Ass'n for Cmty. Affiliated Plans v. U.S. Dep't of Treasury, Civil Case No. 18-2133 (RJL)

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtRICHARD J. LEON United States District Judge
Docket NumberCivil Case No. 18-2133 (RJL)
Decision Date18 July 2019


Civil Case No. 18-2133 (RJL)


FILED: July 19, 2019
July 18, 2019

## 39, 40]

This is an Administrative Procedure Act ("APA") challenge to an August 3, 2018 final rule ("2018 Rule"), 83 Fed. Reg. 38,212, promulgated by the Departments of Labor, Treasury, and Health and Human Services ("the Departments"). The 2018 Rule redefined "short-term, limited duration insurance" (or "STLDI"), a category of individual health insurance that Congress expressly exempted from individual market regulations in the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and did not address further in the 2010 Affordable Care Act ("ACA"). Plaintiffs are a collection of associations and organizations that directly or through their members offer individual health insurance coverage through ACA-created marketplaces ("insurer plaintiffs"), provide various medical services ("provider plaintiffs"), or purchase ACA-compliant individual health insurance ("consumer plaintiffs"). See Compl. [Dkt # 1] at ¶ 15. Plaintiffs claim that the 2018 Rule violates the APA, 5 U.S.C. § 706, by interpreting STLDI

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in a manner that is contrary to the ACA and/or HIPAA and is otherwise arbitrary and capricious. Id. at ¶¶ 97-123.

Pending before me are plaintiffs' and the Departments' cross-motions for summary judgment. See Pls.' Mot. for Summ. J. [Dkt. # 39]; Defs.' Mot. for Summ. J. [Dkt. # 40]. Upon consideration of the briefing, the relevant law, and the entire record herein, the Departments' motion for summary judgment is GRANTED and plaintiffs' motion for summary judgment is DENIED.


The story of STLDI begins in 1996. That was the year that Congress enacted HIPAA, a law designed in part to improve the availability and continuity of health insurance coverage in the individual and group markets. See Pub. L. No. 104-191, 110 Stat. 1936. HIPAA amended the Public Health Service Act ("PHS Act") to create federal standards for "individual health insurance coverage." See PHS Act § 2741, codified at 42 U.S.C. § 300gg-41, et seq. In doing so, the law defined "individual health insurance coverage" to mean "health insurance coverage offered to individuals in the individual market, but [that] does not include short-term limited duration insurance." Id. § 300gg-91(b)(5). That is, Congress in HIPAA exempted STLDI from individual market regulations. Congress did not, however, define what coverage constitutes STLDI.

HIPAA also imposed several reforms on the individual health insurance market. For those seeking individual policies, the law guaranteed coverage availability and preexisting condition protections to "eligible individual[s]," i.e., persons with "18 or more months" of "creditable coverage," id. §§ 300gg-41(a)(1), (b)(1)(A), without any

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"significant breaks in coverage" lasting 63 or more days, id. § 300gg-3(c)(2)(A). HIPAA defined "creditable coverage" to include most forms of health coverage, including STLDI (notwithstanding STLDI's exemption from individual health insurance regulations). See id. § 300gg-3(c)(1)(B); H.R. Rep. No. 104-736, at 180 (1996) ("The conferees intend that creditable coverage includes short-term, limited coverage."); 45 C.F.R. § 146.113(a)(1)(ii) (STLDI is a type of "health insurance coverage"). In addition, HIPAA capped the period during which a group health insurer could exclude benefits for preexisting conditions to 12 months from enrollment (or 18 months for late enrollees) and required that the period be "reduced by the aggregate of the periods of creditable coverage" for the individual seeking to participate in the plan. HIPAA, Pub. L. No. 104-191, § 2701(a)(2)-(3). In sum, individuals who changed plans under certain circumstances were afforded day-for-day credit for their previous coverage, which served to protect them in full or in part from benefit denials for preexisting conditions under their new coverage.

With Congress having created and exempted an undefined category of health insurance, the Departments, predictably, stepped in to give STLDI meaning. In April 1997, during the Clinton Administration, the Departments published an interim final rule ("1997 Rule") defining STLDI as "health insurance coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder without the issuer's consent) that is within 12 months of the date such contract becomes effective." 62 Fed. Reg. 16,894,

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16,928 (Apr. 8, 1997).1 The Departments during the Bush Administration followed up in 2004 with a final rule ("2004 Rule"), which adopted effectively the same definition as the 1997 Rule without opposition or comment. See 69 Fed. Reg. 78,720, 78,748 (Dec. 30, 2004).

