California v. U.S. Dept. of Health & Human Servs.
| Decision Date | 20 July 2020 |
| Docket Number | Case No. 20-cv-00682-LB |
| Citation | 473 F.Supp.3d 992 |
| Parties | State of CALIFORNIA, et al., Plaintiffs, v. U.S. DEPT. OF HEALTH AND HUMAN SERVICES, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Brenda Ayon Verduzco, Kathleen Boergers, Ketakee Rajiv Kane, California Department of Justice Office of the Attorney General, Oakland, CA, Michael Lawrence Goldsmith, California Department of Justice, Los Angeles, CA, for Plaintiff State of California.
Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, Lisa Landau, Chief, Halth Care Bureau, Colleen Kelly Faherty, Pro Hac Vice, Matthew Colangelo, Pro Hac Vice, New York State Office of the Attorney General, New York, NY, for Plaintiff State of New York.
Alacoque Hinga Nevitt, Office of the Attorney General for the District of Columbia, Washington, DC, Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, for Plaintiff District of Columbia.
Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, Susan P. Herman, Pro Hac Vice, Office of the Attorney General, Augusta, ME, for Plaintiff State of Maine.
Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, Kimberly S. Cammarata, Pro Hac Vice, Maryland Office of the Attorney General, Baltimore, MD, for Plaintiff State of Maryland.
Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, Jeanne Nicole DeFever, Oregon Dept. of Justice, Portland, OR, for Plaintiff State of Oregon.
Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, Eleanor Spottswood, Pro Hac Vice, Vermont Attorney General's Office, Montpelier, VT, for Plaintiff State of Vermont.
Abby Lynn Chestnut, Pro Hac Vice, Colorado Department of Law, Denver, CO, Brenda Ayon Verduzco, Department of Justice Office of the Attorney General, Oakland, CA, for Plaintiff State of Colorado.
Bradley Philip Humphreys, U.S. Department of Justice, Washington, DC, for Defendants U.S. Dept. of Health and Human Services, Seema Verma.
Bradley Philip Humphreys, Cormac A. Early, U.S. Department of Justice, Washington, DC, for Defendants Alex M. Azar, Centers for Medicare and Medicaid Services.
ORDER GRANTING THE PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AND DENYING THE DEFENDANTS’ CROSS-MOTION FOR SUMMARY JUDGMENT
Re: ECF Nos. 36 & 43
Section 1303(b)(2)(B) of the Affordable Care Act ("ACA") requires health-insurance issuers to collect separate payments from policy holders ("enrollees" in the insurance plans) for premiums for abortion services and for non-abortion services. 42 U.S.C. § 18023(b)(2)(B). The Department of Health and Human Services ("HHS") issued a rule in 2015 that allowed issuers to satisfy the separate-payment requirement by sending a single bill that itemized the premium for abortion services, sending a separate bill for the premium for abortion services, or sending a notice at enrollment specifying the separate charge. 80 Fed. Reg. 10,750, 10,840 (Feb. 27, 2015) (codified at 45 C.F.R. § 156.280 ). In 2019, HHS replaced the 2015 rule with a new rule that required issuers to send enrollees two separate bills, and enrollees to make two separate payments, to reflect the split between abortion and non-abortion premiums. 84 Fed. Reg. 71,674, 71,684 (Dec. 27, 2019) (codified at 45 C.F.R. pt. 155, 156). In this lawsuit, six states and the District of Columbia sued HHS to invalidate the rule and moved for summary judgment on the following grounds: (1) the rule is arbitrary and capricious under the Administrative Procedures Act ("APA") because HHS did not give a reasoned explanation for the policy change, ignored high costs that accompanied it, ignored the evidence about the harms, and imposed measures with no rational connection to its objective; (2) the rule is contrary to several sections of the ACA; (3) HHS exceeded its statutory authority when it promulgated the rule; (4) HHS failed to follow APA procedures; and (5) the rule violates the Tenth Amendment.1 HHS moved for summary judgment on the grounds that the new rule does not violate the ACA, the APA, or the Tenth Amendment, and it did not exceed its authority by promulgating the rule.2
The court grants the plaintiffs’ summary-judgment motion, and denies HHS's summary-judgment motion, on the ground that the rule is arbitrary and capricious.
