Health Ins. Ass'n of America, Inc. v. Shalala, Nos. 92-5196

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtSTEPHEN F. WILLIAMS; KAREN LeCRAFT HENDERSON; MIKVA
Citation23 F.3d 412,306 U.S. App. D.C. 104
Docket Number92-5197,Nos. 92-5196
Decision Date13 May 1994
Parties, 62 USLW 2711, 44 Soc.Sec.Rep.Ser. 391, Medicare & Medicaid Guide P 42,264 HEALTH INSURANCE ASSOCIATION OF AMERICA, INC., Appellant, v. Donna E. SHALALA, Secretary, Health and Human Services, et al., Appellees. BLUE CROSS AND BLUE SHIELD ASSOCIATION, Appellant, v. Donna E. SHALALA, Secretary, Health and Human Services, et al., Appellees.

Page 412

23 F.3d 412
306 U.S.App.D.C. 104, 62 USLW 2711,
44 Soc.Sec.Rep.Ser. 391,
Medicare & Medicaid Guide P 42,264
HEALTH INSURANCE ASSOCIATION OF AMERICA, INC., Appellant,
v.
Donna E. SHALALA, Secretary, Health and Human Services, et
al., Appellees.
BLUE CROSS AND BLUE SHIELD ASSOCIATION, Appellant,
v.
Donna E. SHALALA, Secretary, Health and Human Services, et
al., Appellees.
Nos. 92-5196, 92-5197.
United States Court of Appeals,
District of Columbia Circuit.
Argued Oct. 29, 1993.
Decided May 13, 1994.

Page 413

Appeal from the United States District Court for the District of Columbia (90cv01356).

Walter A. Smith, Jr., argued the cause, for appellant Health Ins. Ass'n of America, Inc. in No. 92-5196. With him on the joint briefs were William P. Flanagan, Robert J. Cynkar and Janice H. Ziegler. R. Kenly Webster entered an appearance.

Robert J. Cynkar argued the cause, for appellant Blue Cross and Blue Shield Ass'n, Inc. in No. 92-5197. With him on the joint briefs were Janice H. Ziegler, Walter A. Smith, Jr. and William P. Flanagan.

John F. Daly, Atty., U.S. Dept. of Justice, argued the cause, for appellees. With him on the brief were J. Ramsey Johnson, U.S. Atty. at the time the brief was filed, Anthony J. Steinmeyer and Michael Raab, Attys., U.S. Dept. of Justice, and Robert L. Roth, Atty., U.S. Dept. of Health and Human Services.

On the brief for amicus curiae Self-Insurance Institute of America, Inc. was George J. Pantos.

On the brief for amici curiae Group Health Ass'n of America and American Managed Care and Review Ass'n was William G. Kopit.

Before: MIKVA, Chief Judge, WILLIAMS and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.

Concurring opinion filed by Circuit Judge HENDERSON.

Opinion concurring in part and dissenting in part by Chief Judge MIKVA.

STEPHEN F. WILLIAMS, Circuit Judge:

The appellants in these two consolidated cases raise facial challenges to five Medicare regulations promulgated by the Health Care Financing Administration ("HCFA") on behalf of the Secretary of Health and Human Services. They also contend that even if the regulations are valid, the Secretary is attempting to give improper retroactive effect to four of them. In a comprehensive opinion, the district court upheld all five regulations and rejected the appellants' retroactivity arguments. Blue Cross & Blue Shield Ass'n v. Sullivan, 794 F.Supp. 1166 (D.D.C.1992). We affirm in part. We conclude that two of the five regulations go beyond the Secretary's statutory authority and hence are invalid.

Page 414

We also disagree with the district court's retroactivity analysis.

I. The Statutory Framework

Medicare is a system of federally funded health insurance for the aged, the disabled, and people suffering from end-stage renal disease. Many people covered by Medicare are also eligible for benefits under group health plans provided by employers. For its first fifteen years, Medicare paid for services without regard to whether they were also covered by an employer group health plan. As a cost-cutting measure, however, Congress eventually enacted a series of amendments designed to make Medicare a "secondary" payer with respect to such plans. These amendments have been codified at 42 U.S.C. Sec. 1395y(b), which is referred to as the "Medicare as Secondary Payer" ("MSP") statute.

