforced: Basis for Civil Rights Legislation
• VA argues that Congress does not have Constitutionalauthority to enact individual mandate
• VA claims a citizen is not a “Channel of Commerce”
• A person who chooses to go without insurance is a non-economic activity--Passive
• Congress cannot force citizens to purchase a good or service
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State of Florida Action
• 18 States currently
• Broader complaint than VA
• Alleges encroachment on the liberty ofindividuals
• Alleges encroachment on statesovereignty
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State of Florida Action (cont’d)
• Major focus on PPACA’s impact onMedicaid
• Florida forced to vastly broaden itsMedicaid eligibility
• PPACA expands Medicaid to thoseunder 65 with income up to 133% ofpoverty level
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State of Florida Action (cont’d)
• FLA Claims:
– This will bust their budget
– Force massive administrative changes
– Make Florida agencies an arm of the FederalGovernment
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The Florida Action – ConstitutionalTheories
I. Violation of Article 1 and10th Amendment
– co-opting control over statebudgetary process
II. Article 1, § 2, 9
– Capitation and a direct tax
– Not apportioned among the statesper census data
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The Florida Action – ConstitutionalTheories (cont’d)
III. Art. 1 (Commerce Clause) and 10th
Amendment
– Forces citizens to procure health careor pay a tax penalty
– compels them to perform anaffirmative act or pay penalty
– Inactivity is not commerce
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The Florida Action: Status
• Briefing on the Motion to Dismiss willbe completed by August 27, 2010.
• Oral Argument will be held onSeptember 14, 2010.
• If the Motion is denied, the parties willthen brief Summary Judgment Motions.
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Analysis of FLA and VA Actions
• Supreme Court typically defers to Congress
• Broadly interprets commerce clause andtaxing authority
• Some commentators however, characterizethe individual mandate as unprecedentedand not authorized under commerce clause
• Cannot use commerce clause to forcecitizens to buy a product
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Premium Rate Litigation
• PPACA Section 1311 delegates to the Statesthe authority to require plans participating inan Exchange to justify premiums.
• Given recent refusals by State InsuranceCommissioners to permit rate increases,plans in an Exchange risk politicssupplanting actuarial standards.
• Two recent cases, in Maine andMassachusetts respectively, highlight thisproblem.
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Anthem Health Plans of Maine v. Superintendent ofInsurance, Kennebec Sup. Ct. Civil Action No.BCD-WB-AP-08-24 (2010)
– Suit brought by Anthem following ME InsuranceSuperintendent’s refusal to permit a 2009 premiumthat included any profit.
– Insurance Superintendent decision to “allow noprofit and risk margin this year” is based on:
• The financial hardship of those subscribing toindividual products in Maine; and
• The overall financial health of Anthem BCBS.
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Anthem Arguments
• Anthem lost more than $3.7 million in individualbusiness in Maine in the last 5 years.
• Proposed premium increase permitted for only 3%profit.
• Improper for Insurance Department to base ratedeterminations on overall profitability of the carrier.
• The Superintendent’s reliance on the comments ofpolicyholders is improper.
• The refusal to permit Anthem any rate of returnviolates its equal protection rights.
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The ME Insurance Department’sResponse
• The ME Insurance Code does not require theSuperintendent to provide for a profit “for allproducts at all times”.
• The ME Insurance Code does not prohibit theSuperintendent from considering the overallfinancial health of a carrier.
• The Insurance Superintendent’s treatment ofAnthem is permissible because it is rationallyrelated to a legitimate government interest.
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The Court’s April 21, 2010 Ruling
• Oral argument held on the Anthem petition for review on March24, 2010.
• Last Wednesday, the Court upheld the Commissioner’sconclusion that Anthem is not entitled to profit as part of its 2009rates.
• The Court concluded that nothing in the Insurance Codemandates “that a rate is inadequate if it is sufficient to coverprojected losses but fails to include a reasonable profit.”
• The Court also found that nothing in the Insurance Code “limitsthe … inquiry into the adequacy of a particular rate to theperformance of related individual insurance products.”
• Finally, the Court ruled that there was no Equal Protection Clauseviolation.
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Massachusetts Association of Health Plans et al. v. Murphy,Suffolk County, Superior Court Civil Action No. 10-1377-BCS2(2010)
• Massachusetts Plans submitted proposed rateincreases in early March 2010 for April 1, 2010effective dates.
• MA Insurance Commissioner denies 235 of 274proposed rate increases in the individual andsmall group markets.
• On April 1, 2010, the Commissioner concludedthat the proposed rate increases are excessiveand unreasonable.
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Plan’s Motion for PreliminaryInjunction
• On April 5, 2010, 7 plans joined theMassachusetts Association of Health Plans inmoving to enjoin the InsuranceCommissioner.
• The plans argue that the Commissioner is notbasing his determination on actuarialprinciples.
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The Court’s Ruling on the PreliminaryInjunction
• On April 12, 2010, the Court denied themotion for preliminary injunctionwithout addressing the merits of raterejections.
• Instead, the Court ruled that the MAInsurance Code provides anadministrative remedy prior to redressin the Courts.
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Current Status of theMassachusetts Rate Dispute
• Most of the affected plans simultaneouslypursued their administrative hearing rightsbefore the Division of Insurance.
• Those hearings began last week, at whichtime the MA Attorney General, MarthaCoakley, intervened.
• Following completion of the hearings, theDivision of Insurance will have 30 days toissue a ruling.
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Current Status of the MassachusettsRate Dispute (cont’d)
• Separate request by the Commissioner for aninjunction against Harvard Pilgrim and Fallon
• Last Wednesday, Judge Superior Courtgranted the Commissioner’s injunction.
• The Court ruled that the Commissioner’sinterpretation of the rate regulations isentitled to deference and that, as a result, theplans must use April 2009 base rates torequest increases.
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Analysis
• Disturbing trend of premium ratesbeing dictated by politics rather thanactuarial soundness?
• Could this extend to rates establishedin an Exchange under PPACA?
• Is the action of these InsuranceDepartments arbitrary and capricious?
• Do these premium caps address thecore issue driving premium increases?