City of Columbus v. Cochran, Civil Action No. DKC 18-2364

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtDEBORAH K. CHASANOW United States District Judge
PartiesCITY OF COLUMBUS, et al. v. NORRIS COCHRAN, in his official capacity as Acting Secretary of the Department of Health and Human Services, et al.
Decision Date04 March 2021
Docket NumberCivil Action No. DKC 18-2364

NORRIS COCHRAN,1 in his official capacity as Acting Secretary of
the Department of Health and Human Services, et al.

Civil Action No. DKC 18-2364


March 4, 2021


Presently pending and ready for resolution in this action for declaratory judgment and injunctive relief are Plaintiffs' Motion for Summary Judgment (ECF No. 108); Defendants' Cross-Motion for Summary Judgment (ECF No. 118); and two motions for leave to file memoranda as amici curiae (ECF Nos. 122 and 123). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the cross-motions will be granted in part and denied in part. The motions for leave to file as amici curiae will be granted.

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I. Factual Background

Plaintiffs the City of Columbus, Ohio, the Mayor and City Council of Baltimore, Maryland, the City of Cincinnati, Ohio, the City of Chicago, Illinois, and the City of Philadelphia, Pennsylvania (collectively, the "City Plaintiffs") and Stephen Vondra and Bonnie Morgan (collectively, the "Individual Plaintiffs") filed suit against the President of the United States of America in his official capacity, the United States Department of Health and Human Services ("HHS"), the Secretary of HHS in his official capacity, the Centers for Medicare and Medicaid Services ("CMS"), and the Administrator of CMS in her official capacity, (collectively, "Defendants"). Plaintiffs seek review of agency action under the Administrative Procedure Act (the "APA"), 5 U.S.C. § 706.

A. The Affordable Care Act

In 2010, Congress enacted the Patient Protection and Affordable Care Act (the "ACA," "the Act," or "the Affordable Care Act") "to increase the number of Americans covered by health insurance and decrease the cost of health care." Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012). The ACA "adopts a series of interlocking reforms designed to expand coverage in the individual health insurance market." King v. Burwell, 576 U.S. 473, 478-79 (2015). "Individual health insurance is insurance that individuals purchase themselves, in contrast to, for example,

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joining employer-sponsored group health plans." City of Columbus v. Trump, 453 F. Supp. 3d 770, 778 (D.Md. 2020) (citing ECF No. 44, ¶ 32). Individual market health plans are referred to as qualified health plans ("QHPs").

"Prior to the enactment of the ACA, individual health insurance markets were dysfunctional." (Id.). The ACA "aims to achieve systemic improvements in the individual health insurance market by means of certain key reforms[.]" (Id.).

First, the ACA prohibits insurers from rejecting applicants with preexisting conditions (the "guaranteed issue" requirement) and from charging individuals with serious medical conditions or a history of illness higher premiums (the "community rating" requirement"). See Sebelius, 567 U.S. at 548.

Second, recognizing that the failure of healthy individuals to purchase insurance would lead to an economic "death spiral," King, 576 U.S. at 480, the Act "require[ed] that individuals maintain health insurance coverage or make a payment to the IRS." Id. at 493.

Third, the Act requires all QHPs to cover essential health benefits2 and limits cost-sharing (in the form of deductibles and

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co-pays) by enrollees for essential health benefits. It also "prohibits plans from imposing annual or lifetime limits" on essential health benefits coverage. (ECF No. 108-1, at 15) (citing 42 U.S.C. §§ 300gg-6(b), 18022(a)(2), (c).

Fourth, the Act "seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line [("FPL")]." King, 576 U.S. at 482. Such credits are known as advance premium tax credits ("APTCs"). Rather than an enrollee paying the entire insurance premium up front and then later claiming a credit toward that amount on the taxpayer's tax return, HHS may make an advance payment of the premium tax credit amount directly to the enrollee's insurance provider. In this way, APTCs act as a subsidy for low-income individuals who could not afford to purchase insurance outright. The amount of the APTC owed ultimately depends on the individual's income at the end of the year. Thus, individuals must file a federal tax return each year to "reconcile" or pay back any excess APTC received in the previous tax year.