The structure of the MSP statute is relatively simple. Paragraph (1) imposes certain requirements on employer group health plans. 1 A nondiscrimination provision, for instance, insists that plans other than those provided by small employers must provide the same benefits under the same conditions to aged employees (and to aged spouses of employees) as to other employees and spouses. 42 U.S.C. Sec. 1395y(b)(1)(A)(i)(II) (Supp. IV 1992). In addition, when someone age 65 or older is covered by an employer group health plan by reason of his current employment (or the current employment of his spouse), the plan "may not take into account" that his age entitles him to Medicare benefits. Id. Sec. 1395y(b)(1)(A)(i)(I). The effect of this is to nullify any plan provision that would "carve out" expenses covered by Medicare and thus, in effect, make the plan's coverage secondary to Medicare's. 2 Somewhat similar provisions deal with people suffering from end-stage renal disease. See id. Sec. 1395y(b)(1)(C). With exceptions not relevant here, large group health plans also "may not take into account" that an employee or a member of his family is entitled to Medicare benefits by reason of disability. Id. Sec. 1395y(b)(1)(B).

Paragraph (2) then makes Medicare the "secondary" payer with respect to coverage required under paragraph (1), and spells out the means by which that purpose is to be realized. Subparagraph (A) prohibits Medicare from making any payment, other than a conditional one, for any item or service to the extent that "payment has been made [under a group plan], or can reasonably be expected to be made [under a group plan], with respect to the item or service as required under paragraph (1)". Id. Sec. 1395y(b)(2)(A)(i). Subparagraph (B) then explains what it means for a payment to be conditional; in a clause headed "Primary Plans", 3 it declares that any Medicare payment under the circumstances described in subparagraph (A) "shall be conditioned on reimbursement to the appropriate Trust Fund ... when notice or other information is received that payment for such item or service has been or could be made under such subparagraph." Id. Sec. 1395y(b)(2)(B)(i). In order to recover conditional payments, the next clause continues, "the United States may bring an action against any entity which is required or responsible under this subsection to pay with respect to such item or service (or any portion thereof) under a primary plan...." Id. Sec. 1395y(b)(2)(B)(ii). Indeed, when an employer group health plan

Page 415

"fails to provide for primary payment (or appropriate reimbursement) in accordance with ... paragraphs (1) and (2)(A)", a private party or the federal government can sue for double damages. Id. Sec. 1395y(b)(3)(A). In addition, the federal government is subrogated (to the extent of any payment for an item or service to which subparagraph (2)(A) applies) "to any right under this subsection of an individual or any other entity to payment with respect to such item or service under a primary plan." Id. Sec. 1395y(b)(2)(B)(iii).

II. The Challenged Regulations

Acting as the Secretary's delegate, HCFA has promulgated regulations to carry out the MSP statute. The appellants, the Health Insurance Association of America and the Blue Cross and Blue Shield Association, both challenge three regulations as going beyond the Secretary's statutory authority, and each challenges one that the other does not attack. All parties agree that we are to uphold each regulation unless it contradicts "the unambiguously expressed intent of Congress" or is not a "reasonable interpretation" of an ambiguous statutory provision. Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 842-43, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984).

A. 42 CFR Sec. 411.24(e)--third-party administrator liability.

Both appellants are associations of health-insurance companies whose members often enter into contracts with employers or employer group health plans. Under some of these contracts, the companies underwrite some or all of the health plan's benefits. Frequently, however, employers self-insure, and hire one of the appellants' member companies merely to perform administrative services such as adjudicating claims and writing benefit checks drawn on accounts stocked with the employer's money. "[A]lthough there are variations in these [administrative-services] contracts," explains amicus curiae the Self-Insurance Institute of America ("SIIA"), "administrators customarily do not pay the financial obligations of their plan customers from their own funds or commingle plan funds with their own funds." Brief of Amicus Curiae SIIA 12 (emphasis in original); cf. Joint Appendix ("J.A.") 290-98 (sample administrative-services contract).

Nonetheless, HCFA believes that these third-party administrators are "required or responsible under [the MSP statute] to pay ... under a primary plan" within the meaning of 42 U.S.C. Sec. 1395y(b)(2)(B)(ii), and hence that they are subject to suit by HCFA for recovery of conditional payments. Though HCFA's regulations did not explicitly take this position until 1989, 42 CFR Sec. 411.24(e) now asserts that "HCFA has a direct right of action to recover from any entity responsible for making primary payment. This includes an employer, an insurance carrier, plan, or program, and a third party administrator." (Emphasis added).

The appellants argue that this regulation contradicts the plain language of the MSP statute, or at any rate represents an impermissible resolution of ambiguities in that statute. They insist that when an insurance company contracts with an employer or an employer group health plan merely to administer the plan, without putting the company's own funds at risk by assuming ultimate financial liability for making payments under it, HCFA cannot seek recovery from the company for conditional payments, but instead can sue only the employer or the plan itself. Three district courts have agreed. See United States v. Travelers Ins. Co., 815 F.Supp. 521, 524 (D.Conn.1992); Provident Life & Accident Ins. Co. v. United States, 740 F.Supp. 492, 503-04, amended, 1990 U.S.Dist. LEXIS 12810 (E.D.Tenn.1990); United States v. Blue Cross & Blue Shield of Michigan, 726 F.Supp. 1517, 1521-22 (E.D.Mich.1989).

