Attanasio v. DIV. OF COMPLIANCE, US DHHS, Civ. A. No. 86-0071-F.

• Decision Date: 16 January 1990
• Docket Number: Civ. A. No. 86-0071-F.
• Citation: 728 F. Supp. 812
• Parties: Dominick ATTANASIO Jr., Plaintiff, v. DIVISION OF COMPLIANCE, OFFICE OF HEALTH MAINTENANCE ORGANIZATIONS OF THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, and Secretary of Health and Human Services, Defendants.
• Court: U.S. District Court — District of Massachusetts

728 F. Supp. 812

Dominick ATTANASIO Jr., Plaintiff, v. DIVISION OF COMPLIANCE, OFFICE OF HEALTH MAINTENANCE ORGANIZATIONS OF THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, and Secretary of Health and Human Services, Defendants.

Civ. A. No. 86-0071-F.

United States District Court, D. Massachusetts.

January 16, 1990.

Thomas J. Oppenheimer, Springfield, Mass., for plaintiff.

Nicholas C. Theodorou, Asst. U.S. Atty., Boston, Mass., for defendants.

MEMORANDUM AND ORDER

FREEDMAN, Chief Judge.

I. INTRODUCTION

Before the Court are plaintiff's motion for partial summary judgment and defendants' motion to dismiss. In essence, plaintiff contends that certain regulations promulgated by the Secretary of Health and Human Services ("Secretary") are invalid, and that plaintiff is entitled to judgment as a matter of law. Defendants, however, aver that the Secretary acted beyond his statutory authority by creating the regulations, and that plaintiff's complaint fails to state a claim upon which relief can be granted.

An Act of Congress provides, inter alia, that in accordance with the Secretary's regulations, an employer must offer as a part of its employee health benefits plan the option of joining a health maintenance organization ("HMO"). The Secretary's regulations, promulgated under the Act, state that an employer is obligated to offer the HMO option to its employees only if the employer receives from the HMO a written request for inclusion. The issue presented in this case is whether the Secretary's regulation is arbitrary, capricious or an abuse of discretion.

II. FACTS

Plaintiff Dominick Attanasio Jr. is employed by the Laurino Packaging Corporation of West Springfield, Massachusetts ("Laurino"). As do many employers, Laurino extends to its employees the opportunity to enroll in a health benefits plan. In July of 1984, Laurino offered its employees, including plaintiff, the option of enrolling in either the Blue Cross/Blue Shield health plan or the Medical West health maintenance organization. Plaintiff chose Medical West. The Medical West coverage became effective on August 1, 1984. However, Laurino terminated the Medical West coverage on November 1, 1984, and informed all employees that those previously covered by Medical West would be transferred to Blue Cross/Blue Shield.

In response to the termination, plaintiff filed a complaint with the Division of Compliance, Office of Health Maintenance Organizations ("Division"), an agency of the United States organized under the Department of Health and Human Services responsible for enforcing the provisions of the Health Maintenance Organization Act of 1973, Pub.L. No. 93-222, 42 U.S.C. §§ 300e et seq. ("Act"). Plaintiff argued that Laurino's termination of the Medical West option for its employees violated Laurino's obligation under the Act, as amended by Section 110 of Title I of the Health Organization Act Amendments of 1976, Pub.L. 94-460, 42 U.S.C. § 300e-9 ("section 300e-9"), to offer an HMO health plan option to its employees. In a two-page letter, the Division denied plaintiff's complaint. The Division based its decision on regulations¹ promulgated by the Secretary pursuant to the Act, which required that the employer receive from the interested HMO² a written request for inclusion before the employer has any obligation under the statute. Upon contacting a Medical West executive, the Division discovered that Medical West did not send a written request for inclusion to Laurino, see Letter from Christine C. Boesz, Deputy Director at the Division of Compliance, to Plaintiff's Attorney Thomas J. Oppenheimer at 2 (Jan. 23, 1986) ("Boesz Letter"), and that Laurino therefore did not receive one.³ "Therefore, unless Laurino Packaging Corporation has received a timely written request from Medical West Community Health Plan and the corporation has met the other requirements of 110.802 42 C.F.R. § 417.151, neither the provisions of 42 U.S.C. 300e-9 nor 42 CFR § 110.801 section 417.150 et seq., apply." Boesz Letter at 1.

