N.C. Ins. Guar. Ass'n v. Becerra

• Decision Date: 21 September 2021
• Docket Number: 5:20-CV-522-FL
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION, Plaintiff, v. XAVIER BECERRA, in his official capacity as Secretary of the United States Department of Health and Human Services; UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; and CENTER FOR MEDICARE AND MEDICAID SERVICES, Defendants.[1]

NORTH CAROLINA INSURANCE GUARANTY ASSOCIATION, Plaintiff, v. XAVIER BECERRA, in his official capacity as Secretary of the United States Department of Health and Human Services; UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; and CENTER FOR MEDICARE AND MEDICAID SERVICES, Defendants.^[1]

No. 5:20-CV-522-FL

United States District Court, E.D. North Carolina, Western Division

September 21, 2021

ORDER

LOUISE W. FLANAGAN, UNITED STATES DISTRICT JUDGE.

This case wherein plaintiff seeks judicial declaration of its responsibilities under the federal Medicare statutory scheme and challenges defendants' administrative determination regarding the same is before the court on defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6) (DE 9). The motion has been briefed fully, and the issues raised are ripe for ruling. For the following reasons, defendants' motion is granted.

STATEMENT OF THE CASE

Plaintiff commenced this action on October 5, 2020, seeking a declaration, pursuant to 28 U.S.C. § 2201, that it is not a “primary plan” or an “applicable plan” under the Medicare Secondary Payer (“MSP”) statute, 42 U.S.C. § 1395y(b). Plaintiff also alleges that defendants have violated the Administrative Procedures Act, 5 U.S.C. § 706, and the standards enumerated in 42 U.S.C. § 405(g), as applicable to the Secretary of the United States Department of Health and Human Services (“the Secretary”) under 42 U.S.C. § 1395ii, through their determination regarding plaintiff's MSP responsibilities. Plaintiff seeks this judicial declaration along with injunctive relief against defendants preventing them from enforcing certain MSP-reporting requirements against plaintiff.

STATEMENT OF THE FACTS

The facts alleged in the complaint may be summarized as follows. Plaintiff as a statutorily created association, N.C. Gen Stat. § 58-48-25, consists of insurers admitted to conduct insurance business in North Carolina and to write insurance pursuant to the Insurance Guaranty Association Act (“the Act”), N.C. Gen. Stat. § 58-48-1. Plaintiff was created in order “to establish a fund from which insureds and claimants could obtain limited statutory benefits in the event a member insurer became” insolvent. (Compl. ¶ 11). Plaintiff is obligated statutorily to “pay[] certain defined ‘covered claim[s]' arising out on an insurance policy of an insolvent insurer.” (Id.). It funds payment, adjustment, and defense of covered claims by assessing its members, who recoup this cost through a tax offset.

However according to the complaint, plaintiff does not issue insurance policies, collect premiums, make profits, or assume contractual obligations to the insureds of insolvent insurers. It “does not and cannot ‘stand in the shoes' of the insolvent insurer for all purposes.” (Id. ¶ 18). Plaintiff is only obligated in regard to a “covered claim[], ” which is “not co-extensive with the insolvent insurer's obligations under its policies, ” (id.), and which is statutorily defined as

an unpaid claim . . . which is in excess of fifty dollars . and arises out of and is within the coverage . . . of an insurance policy to which [the Act] applies . . . if such insurer becomes an insolvent insurer . . . and (i) the claimant or insured is a resident of this State at the time of the insured event; or (ii) the property from which the claim arises is permanently located in this State.

(Id. ¶ 17 (quoting N.C. Gen. Stat. § 58-48-20(4))). A covered claim does not include

any amount awarded (i) as punitive or exemplary damages; (ii) sought as a return of premium under a retrospective rating plan; or (iii) due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation or contribution recoveries or otherwise.

(Id. (quoting N.C. Gen. Stat. § 58-48-20(4))).

Historically defendants have treated plaintiff as a “primary plan” under the MSP statute because certain Medicare beneficiaries are, and were, also claimants under policies issued by insolvent insurers, making those claimants eligible for payments of covered claims. (Compl. ¶¶ 26-27). This required plaintiff, under the MSP statute, to pay defendants for certain conditional payments defendants made with regard to those claimants.

