State v. United States

• Decision Date: 05 January 2016
• Docket Number: Case No. 2:15–cv–321
• Citation: 154 F.Supp.3d 621
• Parties: The State of Ohio, et al., Plaintiffs, v. United States of America, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

154 F.Supp.3d 621

The State of Ohio, et al., Plaintiffs,

v.United States of America, et al., Defendants.

Case No. 2:15–cv–321

United States District Court, S.D. Ohio, Eastern Division.

Signed January 5, 2016

Frederick D. Nelson, Eric Earl Murphy, Ryan L. Richardson, Ohio Attorney General's Office, Columbus, OH, David P. Fornshell, Dinsmore & Shohl, Cincinnati, OH, Stuart Kyle Duncan, Duncan PLLC, Washington, DC, for Plaintiffs.

Steven A. Myers, U.S. Department of Justice, Washington, DC, for Defendants.

OPINION & ORDER

ALGENON L. MARBLEY

, UNITED STATES DISTRICT JUDGE

In its most recent challenge to the Patient Protection and Affordable Care Act of 2010, commonly known as “Obamacare,” the State of Ohio takes aim at a lesser-known provision from the law—one designed to stabilize prices in the individual insurance market during the first three years of the Act's guaranteed-issue and community-rating reforms. See 42 U.S.C. § 18061

(known as the “Transitional Reinsurance Program”). Those guaranteed-issue and community-rating reforms, which provide some of the best-known and most essential features of the Affordable Care Act, prohibit insurers from denying coverage or charging higher premiums because of an individual's pre-existing medical conditions. See id. §§ 300gg, 300gg-1, 300gg-3; King v. Burwell , –––U.S. ––––, 135 S.Ct. 2480, 2485–86, 192 L.Ed.2d 483 (2015) (“The Patient Protection and Affordable Care Act adopts a series of interlocking reforms designed to expand coverage in the individual health insurance market. First, the Act bars insurers from taking a person's health into account when deciding whether to sell health insurance or how much to charge.”); Annie L. Mach & Bernadette Fernandez, Cong. Research Serv., R42069, Private Health Insurance Market Reforms in the Affordable Care Act

(ACA) 3-5 (2014).

Because the guaranteed-issue and community-rating reforms extended healthcare insurance to anyone, regardless of their health status, Congress worried that adverse selection (i.e. , the tendency for high-risk individuals to buy health insurance and low-risk individuals not to) might lead to proportionally fewer low-risk enrollees, which in turn could cause spikes in insurance premiums. See 42 U.S.C. § 18061(c)(1)

. As a result, Congress established the Transitional Reinsurance Program to offset (partially) the cost of insuring high-risk enrollees during benefit years 2014, 2015, and 2016. See

id. § 18061(b)(1). Under the Transitional Reinsurance Program, Congress sought to stabilize premiums in the reformed marketplace by collecting contributions from health insurance issuers and group health plans and then using those contributions to fund reinsurance payments to individual-market issuers that cover high-risk (and thus, high-cost) enrollees. Id. In other words, Congress enacted a three-year program designed to reduce premiums for individuals and ensure market stability for insurers while they first adjusted their actuarial estimates to some of the milestone reforms from the Affordable Care Act—i.e. , to avoid “death spirals” that would cripple the insurance market.

The State of Ohio and a handful of its instrumentalities and political subdivisions (collectively, “the State”) take umbrage with the Transitional Reinsurance Program, at least insofar as it applies to them. (See Pls.' Am. Compl., ECF # 13, PageID 59). The State claims that the health plans it provides to its employees are not required to make reinsurance contributions because the plans are not “group health plans” within the meaning of the Affordable Care Act. (Id. at ¶ 40). Alternatively, the State contends that requiring its health plans to make these contributions violates the Tenth Amendment and the Intergovernmental Tax Immunity Doctrine—two separate components of what the State collectively refers to as “structural” federalism. (Id. at ¶¶ 98-99).

Accordingly, the State argues that this Court should order the federal government to remit any payments the State has made under the Transitional Reinsurance Program; set aside any regulations purporting to apply the program to state or local governmental entities; and enjoin the federal government from collecting any further payments from the State under the program. (Id. at ¶ 100).

The State of Ohio, however, is no stranger to Affordable Care Act challenges. To the contrary, the State's Attorney General proudly trumpets that his first act in office was joining a twenty-five state lawsuit challenging the Act in its entirety. See Ohio Attorney General, http://www.ohioattorneygeneral.gov/About-AG/Mike-Dewine (last visited Nov. 6, 2015). The Supreme Court of the United States ultimately rebuffed the thrust of that lawsuit, upholding the individual healthcare mandate in the process. See Nat'l Fed. of Indep. Bus. v. Sebelius (NFIB) , ––– U.S. ––––, 132 S.Ct. 2566, 2594–2600, 183 L.Ed.2d 450 (2012)

. The Supreme Court did, however, strike down some of the Medicaid expansion provisions from the Affordable Care Act as unduly coercive under the Constitution's Spending Clause, thus handing Ohio a partial victory. Id. at 2601–07.