The Act also requires the creation of an Exchange in each State. Each Exchange serves as "a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange but provides that the Federal Government will establish 'such Exchange' if the State

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does not." Id. at 473 (citing 42 U.S.C. §§ 18031, 18041). Some states have chosen to create Exchanges themselves ("state-based Exchanges") while others have created Exchanges that operate on the federal platform ("state-based Exchanges on the federal platform"). Some states declined to establish an Exchange at all so the Exchanges in those states are operated by CMS ("federal Exchanges"). Each Exchange must also "provide[] for the establishment of a Small Business Health Options Program [("SHOP Exchange")] . . . that is designed to assist . . . small employers . . . in facilitating the enrollment of their employees in qualified health plans offered in the small group market in the State." 42 U.S.C. § 18031(b)(1)(B).

Individuals generally enroll in qualified health plans for a given benefit year during a specified annual open enrollment period occurring in November and December of the preceding year. See id. § 18031(c)(6). To assist individuals in enrolling, the ACA requires that Exchanges award grants to healthcare "Navigators" that conduct public education activities to raise awareness of the availability of QHPs, provide consumers with information to help understand their choices, facilitate consumers' enrollment, and ensure access to consumer protections. See id. § 18031(i)(3).

Each year, HHS promulgates rules pursuant to its rulemaking authority under the ACA and the Public Health Service Act ("PHS Act"). Such rules are the mechanisms by which HHS makes ongoing

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adjustments to the regulations and processes surrounding ACA insurance markets.

B. The 2019 Rule

On April 17, 2018, the U.S. Department of Health and Human Services promulgated its annual Notice of Benefit and Payment Parameters for 2019, 83 Fed. Reg. 16,930 (April 17, 2018) ("the 2019 Rule"), which governs many aspects of ACA insurance markets beginning in the 2019 plan year. Plaintiffs argue that nine particular provisions of the 2019 Rule violate the Administrative Procedure Act. Each will be discussed separately.

II. Procedural Background

Plaintiffs filed an amended complaint on January 25, 2019 asserting two claims: violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706, and violation of the Take Care Clause, U.S. Const. art. II, § 3. (ECF No. 44). Defendants moved to dismiss both claims. (ECF No. 52). Defendants' motion to dismiss was granted as to the Take Care Clause challenge but denied as to the APA challenge. (ECF No. 103). The parties then agreed to proceed by cross-motions for summary judgment based on the administrative record of the 2019 Rule.3 (ECF No. 104). Plaintiffs filed their motion for summary judgment on August 13, 2020. (ECF No. 108). Defendants simultaneously filed their opposition and

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their cross-motion for summary judgment on September 28, 2020. (ECF No. 118).

Over the course of this litigation, the court has granted five motions for leave to file memoranda as amici curiae in support of Plaintiffs.4 In addition, nineteen states and the District of Columbia jointly filed an amicus brief in support of Plaintiffs pursuant to United States District Court for the District of Maryland Standing Order 2018-07.5 (ECF No. 72). Currently pending are two additional motions for leave to file memoranda as amici curiae. The first is filed collectively by: The Shriver Center on Poverty Law, Planned Parenthood Federation of America, the National Health Law Program, the Asian & Pacific Islander American Health Forum, the Association of Asian Pacific Community Health

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Organizations, and Families USA. (ECF No. 122). The second is filed by Young Invincibles. (ECF No. 123).

Although this is an administrative review action where Defendants must defend their decisions by offering the actual reasoning behind those decisions, the court will grant both pending motions for leave as each party has demonstrated a special interest in the outcome of the suit and provided helpful information to the court. See Bryant v. Better Bus. Bureau of Greater Md., Inc., 923 F.Supp. 720, 728 (D.Md. 1996).

III. Judicial Review of Agency Action

Although the parties filed motions for summary judgment, they recognize that Fed.R.Civ.P. 56 does not govern this action. Plaintiffs seek APA review of agency action and "[r]eviews of agency action in the district courts must be processed as appeals." Olenhouse v. Commodity Credit Corp., 42 F3d 1560, 1580 (10th Cir. 1994) (emphasis in original). "[M]otions for summary judgment are conceptually incompatible with the very nature and purpose of an appeal." Id.; see also Jarita Mesa Livestock Grazing Ass'n v. U.S. Forest Serv., 305 F.R.D. 256, 281 (D.N.M. 2015). "Accordingly, district courts reviewing agency action do not determine whether a 'genuine dispute as to any material fact' exists, Fed.R.Civ.P. 56, and instead 'engage in a substantive review of the record to determine if the agency considered relevant factors or articulated a reasoned basis for its conclusions[.]'"

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New Mexico Health Connections v. United States, 312 F.Supp.3d 1164, 1171 (D.N.M. 2018) (quoting Olenhouse, 42 F.3d at 1580). "The entire case is...

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