On February 26, 1986, plaintiff filed a complaint in United States District Court against the Division and the Secretary. Plaintiff makes three claims for relief. In his first claim for relief, plaintiff seeks a declaratory judgment stating that the Division's decision is erroneous and without force of law, because it is based on regulations contrary to section 300e-9. In his third claim, plaintiff avers that the Secretary's regulation requiring a written request of inclusion is contrary to congressional intent as expressed in section 300e-9. Plaintiff contends that the Court must declare sections 417.150 et seq. invalid to the extent that they provide that section 300e-9 and the regulations apply only where the employer has received a written request for inclusion from the interested HMO.

Plaintiff's second claim for relief is in the alternative. If the Court should find that the regulations are valid and that the Division's reliance on the regulations is well-placed, then plaintiff asks the Court to remand the case to the Division for further investigation into the issue of whether Laurino actually received a written request for inclusion from Medical West.

Plaintiff has moved for summary judgment as to the first and third claims for relief. Plaintiff argues that because the regulation is on its face invalid, and the Division admittedly relied on those regulations, plaintiff is entitled to judgment as a matter of law. Defendants have moved to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(6),⁴ based on their contention that the regulations are valid exercises of statutory authority granted to the Secretary by Congress, and that the Division correctly applied the statute and the regulations in this instance. Defendants also contend that the Division correctly investigated the matter regarding the written request for inclusion. Plaintiff's motion for partial summary judgment and defendants' motion to dismiss are now before the Court.

III. DISCUSSION

A. Issue Definition

Title 42 U.S.C. § 300e-9, entitled "Employee's health benefits plans," provides that "(a) in accordance with regulations which the Secretary shall prescribe ... each employer which is now or hereafter required ... to pay its employees the minimum wage ... and which during any calendar quarter of the previous calendar year employed an average number of employees of not less that 25 ... shall include in any health benefits plan ... the option of membership in qualified⁵ health maintenance organizations...."⁶ Thus, the statute empowers the Secretary to promulgate regulations in order to administer and enforce obligations under the statute.

Pursuant to section 300e-9, the Secretary created 42 C.F.R. §§ 417.150 et seq. Section 417.151 provides that an employer is subject to the regulations promulgated under section 300e-9 only if the employer "(1) Offers ... a health benefits plan to its eligible employees; and (2) Has received written request for inclusion in the employer's ... health benefits plan ... from one or more qualified HMOs...." (Emphasis added). Section 417.152(e) further provides that "if the request for inclusion does not meet the requirements of paragraphs (a) through (c) of this section regarding the nature and content of the written request, the employing entity is not required to include the HMO alternative in its employees' health benefits plan...." The issue now before the Court is whether the regulations are a valid exercise of administrative power; that is, may the Secretary make application of section 300e-9 and the attendant regulations contingent upon receipt by the employer of a written request for inclusion from the interested HMO?

The Supreme Court has not decided any case involving section 300e-9 or 42 C.F.R. §§ 417.150 et seq. The parties have cited no binding or persuasive case law regarding the Secretary's powers under section 300e-9. Indeed, no federal court in any circuit has considered the issue presently at bar. Absent such authority, the Court embarks on an uncharted course.

B. Standard of Review

Title 5 U.S.C. § 706 provides that "the reviewing court shall ... (2) hold unlawful and set aside agency action, findings, and conclusions found to be—(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law...." The arbitrary and capricious standard requires that the reviewing court give considerable deference to the agency determination. Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). The courts must allow an agency leeway in interpreting the statutes, because the agency, and not the court, has been empowered by Congress to set the statutory machine in motion, and make the parts work efficiently. Id. "The scope of review under the `arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Manufacturers Ass'n. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1982). Under the arbitrary and capricious standard, the Court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974), citing Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). A reviewing court is "constrained to affirm the Secretary's determination ... in close cases." McInnis v. Weinberger, 530 F.2d 55, 63 (1st Cir.1976).

However, reviewing courts will not simply "rubber-stamp" the agency rule. National Labor Relations Board v. Brown, 380 U.S. 278, 291, 85 S.Ct. 980, 988, 13 L.Ed.2d 839 (1965). Rather, the court must "honor the clear meaning of the statute, as revealed by its language, purpose, and history."...