In 2014, Ohio redoubled its efforts against the Affordable Care Act by leading nineteen states in filing a friend-of-the-court brief in support of a challenge to the contraception-coverage mandate. See Brief of Amici Curiae States of Michigan, Ohio, & 18 Other States for Conestoga, Hobby Lobby, Mardel

, Burwell v. Hobby Lobby Stores, Inc. , ––– U.S. ––––, 134 S.Ct. 2751, 189 L.Ed.2d 675 (2014)

(Nos. 13–354, 13–356), 2014 WL 333885. There, the challengers notched a partial victory, as the Supreme Court held that the Religious Freedom Restoration Act of 1993 prohibits the federal government from demanding that closely held corporations provide health-insurance coverage for contraception when doing so violates the sincerely held religious beliefs of the companies' owners. Hobby Lobby , 134 S.Ct. at 2759.

The State sat out the third Affordable Care Act challenge to reach the Supreme Court, King v. Burwell , ––– U.S. ––––, 135 S.Ct. 2480, 192 L.Ed.2d 483 (2015)

. There, the Court rejected an assault on the law's provision of premium tax credits to low-and moderate-income Americans who happened to reside in states that chose not to establish independent insurance exchanges. Id. at 2496. In the process, the Court flatly noted that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”

Id.

But the respite did not last long. Ohio soon joined nineteen other states in urging the Supreme Court to reject an administrative accommodation from the Affordable Care Act for non-profit religious colleges, hospitals, and charities that raise faith-based objections to birth control. See Brief of the States of Texas, Ohio, et al. as Amici Curiae Supporting Petitioners, Little Sisters of the Poor Home for the Aged, Denver, Colo. v. Burwell , 136 S.Ct. 446 (2015) (No. 15–105), 2015 WL 5029191

. Although seven of eight federal appeals courts have ruled in the federal government's favor on this issue, Ohio pressed on, and the Supreme Court granted certiorari to resolve the apparent circuit split. See Adam Liptak, Supreme Court to Hear Another Case on Contraception and Religion , N.Y. Times, Nov. 7, 2015, at A11.

Now, the State takes aim at the Transitional Reinsurance Program. As with much of the State's previous challenge in NFIB

, however, this shot misses the mark. Put simply, Congress intended for all group health plans, including those operated by state or local governments, to pay into the Transitional Reinsurance Program. The text, structure, and purpose of the Affordable Care Act (and related statutes) confirm as much. Moreover, Congress and the Department of Health and Human Services did not violate the Constitution when they subjected health plans offered by state and local government employers to the same requirements as those offered by private-sector employers.

Because the State of Ohio's claims fail as a matter of law, the Court GRANTS the federal government's Motion to Dismiss this lawsuit and DENIES the State's Motion for Summary Judgment.

I. BACKGROUND

Congress enacted the Affordable Care Act (or “ACA” for short) to address longstanding concerns over the lack of affordable, universally available healthcare. The ACA contained several provisions that, by now, have become ingrained in the nation's conscience, through either headline-grabbing litigation or personal experience. These features include the guaranteed-issue and community-ratings provisions described above, 42 U.S.C. §§ 300gg

, 300gg–1, 300gg–3 ; the requirement that most individuals pay a tax penalty if they fail to maintain coverage, I.R.C. § 5000A ; federal tax credits that help low-and moderate-income Americans purchase health insurance, I.R.C. § 36B ; and a provision allowing younger Americans to stay on their parents' healthcare plans until they reach age twenty-six, 42 U.S.C. § 300-gg-14.

The ACA also included a lesser-known provision, the Transitional Reinsurance Program, to help ease the move to a healthcare system where insurance carriers could no longer discriminate against high-risk individuals in the individual market. See 42 U.S.C. § 18061

. This program targeted volatility and price increases in the individual market as insurers adjusted (perhaps imperfectly at first) to different risk pools. See Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014 (Final Rule), 78 Fed. Reg. 15,410, 15,411 (Mar. 11, 2013). In other words, the Transitional Reinsurance Program sought “to protect against [insurance] issuers' potential perceived need to raise premiums due to the implementation of the 2014 market reform rules, specifically [the] guaranteed availability [provisions]” for high-risk enrollees. Id. at 15,467.

To accomplish these goals, the ACA requires each state, or the Department of Health and Human Services (“HHS”) on the state's...