The ACA created state health-insurance exchanges to allow customers to buy private insurance plans, and it provided federal subsidies to lower the cost of coverage to eligible enrollees. 42 U.S.C. §§ 1396w-3(b)(1)(B)–(C) ; King v. Burwell , 576 U.S. 473, 135 S. Ct. 2480, 2485–87, 192 L.Ed.2d 483 (2015). Federal law generally prohibits the use of federal funds for abortion services (except for rape, incest, or pregnancy that endangers the mother's life) through the Hyde Amendment, which is enacted annually in the annual appropriations bills for HHS and certain other agencies. 42 C.F.R. §§ 441.200, 441.202, 441.203 ; see Harris v. McRae , 448 U.S. 297, 300-04, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980). To ensure compliance with the Hyde Amendment, section 1303 of the ACA prohibits health-insurance issuers from using federal subsidies to pay for non-Hyde abortion services. 42 U.S.C. § 18023(b)(2)(A). If a health plan covers abortion services, then the issuer must collect from each enrollee ("without regard to the enrollee's age, sex, or family status) a separate payment for" (1) the portion of the premium for the non-Hyde abortion services equal to the actuarial value of that coverage (and that is at least $1 per month) and (2) the portion of the premium for services other than abortion services. Id. § 18023(b)(2)(B). The separate payments must be deposited into "separate allocation accounts." Id. The segregated funds can be used only for their separate purposes, meaning, payments for abortion services are used only for abortion services and payments for other services are used only for other services. Id. § 18023(b)(2)(C). Under the ACA, state health-insurance commissioners ensure that health plans comply with the segregation requirements. Id. § 18023(b)(2)(E)(i).
The ACA also has notice procedures. It requires issuers to send enrollees notice of the plan's inclusion of abortion coverage "only as part of the summary of benefits and coverage explanation, at the time of enrollment, of such coverage." Id. § 18023(b)(3)(A). The notice also "shall provide information only with respect to the total amount of the combined payments for [non-Hyde abortions] ... and other services covered by the plan." Id. § 18023(b)(3)(B).
In 2015, the Government Accountability Office ("GAO") identified inconsistencies by 18 issuers in 10 states with health plans that offered abortion services: two issuers who did not collect the statutory $1, four issuers who did not include the required notices, and other issuers who did not collect payments by sending a bill itemizing the separate payments or sending separate bills for the two premiums.3 In response, in 2015, HHS proposed and finalized a rule establishing that issuers could satisfy section 1303 in several ways: (1) sending an enrollee a single monthly bill that separately itemized the premium amount for non-Hyde abortion services; (2) sending a separate monthly bill for non-Hyde abortion services; or (3) sending an enrollee a notice at or soon after enrollment that the monthly invoice or bill will include a separate charge for the non-Hyde abortion services and specifying the charge. 45 C.F.R. § 156.280. The rule allowed enrollees to make one payment (a "single transaction") for the segregated services. Id. The issuer then deposited the separate payments into the two segregated accounts. Id.
In October 2017, the Centers for Medicare & Medicaid Services’ Center for Consumer Information and Insurance Oversight issued a bulletin confirming that these alternatives comply with section 1303's segregated funding requirements.4
In November 2018, the agency proposed the new rule that the plaintiffs challenge in this lawsuit: a rule that requires (1) issuers to send two separate bills each month for the premium for non-Hyde abortion services and the premium for other services and (2) enrollees to pay the two bills in separate transactions. 83 Fed. Reg. 56,015, 56,030 –031 (Nov. 9, 2018). HHS said that its proposed rule "would better align the regulatory requirements for QHP [ (qualified health plan) ] issuer billing of enrollee premiums with the separate payment requirement in section 1303 of the [ACA]." Id. at 56,022. HHS received nearly 75,000 public comments to its proposed rule.5 Some supported the rule, but a majority did not.6
For example, state exchanges said that the proposal could result in significant consumer confusion and loss of insurance coverage.7 Even with consumer outreach and education campaigns, the exchanges predicted that most policy holders would not understand the purpose of the two bills or why they had to send separate payments.8
Other stakeholders described confusion that would cause consumers to not complete their initial enrollment. After enrolling, consumers must make their first month's premium payment — known as a "binder" payment — in full, and if they do not, there is no coverage. Because the proposed rule required two payments (at least $1 and a separate payment for the balance of the premium), some consumers would miss the full payment and thus would not initiate coverage.9
Physicians and professional medical associations echoed the concerns that policy holders who failed to pay the abortion-related premium would be left without coverage, resulting in a disproportionate impact on vulnerable communities.10 Consumer-advocacy groups explained that the current process aligned with industry practice and was...
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