The essence of the appellants' argument is that HCFA is wrong to equate the statutory phrase "responsible ... to pay" with the phrase "responsible for making ... payment". According to Amicus SIIA, "Any common sense reading of the phrase 'responsible to pay' could only mean the party that bears...

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120 practice notes
  • In re Dow Corning Corp., No. 95-20512.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • June 22, 2000
    ...health insurance for the aged, the disabled, and people suffering from end-stage renal disease." Health Ins. Ass'n of America v. Shalala, 23 F.3d 412, 414 (D.C.Cir.1994); see also Social Security Amendments of 1965, Pub.L. No. 89-97, § 1862(b), 79 Stat. 286, 325 ("Social Security Amendments......
  • Cmty. Health Sys., Inc. v. Burwell, Civil Action No. 14–1432 (BAH)
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    • U.S. District Court — District of Columbia
    • July 7, 2015
    ...and merely " ‘supplies crisper and more detailed lines than the [regulation] being interpreted.’ " Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 423 (D.C.Cir.1994) (quoting Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C.Cir.1993) ). The policy has no effect on......
  • In re Silicone Gel Breast Implants Liab. Litig., No. CV-92-N-10000-S.
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    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • September 26, 2001
    ...¶¶ 41, 70. The RSP Defendants counter that they have no duty to investigate any claimant's Medicare history.14 In HIAA v. Shalala, 23 F.3d 412 (D.C.Cir.1994), the D.C. Circuit considered challenges by health insurers to various regulations HCFA promulgated to implement the MSP statute. The ......
  • In re Applications for Consent to Transfer of Control of Licenses, MB 07-57
    • United States
    • Federal Communications Commission Decisions
    • August 5, 2008
    ...Applicants' Comments to NPRM at 3-4, n.11 (quoting Wilderness Soc., 434 F.3d at 596). [519] Health Ins. Ass'n of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. Cir. 1994). See also Community Nutrition Inst., 818 F.2d at 947 n.8 (FDA action levels for contaminants were binding rules despit......
  • Request a trial to view additional results
116 cases
  • In re Dow Corning Corp., No. 95-20512.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • June 22, 2000
    ...health insurance for the aged, the disabled, and people suffering from end-stage renal disease." Health Ins. Ass'n of America v. Shalala, 23 F.3d 412, 414 (D.C.Cir.1994); see also Social Security Amendments of 1965, Pub.L. No. 89-97, § 1862(b), 79 Stat. 286, 325 ("Social Security Amendments......
  • Cmty. Health Sys., Inc. v. Burwell, Civil Action No. 14–1432 (BAH)
    • United States
    • U.S. District Court — District of Columbia
    • July 7, 2015
    ...and merely " ‘supplies crisper and more detailed lines than the [regulation] being interpreted.’ " Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 423 (D.C.Cir.1994) (quoting Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1112 (D.C.Cir.1993) ). The policy has no effect on......
  • In re Silicone Gel Breast Implants Liab. Litig., No. CV-92-N-10000-S.
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • September 26, 2001
    ...¶¶ 41, 70. The RSP Defendants counter that they have no duty to investigate any claimant's Medicare history.14 In HIAA v. Shalala, 23 F.3d 412 (D.C.Cir.1994), the D.C. Circuit considered challenges by health insurers to various regulations HCFA promulgated to implement the MSP statute. The ......
  • In re Applications for Consent to Transfer of Control of Licenses, MB 07-57
    • United States
    • Federal Communications Commission Decisions
    • August 5, 2008
    ...Applicants' Comments to NPRM at 3-4, n.11 (quoting Wilderness Soc., 434 F.3d at 596). [519] Health Ins. Ass'n of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. Cir. 1994). See also Community Nutrition Inst., 818 F.2d at 947 n.8 (FDA action levels for contaminants were binding rules despit......
  • Request a trial to view additional results
1 books & journal articles
  • Agency Control and Internally Binding Norms.
    • United States
    • Yale Law Journal Vol. 131 Nbr. 4, February 2022
    • February 1, 2022
    ...to transform 'a vague statutory duty or right into a sharply delineated duty or right.'" (quoting Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 423 (D.C. Cir. 1994))), and Am. Mining Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1111 (D.C. Cir. 1993) (observing that the bindi......

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