Unum Life Ins. Co. of Am. v. Dist. of Columbia, Nos. 17-TX-1296

Decision Date24 September 2020
Docket Number17-TX-1298,Nos. 17-TX-1296,17-TX-1297,17-TX-1300,17-TX-1299,& 17-TX-1301
Citation238 A.3d 222
Parties UNUM LIFE INSURANCE COMPANY OF AMERICA et al., Appellants, v. DISTRICT OF COLUMBIA, Appellee.
CourtD.C. Court of Appeals

Carl Erdmann, with whom Chris Bowers and Nathan Wacker were on the brief, for appellants.

Loren L. AliKhan, Solicitor General for the District of Columbia, with whom Karl A. Racine, Attorney General for the District of Columbia, Stacy L. Anderson and Mary L. Wilson, Assistant Attorneys General, were on the brief, for appellee.

Before Beckwith and Easterly, Associate Judges, and Kravitz, Associate Judge, Superior Court of the District of Columbia.*

Easterly, Associate Judge:

As part of the comprehensive health care reforms enacted in the Patient Protection and Affordable Care Act ("ACA"), Pub. L. No. 111-148, 124 Stat. 119 (2010) (codified as amended in scattered sections of 21, 25, 26, 29, 42 U.S.C.), Congress gave states a temporary financial incentive to take part in a new health insurance marketplace and establish health benefit exchanges where individuals and small businesses could more easily purchase plans meeting minimum federal requirements. After the ACA's enactment, the District of Columbia Council established a health benefit exchange and authorized the entity overseeing the exchange to fund it through a tax on all health insurance companies doing a certain amount of business in the District. See D.C. Code §§ 31-3171.01(6), 31-3171.03(f)(1) (2016 Repl.). A group of insurers who are subject to the tax but do not offer health plans on the District's exchange, among them Unum Life Insurance Company, have challenged the tax, arguing that (1) the Council's legislation is preempted by the ACA, which does not permit the District to levy such a tax on these insurers, and (2) by allowing an executive agency to administer the tax, the Council impermissibly delegated its legislative power and violated the nondelegation doctrine as applied to the District's government. The trial court rejected these arguments and granted the District summary judgment. We uphold the District's law against the insurers’ challenge and affirm.

I. Facts and Procedural History

Among other reforms, the ACA established American Health Benefit Exchanges ("Exchanges") to "facilitate[ ] the purchase" by individuals and small businesses of "qualified health plans" meeting certain statutory and regulatory qualifications as set out in the ACA. 42 U.S.C. § 18031(b) (2018) ; see id. §§ 18021, 18022(c) (defining qualified health plans). See generally King v. Burwell , 576 U.S. 473, 135 S. Ct. 2480, 2485–87, 192 L.Ed.2d 483 (2015) (summarizing ACA's reforms, including the role of the Exchanges). Congress gave states the option to establish and administer these Exchanges themselves, so long as the Exchange was a government agency or nonprofit and met other minimum requirements, such as maintaining an internet website through which individuals could enroll and a toll-free telephone hotline to field user requests. 42 U.S.C. §§ 18031(b), 18041(a)(b). Exchanges were permitted to offer only qualified health plans, see id. § 18031(d)(2)(A), and could not sell certain types of insurance, see id. §§ 300gg-63, 300gg-91(c), 18032(d)(2)(B). For those states that declined to create their own Exchange, Congress directed the United States Department of Health and Human Services ("HHS") to operate an Exchange in those states. Id. § 18041(c). States that established Exchanges would receive federal financial and technical support, but only for the first few years after the ACA's enactment. Id. § 18031(a). The ACA provided that by January 1, 2015, the "State shall ensure that such Exchange is self-sustaining ... , including allowing the Exchange to charge assessments or user fees to participating health insurance issuers, or to otherwise generate funding, to support its operations." Id. § 18031(d)(5).