In 2010, fourteen years after STLDI's debut in HIPAA, Congress passed the ACA, which overhauled the operation of individual health insurance markets in order "to increase the number of Americans covered by health insurance and decrease the cost of health care." Nat'l Fed. of Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012). Among the ACA's reforms were: (1) "guaranteed issue," requiring insurers to offer coverage to all individuals regardless of health status and to accept every individual who applies for such coverage, see 42 U.S.C. § 300gg-1; (2) "community rating," which generally prohibits insurers from charging higher premiums based on a person's medical history or gender, see id. § 300gg; (3) a collection of "essential health benefits" that insurers must provide in their plans, id. § 300gg-6; (4) the creation of "single risk pools" for individual and small group enrollees, from which insurers must set their premiums, id. § 18032(c); (5) the establishment of "Health Benefit Exchanges," which are state-specific online marketplaces where consumers can purchase ACA-compliant "qualified health plans" or "QHPs" (that is, plans that comply with the foregoing requirements), see id. §§ 18021, 18031, 18032; and (6) the provision of subsidies for low-income individuals in the form of premium tax credits,

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which are designed to help eligible persons purchase QHPs through an ACA Exchange and are tied to the premium charged by a benchmark plan available on the Exchange, as well as to a consumer's household income, see 26 U.S.C. § 36B; id. § 36B(b)(2). Not among the ACA's reforms was any change to HIPAA's definition of "individual health insurance coverage," which expressly excluded STLDI. See 42 U.S.C. § 300gg-91(b)(5). Accordingly, STLDI remained exempt under the ACA from individual health insurance market regulations, including those imposed by the ACA. STLDI also remained statutorily undefined.

The ACA's most well-known feature, of course, is the so-called "individual mandate," which requires individuals to maintain "minimum essential coverage"—e.g., purchasing a QHP on an Exchange, see 26 U.S.C. § 5000A(f)(1)(C)—or pay a tax penalty. See id. § 5000A(a)-(b). There are statutory exemptions from the penalty, including for those who cannot afford ACA-compliant plans or will suffer hardship in securing them. See id. § 5000A(e)(1), (5). But, as of January 1, 2019, those exemptions are effectively moot, as Congress's Tax Cuts and Jobs Act of 2017 ("TJCA") reduced the tax penalty amount to $0 for all individuals, effective at the beginning of this year. See Budget Fiscal Year, 2018, Pub. L. No. 115-97 § 11081, 131 Stat. 2054 (2017).

It is not in dispute that after the ACA's reforms took effect in 2014, health insurance premiums began to rise. See, e.g., 83 Fed. Reg. at 38,232 ("[i]ndividual market premiums increased 105 percent from 2013 to 2017, in the 39 states using in 2017"). Two years later, in 2016, the Departments during the Obama Administration became "concerned" that individuals were "purchasing [STLDI] coverage as their primary form of

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health coverage" and that STLDI issuers might "target[]" "healthier individuals, . . . thus adversely impacting the risk pool for Affordable Care Act-compliant coverage." 81 Fed. Reg. 75,316, 75,317-18 (Oct. 31, 2016). In other words, the Departments were worried that as the cost for ACA-compliant plans rose, more and more healthy individuals would be incented to exit the ACA Exchanges and purchase cheaper health coverage options like STLDI. Accordingly, the Departments adopted a final rule ("2016 Rule") that redefined STLDI "so that the coverage must be less than three months in duration, including any period for which the policy may be renewed." Id. at 75,318. The 2016 Rule thus reduced the maximum term and duration of STLDI from less than twelve to less than three months, and it effectively prohibited renewals.

Just days after the 2016 Rule was finalized, American voters elected a new Administration with, to say the least, different views from the previous Administration regarding competition and choice in health insurance markets. On January 20, 2017, President Trump issued an Executive Order stating his Administration's policy "to seek the prompt repeal of the [ACA]" and ordering agencies with authority and responsibilities under the ACA to take all possible legal steps "to minimize the unwarranted economic and regulatory burdens of the Act," provide relief from "regulatory burden[s] on individuals, families, health care providers, health insurers, patients," and maximize "options for patients and consumers." Exec. Order No. 13,765, Minimizing the Economic Burden of the [ACA] Pending Repeal, 82 Fed. Reg. 8351, 8351, Secs. 1, 2, 4 (Jan. 20, 2017). Congress also tried its hand several times at repealing the ACA outright. See American Health Care Act of 2017, H.R. 1628, 115th Cong. (2017); Better Care Reconciliation Act

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of 2017, S. Amend. 270 (July 25,...

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