On June 1, 2020, plaintiff sought a written opinion from defendant Center for Medicare and Medicaid Services (“Center”) to the effect that it was not a primary plan and did not fall under the MSP statute's reporting requirements, relying on the United States Court of Appeals for the Ninth Circuit's decision in California Insurance Guarantee Association v. Azar, 940 F.3d 1061 (9th Cir. 2019) (hereinafter CIGA). Defendants Center and United States Department of Health and Human Services (“Department”) replied by August 12, 2020, letter denying the request for a written opinion, asserting, in part, that the Ninth Circuit's opinion was inapplicable to plaintiff. In contrast, defendants Department and Center had confirmed by written opinion letter, dated May 21, 2020, to the California Insurance Guarantee Association that the organization was no longer required to comply with the MSP statute's reporting requirements.

COURT'S DISCUSSION

A. Motion to Dismiss

1. Standard of Review

A motion to dismiss under Rule 12(b)(1) challenges the court's subject matter jurisdiction. Such motion may either 1) assert the complaint fails to state facts upon which subject matter jurisdiction may be based, or 2) attack the existence of subject matter jurisdiction in fact, apart from the complaint. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). When a defendant challenges the factual predicate of subject matter jurisdiction, a court “is to regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). The nonmoving party in such case “must set forth specific facts beyond the pleadings to show that a genuine issue of material fact exists.” Id. On the other hand, where a defendant raises a “facial challenged to standing that do[es] not dispute the jurisdictional facts alleged in the complaint, ” the court accepts “the facts of the complaint as true as [the court] would in context of a Rule 12(b)(6) challenge.” Kenny v. Wilson, 885 F.3d 280, 287 (4th Cir. 2018).

To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. In evaluating whether a claim is stated, “[the] court accepts all well-pled facts as true and construes these facts in the light most favorable to the plaintiff, ” but does not consider “legal conclusions, elements of a cause of action, . . . bare assertions devoid of further factual enhancement[, ] . . . unwarranted inferences, unreasonable conclusions, or arguments.” Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (quotations omitted).

2. Analysis

a. The MSP Statute

As a preliminary matter, the court summarizes the relevant MSP statutory scheme. Section 1395y provides that the Medicare Trust Fund is a “secondary payer, ” that is Medicare is not primarily responsible for payment, ^[2] for certain otherwise covered items and services where “payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” 42 U.S.C. 1395y(b)(2)(A).

However, § 1395y allows the Secretary to make conditional payments “if a primary plan . . . has not made or cannot reasonably be expected to make payment with respect to . . . [a covered] item or service promptly.” Id. § 1395y(b)(2)(B)(i); Netro, 891 F.3d at 524 (“Where a private party responsible for medical costs does not or cannot promptly meet its obligations, Medicare may pay up front, so long as the responsible party eventually reimburses the government.”). This payment is “conditioned on reimbursement to the appropriate Trust Fund, ” 42 U.S.C. § 1395y(b)(2)(B)(i), which is required “if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.” Id. § 1395y(b)(2)(B)(ii). The statute defines a “primary plan” as “a group health plan or large group health plan, . . . a workmen's compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) or no fault insurance.” Id. § 1395y(b)(2)(A)(ii); 42 C.F.R. § 411.21.

Section 1395y also requires that “applicable” liability insurance, no fault insurance, and workers' compensation “plans, ” meaning, in effect, “primary plans, ” submit periodic reports regarding determinations of whether claimants are entitled to receive benefits under Medicare. See 42 U.S.C. § 1395y(b)(8)(A)-(B), (F). Failure to comply with this reporting requirement may result in “a civil penalty of up to $1, 000 for each day of noncompliance with respect to each claimant, ” which is “in addition to any Medicare secondary payer claim” with respect to that claimant, if required. See id. § 1395y(b)(8)(E).^[3]

As to administrative and judicial review, the Medicare Act provides that the “Secretary shall . . . make initial determinations with respect to benefits . . . including an initial determination by the...