New Mex. Health Connections, Non-Profit Corp. v. U.S. Dep't of Health & Human Servs., CIV 16-0878 JB-JHR

• Decision Date: 19 October 2018
• Docket Number: No. CIV 16-0878 JB-JHR,CIV 16-0878 JB-JHR
• Citation: 340 F.Supp.3d 1112
• Parties: NEW MEXICO HEALTH CONNECTIONS, a New Mexico Non-Profit Corporation, Plaintiff, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; Centers for Medicare and Medicaid Services; Sylvia Mathews Burwell, Secretary of the United States Department of Health and Human Services, in her official capacity and Andrew M. Slavitt, Acting Administrator for the Centers for Medicare and Medicaid Services, in his official capacity, Defendants.
• Court: U.S. District Court — District of New Mexico

340 F.Supp.3d 1112

NEW MEXICO HEALTH CONNECTIONS, a New Mexico Non-Profit Corporation, Plaintiff,

v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES; Centers for Medicare and Medicaid Services; Sylvia Mathews Burwell, Secretary of the United States Department of Health and Human Services, in her official capacity and Andrew M. Slavitt, Acting Administrator for the Centers for Medicare and Medicaid Services, in his official capacity, Defendants.

No. CIV 16-0878 JB-JHR

United States District Court, D. New Mexico.

Filed October 19, 2018

Nancy Ruth Long, Long Komer & Associates, P.A., Santa Fe, New Mexico, and Barak A. Bassman, Leah Greenberg Katz, Marc D. Machlin, Sara Richman, Pepper Hamilton, LLP, Philadelphia, Pennsylvania, Attorneys for the Plaintiff

Chad A. Readler, Acting Assistant Attorney General, Joel McElvain, Assistant Branch Director, Arjun Garg, Serena Orloff, James R. Powers, Trial Attorneys, United States Department of Justice, Civil Division, Federal Programs Branch, Washington, D.C., Attorneys for the Defendants

MEMORANDUM OPINION AND ORDER

James O. Browning, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on: (i) the Defendants' Motion to Alter or Amend Judgment Pursuant to Federal Rule of Civil Procedure 59(e), filed March 28, 2018 (Doc. 57)("Motion"); (ii) the Plaintiff's Motion to Strike the Declaration of Jeffrey Wu or in the Alternative Grant Plaintiff Leave to Take Discovery, filed April 23, 2018 (Doc. 61)("Motion to Strike"), and Plaintiff's Memorandum of Law in Support of its Motion to Strike the Declaration of Jeffrey Wu or in the Alternative, Grant Plaintiff Leave to Take Discovery, filed April 23, 2018 (Doc. 62)("Strike Mem."); and (iii) the Motion of America's Health Insurance Plans and Blue Cross Blue Shield Association for Leave to File Statement on New Developments in Support of Rule 59(e) Motion as Amici Curiae, filed July 19, 2018 (Doc. 80)("Motion for Leave"). The Court held a hearing on the Motion and the Motion to Strike on June 21, 2018. The primary issues are: (i) whether the Court should reconsider its determination in the Memorandum Opinion and Order, 312 F.Supp.3d 1164 (2018) (Doc. 55)(" MOO"), that Defendant United States Department of Health and Human Services' ("HHS")¹ risk adjustment formula is arbitrary and capricious, because, HHS contends, it had no obligation to explain its decision to operate the program in a budget-neutral manner, it never stated budget neutrality was compelled by statute, and its decision not to use any budget authority to operate the program was unreviewable; (ii) whether the Court should reconsider its decision to vacate HHS' risk adjustment formula and instead remand without vacatur because, as HHS contends, the Court has equitable discretion to remand without vacatur or to limit the vacatur to New Mexico; (iii) whether the Court may consider the remarks in the Declaration of Jeffrey Wu (executed March 3, 2018), filed March 28, 2018 (Doc. 57-1)("Wu Decl."), because, as Plaintiff New Mexico Health Connections ("Health Connections") contends, it is improper evidence under rule 59 of the Federal Rules of Civil Procedure and the Administrative Procedure Act; and (iv) whether the Court should grant America's Health Insurance Plans ("AHIP") and Blue Cross Blue Shield Association ("Blue Cross") leave to file a joint statement as amici curiae, because, as Health Connections contends, the request is untimely, irrelevant, and moot.

While the Court carefully reconsiders its MOO, the Court stands by both its determination that HHS' risk adjustment formula is arbitrary and capricious, and that vacating the formula and remanding to HHS for further consideration is the appropriate remedy. The Court also concludes that it is appropriate to consider recent developments and the consequences of its decision in this case and, thus, may consider the remarks in the Wu Decl. and the statement that AHIP and Blue Cross wish to file as amici curiae. Accordingly, the Court denies the Motion and the Motion to Strike, and grants the Motion for Leave.

