Post on 19-May-2022
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?