The District of Columbia opted to establish the District of Columbia Health Benefit Exchange ("Exchange") and created the District of Columbia Health Benefit Exchange Authority ("Authority") to oversee and implement it. See Health Benefit Exchange Authority Establishment Act of 2011 ("Establishment Act"), D.C. Law 19-94, 59 D.C. Reg. 213 (codified as amended at D.C. Code §§ 31-3171.01 to - 3171.18 ). It also formed the District of Columbia Health Benefit Exchange Authority Fund ("Fund") and specified that any revenues placed into the Fund would be used to administer the Exchange. See D.C. Code § 31-3171.03(a). To fund the Exchange, the Council instructed the Authority to assess all health insurance carriers "doing business in the District" whose gross receipts met or surpassed $50,000 in one year, without regard to whether these insurers offer plans on the Exchange (referred to by the parties as the "health carrier tax"). See Health Benefit Exchange Authority Financial Sustainability Amendment Act of 2015, D.C. Law 21-13, 62 D.C. Reg. 5946 (codified at D.C. Code §§ 31-3171.01, 31-3171.03 ); D.C. Code § 31-3171.01(6). "These assessments shall be deposited in the Fund." D.C. Code § 31-3171.03(f)(1). The Council set the health carrier tax at "an amount based on a percentage of [the insurer's] direct gross receipts for the preceding calendar year." D.C. Code § 31-3171.03(f)(1). It directed the Authority to "adjust the assessment rate in each assessable year" and required that the "amount assessed shall not exceed reasonable projections regarding the amount necessary to support the operations of the Authority." D.C. Code § 31-3171.03(f)(2)(3).

The insurers pursuing this appeal all do business in the District, but they have never sold a plan on the Exchange, do not offer "qualified health plans" within the meaning of the ACA, and consequently may not offer their insurance plans for sale on the Exchange. See 42 U.S.C. § 18031(d)(2)(B)(i). Pursuant to the health carrier tax, they were assessed by the Authority approximately $400,000 in the aggregate in 2016. The insurers paid their assessments under protest, requested reconsideration by the Authority, and, when those requests were denied, filed a petition in the D.C. Superior Court in January 2017, challenging the legality of the health carrier tax.

The insurers filed suit in Superior Court because the federal courts foreclosed any challenge to D.C. Code § 31-3171.03(f) in that forum. In 2014, a trade association of insurance companies sued the Authority, the District, and others in the United States District Court for the District of Columbia and raised various challenges to the statute, including that it was preempted by the ACA and violated nondelegation principles. Am. Council of Life Insurers v. District of Columbia Health Benefit Exch. Auth. ("ACLI I "), 73 F. Supp. 3d 65, 73–74 (D.D.C. 2014), vacated , 815 F.3d 17 (D.C. Cir. 2016). The district court rejected all of the trade association's arguments and upheld the statute. See id. at 111. The United States Court of Appeals for the District of Columbia Circuit vacated this decision and remanded for the District Court to dismiss the suit on jurisdictional grounds. Am. Council of Life Insurers v. District of Columbia Health Benefit Exch. Auth. ("ACLI II "), 815 F.3d 17, 21 (D.C. Cir. 2016). The Circuit reasoned that D.C. Code § 31-3171.03(f) imposed a tax, and "exclusive jurisdiction over challenges to taxes imposed by the District" lay in the D.C. Superior Court. Id. at 19.

Relitigating many of the same issues that had been raised in federal district court, the insurers and the District filed cross-motions for summary judgment and proceeded on stipulated facts in Superior Court. Like the challenger in ACLI I , the insurers argued that the health carrier tax was preempted by the ACA and violated nondelegation principles. In ruling on the motions, the Superior Court adopted and incorporated the ACLI I opinion and granted the District's motion for summary judgment and denied the insurers’ motion. This appeal followed.

II. Standard of Review

A trial court properly grants summary judgment where the record "show[s] that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Bruno v. W. Union Fin. Servs., Inc. , 973 A.2d 713, 717 (D.C. 2009) (quoting Super. Ct. Civ. R. 56(c) ). "In reviewing a trial court order granting a summary judgment motion, we conduct an independent review of the record, and our standard of review is the same as the trial court's standard in considering summary judgment." Id . (internal quotation marks omitted). Our de novo review extends to embedded constitutional claims, Walton v. District of Columbia , 670 A.2d 1346, 1352–53 (D.C. 1996), and matters of statutory interpretation, Tippett v. Daly , 10 A.3d 1123, 1126 (D.C. 2010) (en banc).

III. Preemption

We are asked to determine whether a provision of the ACA, 42 U.S.C. § 18031(d)(5)(A), directing states to "ensure" that their Exchanges are "self-sustaining," preempts the District's health carrier tax under D.C. Code § 31-3171.03(f)(1). "[P]ursuant to the Supremacy Clause, federal law may preempt state law, either expressly or impliedly." Murray v. Motorola, Inc. , 982 A.2d 764, 771 (D.C. 2009). Express preemption exists where the federal statute "reveals an explicit congressional intent to preempt state law," usually through a specific statutory provision. Id . (internal quotation marks omitted). Implied preemption occurs in one of two ways: (1) field preemption, "when federal law so thoroughly occupies a legislative field as to make reasonable the inference that Congress left no room for the States to supplement it," id . at 772 (internal quotation marks omitted); or (2) conflict preemption, "where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and...

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