FACTUAL BACKGROUND

Congress enacted The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified at 42 U.S.C. §§ 300gg-1 to - 19, 18001 - 18022 )("ACA") "to expand coverage in the individual health insurance market." King v. Burwell, ––– U.S. ––––, 135 S.Ct. 2480, 2485, 192 L.Ed.2d 483 (2015) (Roberts, C.J.). To affect that goal, the ACA: (i) bars insurers from considering pre-existing medical conditions when deciding whether to sell insurance and when determining prices; (ii) requires individuals to make an individual shared responsibility payment to the Internal Revenue Service unless they maintain health-insurance coverage; and (iii) gives certain individuals tax credits to make health insurance more affordable for them. See King v. Burwell, 135 S.Ct. at 2485 ; 26 U.S.C. § 5000A (describing the individual shared responsibility payment requirement).

The ACA expands healthcare access, but it also increases health-insurance-industry risk. That the ACA requires insurers to cover all individuals, healthy or otherwise, means an insurer could end up providing coverage to a particularly sickly group of customers. See 42 U.S.C. § 300gg-1(a) ("[E]ach health insurance issuer that offers health insurance coverage in the individual or group market in a State must accept every employer and individual in the State that applies for such coverage."). The ACA prohibits those same insurers from responding to the increased cost of providing healthcare coverage to sicker individuals by charging those individuals higher prices. See 42 U.S.C. § 300gg(a) (prohibiting price discrimination based on factors other than geography, age, tobacco use, and whether coverage extends to an individual or to a family). Taken together, those two ACA requirements "threaten to impose massive new costs on insurers, who are required to accept unhealthy individuals but prohibited from charging them rates necessary to pay for their coverage." Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519, 548, 132 S.Ct. 2566, 183 L.Ed.2d 450 (2012).

The ACA contemplates three kinds of programs -- two temporary and one permanent -- to ameliorate that problem. See 42 U.S.C. §§ 18061 -63. First, under transitional reinsurance programs, which operated only from 2014 to 2016, insurers make payments to "an applicable reinsurance entity," typically HHS, and reinsurance entities use those funds to provide "reinsurance payments" to insurers "that cover high risk individuals in the individual market." 42 U.S.C. § 18061(b)(1). According to HHS, "The reinsurance program will reduce the uncertainty of insurance risk in the individual market by partially offsetting issuers' risk associated with high-cost enrollees." HHS Notice of Benefit and Payment Parameters for 2014, 78 Fed. Reg. 15,410, 15,411 (dated March 11, 2013) (A.R.000228)("2014 Final Rule"). "Each State is eligible to establish a reinsurance program," but "HHS will establish a reinsurance program for each State that does not elect to establish its own reinsurance program." 45 C.F.R. § 153.210(a), (c).

Second, under the temporary risk corridor program, which also operated only from 2014 to 2016, sufficiently profitable insurers must make payments to HHS while HHS must make payments to sufficiently unprofitable insurers. See 42 U.S.C. § 18062. Those payments, HHS predicts, "will protect against uncertainty in rate setting for qualified health plans by limiting the extent of issuers' financial losses and gains." 2014 Final Rule, 78 Fed. Reg. at 15,411 (A.R.000228).

Third, under permanent risk adjustment programs, "each State shall assess a charge" on insurers "if the actuarial risk of [their] enrollees ... for a year is less than the average actuarial risk of all enrollees in all plans or coverage in such State for such year." 42 U.S.C. § 18063(a)(1). Likewise, "each State shall provide a payment" to insurers "if the actuarial risk of [their] enrollees ... is greater than the average actuarial risk of all enrollees in all plans and coverage in such State for such year." 42 U.S.C. § 18063(a)(2). Risk adjustment programs are "intended to provide increased payments to health insurance issuers that attract higher-risk populations, such as those with chronic conditions, and reduce the incentives for issuers to avoid higher-risk enrollees." 2014 Final Rule, 78 Fed. Reg. at 15,411 (A.R.000228).

While the ACA refers to "States" assessing charges and providing payments in risk adjustment programs, 42 U.S.C. § 18063(a), it also tells HHS to "issue regulations setting standards for meeting" the ACA's requirements "with respect to ... the establishment of the reinsurance and risk adjustment programs." 42 U.S.C. § 18041(a). When a state establishes a risk adjustment program, it must use "the Federal standards" or "a State law or regulation that the [HHS] Secretary determines implements the standards within the State." 42 U.S.C. § 18041(b). If a state does not establish a risk adjustment program or if a state establishes a risk adjustment program but does not take "the actions the [HHS] Secretary determines necessary to implement" federal risk adjustment standards, then "the [HHS] Secretary shall take such actions as are necessary to implement" those standards. 42 U.S.C. § 18041(c).

HHS regulations implementing that open-ended mandate in 42 U.S.C. § 18041(c) declare that the agency will operate risk adjustment programs for "[a]ny State that does not elect to operate an Exchange, or that HHS has not approved to operate an Exchange," 45 C.F.R. § 153.310(a)(2) ; for "[a]ny State that elects to operate an Exchange but does not elect to administer risk adjustment," 45 C.F.R. § 153.310(a)(3) ; and for, "[b]eginning in 2015, any State that is approved to operate an Exchange and elects to operate risk adjustment but has not been approved by HHS to operate risk adjustment," 45 C.F.R. § 153.310(a)(4)....