Gerhart v. U.S. Dep't of Health & Human Servs.

Citation242 F.Supp.3d 806
Decision Date16 March 2017
Docket NumberNo. 4:16–cv–00151–RGE–CFB,4:16–cv–00151–RGE–CFB
Parties Nick GERHART, in his Capacity as Liquidator of CoOportunity Health, Inc.; and Dan Watkins, in his Capacity as Special Deputy Liquidator of CoOportunity Health, Inc., Plaintiffs, v. UNITED STATES DEPARTMENT OF HEALTH & HUMAN SERVICES; Centers for Medicare & Medicaid Services; Thomas E. Price, in his Capacity as Secretary of the United States Department of Health and Human Services; and the United States of America, Defendants.
CourtU.S. District Court — Southern District of Iowa

Kirsten A. Byrd, Douglas J. Schmidt, Derek T. Teeter, Kansas City, MO, Mark Davis Hill, Husch Blackwell LLP, Omaha, NE, for Plaintiffs.

Charles E. Canter, Terrance Anthony Mebane, Serena M. Orloff, US Dept of Justice, Washington, DC, William C. Purdy, United States Attorney's Office, Des Moines, IA, Curtis J. Weidler, US Department of Justice, Washington, DC, for Defendants.

ORDER RE: DEFENDANTS' MOTION TO DISMISS

Rebecca Goodgame Ebinger, United States District Judge

I. INTRODUCTION

The Department of Health and Human Services seeks dismissal of the present suit. The Department asserts this Court does not have jurisdiction because the requested damages are purely monetary in nature and could be adequately addressed in the Court of Federal Claims. Defs.' Mot. Dismiss, ECF No. 61. The co-operative liquidators resist this motion, asserting this Court has jurisdiction because money damages are insufficient to address their claims. Pls.' Resist. Defs.' Mot. Dismiss, ECF No. 69.

The matter came before the Court for hearing on December 15, 2016. Hr'g Defs.' Mot. Dismiss Mins., ECF No. 78. Attorneys Charles Canter and Serena Orloff appeared on behalf of Defendants United States Department of Health and Human Services; Centers for Medicare and Medicaid Services; Thomas E. Price, in his capacity as Secretary of the United States Department of Health and Human Services;1 and the United States.2 Id. Attorneys Mark Hill, Douglas Schmidt, and Derek Teeter appeared on behalf of Plaintiff Nick Gerhart, in his capacity as Liquidator of CoOportunity Health, Inc.,3 and Dan Watkins, in his capacity as Special Deputy Liquidator of CoOportunity Health, Inc.4 Id.

For the reasons stated below, the Court grants HHS' Motion to Dismiss because the Court lacks jurisdiction over the Liquidators' claims.

II. SUMMARY OF RELEVANT FACTS

The Court set forth an overview of the relevant facts in its August 12, 2016 order denying the Liquidators' motion for a preliminary injunction. ECF No. 55 at 2–8.

Since then, the parties provided additional briefing regarding the federal programs at issue and supplemented the record as to the present relationship between HHS and the Liquidators. The Court provides a focused recitation of the programs and facts at issue.

In part, the Liquidators take issue with HHS' treatment of the startup and solvency loans CoOportunity received and the Patient Protection and Affordable Care Act's (ACA) "3Rs" program payments. The 3Rs program consists of three programs: reinsurance, risk adjustment, and risk corridors. See generally 42 U.S.C. §§ 18061 –63. Issuers organized under the Consumer Operated and Orientation Plan (CO–OP) program—such as CoOportunity—are eligible to participate in all three programs. Establishment of Consumer Operated and Oriented Plan (CO–OP) Program, 76 Fed. Reg. 77,392 –01, 77,406 (Dec. 13, 2011). The 3Rs program was enacted to stabilize the market while issuers adjusted their actuarial estimates and to encourage participation in the nascent insurance marketplace. The ACA's 3Rs program is similar to the three mitigation programs enacted when Medicare Part D launched. See 42 U.S.C. § 1395w–115 (describing a permanent risk corridors program, a temporary risk adjustment program, and a permanent reinsurance program); 42 C.F.R. § 423.336 (same).

The reinsurance and risk corridors programs are temporary (transitional) programs for the 2014, 2015, and 2016 benefit years. See 42 U.S.C. §§ 18061(b)(1), 18062. The reinsurance program uses mandatory annual contributions to pay qualified issuers for a percentage of their high-risk (catastrophic) claims costs for individual enrollees. 45 C.F.R. §§ 153.220, 153.230, 153.235. The risk corridors program is "based on the ratio of the allowable costs of the plan to the plan's aggregate premiums." 42 U.S.C. § 18062(a). Under the risk corridors program, issuers pay HHS a penalty if their claims costs are less than their premiums (minus administrative costs) by a given percentage. Id. § 18062(b)(2). Conversely, HHS makes payments to issuers having greater claims costs than premiums (minus administrative costs) over a given percentage. Id. § 18062(b)(1). The third program, the risk adjustment program, is permanent. See id. § 18063. The risk adjustment program mandates payments from insurance pools with lower-than-average actuarial risk to insurance pools with higher-than-average actuarial risk. Prior to the end of the 2014 benefit year, HHS announced it would operate the 3Rs program as budget neutral. See 45 C.F.R. § 153.230(d) ("If HHS determines that all reinsurance payments requested ... for a benefit year will not be equal to the amount of all reinsurance contributions collected, ... HHS will determine a uniform pro rata adjustment."); 160 Cong. Rec. H9838 (daily ed. Dec. 11, 2014) (noting that budget neutral means "the federal government will never pay out more than it collects from issuers over the three year period risk corridors are in effect"); HHS Notice of Benefit and Payment Parameters for 2014, 78 Fed. Reg. 15,410 –01, 15,441 (Mar. 11, 2013) ("The Affordable Care Act risk adjustment program is designed to be a budget-neutral revenue redistribution among issuers."). But see, e.g. , 42 U.S.C. § 18062(b)(1) (providing HHS "shall pay" specified amounts to eligible issuers of qualified health plans); 45 C.F.R. § 153.510(b) (providing HHS "will pay" specified amounts to eligible issuers of qualified health plans).

Central to this suit is HHS' calculation of the risk corridors payments. For the 2014 benefit year, issuers received a prorated rate (12.6%) for their risk corridors payments. Dep't of Health & Human Servs., Ctrs. for Medicare & Medicaid Servs., Risk Corridors Payment and Charge Amounts for Benefit Year 2014 (Nov. 19, 2015), https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RC-Issuer-level-Report.pdf [hereinafter 2014 Risk Corridors Calculation]. Monies collected for the 2015 benefit year have been and will be used to pay the shortfalls from the 2014 benefit year. Defs.' Ex. 2, Reply Supp. Defs.' Mot. Dismiss 1–2, ECF No. 72–3 (letter dated September 9, 2016, estimating no funds will be available for 2015 benefit year risk corridors payments and stating funds collected will be used for 2014 benefit year risk corridors payments); see also Dep't of Health & Human Servs., Ctrs. for Medicare & Medicaid Servs., Risk Corridors Payment and Charge Amounts for the 2015 Benefit Year (Nov. 18, 2016), https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-RC-Issuer-level-Report-11-18-16-FINAL-v2.pdf [hereinafter 2015 Risk Corridors Calculation]. The final risk corridors calculation will be based on the 2016 benefit year. The risk corridors payments for the 2016 benefit year are expected to be remitted starting in August 2017. HHS has indicated "in the event of a shortfall for the 2016 benefit year, HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations." ECF No. 72–3 at 1. HHS states it intends to work with Congress to make "required" risk corridors payments. Id.

CoOportunity was an insurer incorporated in Iowa and licensed by the states of Iowa and Nebraska to issue health insurance plans.5 First Am. Compl. (FAC) ¶¶ 23–24, ECF No. 51. During its operation, CoOportunity received $14.7 million in startup funds and $130.6 million in solvency funds. Id. ¶¶ 20, 30. In December 2014, CoOportunity was placed under a supervision order by the Iowa Insurance Commissioner. Id. ¶ 34. On February 13, 2015, HHS terminated the startup loan agreement with CoOportunity. Id. ¶¶ 82–83. Effective February 28, 2015, the Iowa District Court for Polk County issued a final order of liquidation for CoOportunity. Id. ¶ 41. In the benefit year 2014, HHS owed CoOportunity a reimbursement under the risk adjustment and reinsurance programs. HHS netted these payments, along with other amounts owed under the ACA, and remitted a payment to the Liquidators. See id. ¶¶ 116–17; 45 C.F.R. § 156.1215. CoOportunity was also owed a risk corridors payment for 2014. See 2014 Risk Corridors Calculation at tbls.16 & 28. CoOportunity's 2014 risk corridors payment was not released because HHS placed an administrative hold on CoOportunity's accounts, stating the insurer was insolvent and indebted to the United States. FAC ¶ 118. In March 2016, HHS collected CoOportunity's $14.7 million startup loan through offset. Id. ¶¶ 111–14; Pls.' Ex. 7, Pls.' Mot. Prelim. Inj., ECF No. 33–2 (letter dated March 22, 2016). As recently as August 2016, HHS notified the Liquidators it collected payments from the monies placed on administrative hold. Decl. Watkins, Pls.' Ex. 2, Pls.' Resist. Defs.' Mot. Dismiss 2–3, ECF No. 69–3; Pls.' Exs. 2–A to 2–H, Pls.' Resist. Defs.' Mot. Dismiss, ECF No. 69–3 (letters and emails dated August 2016 concerning CoOportunity's debts to HHS).

The Liquidators' amended complaint makes two general requests: Count I seeks declaratory relief, and Count II requests injunctive relief. Count I requests declaratory judgments that: 1) Iowa law governs all claims against CoOportunity; 2) HHS' netting of payments is arbitrary and capricious; 3) HHS' claim to super-priority is arbitrary and capricious; 4) HHS' administrative hold is arbitrary and capricious; and 5) HHS' netting is arbitrary and capricious. FAC ¶¶ 143–51. In Count II the Liquidators...

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