A New Hampshire judge overseeing what he said was possibly the first case brought by a Medicare recipient to challenge the Patient Protection and Affordable Care Act (PPACA), dismissed the lawsuit on March 30, saying the plaintiff lacked standing to bring the suit (Harold Peterson v. Barack Obama, et al., No. 10-170, D. N.H.). Harold Peterson sued President Barack Obama, the United States of America, the U.S. Congress, the U.S. Senate and the U.S. House of Representatives in the U.S. District Court for the District of New Hampshire, seeking declaratory judgment and injunctive relief. Peterson, a Medicare recipient, contended that the PPACA violated the Fifth, 10th and 14th Amendments and Article 1, Section 8, and Article 6 of the U.S. Constitution because the Constitution did not empower Congress to take over the health care business.
Although the PPACA and particularly the mandate raised interesting constitutional issues, Peterson did not have standing to litigate them, Judge Joseph N. Laplante said. Medicare coverage automatically satisfies the PPACA's individual mandate requirement, so Peterson wouldnot incur any financial burdens and wouldnot need to do anything to satisfy the mandate, Judge Laplante said.
The court rejected Peterson's unique arguement that standing was a 'Fiction'. "The Constitution limits the jurisdiction of federal courts to 'Cases' and 'Controversies.' Lujan v. Defenders of Wildlife, 504 U.S. 555, 559, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992) (quoting U.S. Const. art. III, § 2, cl. 1). To satisfy the Constitution's 'case or controversy' requirement, a party seeking relief in federal court must show that he has suffered an actual injury, which is fairly traceable to the defendant's conduct and redressable by a favorable judicial decision. Coggeshall v. Mass. Bd. of Registration of Psychologists, 604 F.3d 658, 666 (1st Cir. 2010), citing Lujan, 504 U.S. at 560-61). That is commonly known as the doctrine of 'standing.' Peterson argues that 'standing is a fiction created by the courts' and that he need not satisfy any such requirement. But the Supreme Court has called the standing requirement 'essential and unchanging,' Lujan, 504 U.S. at 560, and this court must follow Supreme Court precedent."
Lexis.com subscribers can access the enhanced version of Peterson v. United States, 2011 U.S. Dist. LEXIS 34775 (D.N.H. 2011) decision with summary, headnotes, and Shepard's.
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By R. Dean Conlin, Partner, Locke, Lord, Bissell & Liddell, L.P.
Small employers have struggled to have the same funding and plan design flexibility and uniform plan coverage for group health insurance as larger employers. A fully insured, multiple employer welfare arrangement ("MEWA") might suffice, but it relies on federal preemption of state insurance regulation. The Department of Labor's advisory opinions on this issue are analyzed and the current status of MEWAs is explored in this commentary by R. Dean Conlin.
A key provision of the Affordable Care Act is the requirement that individuals either purchase minimum essential health insurance or pay a penalty ("individual mandate"). This watershed requirement has been challenged as a violation of the federal Commerce Clause. Whether or not the ACA's individual mandate survives this challenge, large employers will likely continue to provide health insurance to their employees through self-funded plans that rely on the preemption of state insurance regulation by the Employee Retirement Income Security Act of 1974 ("ERISA"). This commentary first describes ERISA's preemption of state insurance regulation that would otherwise prevent large employers from being authorized to provide their employees with uniform plans of tailored health coverage.
The commentary next explains that small employers have long struggled to provide similar self-funded health plans. For the past decade, Congress has considered, but not passed, association health plan legislation that would permit small employers to group together through trade and professional associations, either to purchase health insurance from commercial insurers or to provide their own coverage through self-funding. At the present time, however, without any further Congressional action, a form of association or multiple employer health plan could be provided nationwide pursuant to ERISA.
This commentary carefully examines the fully insured, multiple employer welfare arrangement authorized by ERISA. While exploring the intersection of state and federal insurance regulation, the article dissects confusing opinions issued by the Department of Labor that effectively prevent small employers from utilizing a fully insured MEWA.
R. Dean Conlin, a partner with Locke, Lord, Bissell & Liddell, L.P., has more than 35 years' experience in a wide range of insurance regulatory, transactional and corporate matters for domestic and alien insurers and reinsurers. He has organized and represents alternative risk vehicles including risk retention groups, captives, intergovernmental cooperatives, and multi-employer pools. In addition, Mr. Conlin has focused on managed health care since the early stages of preferred provider networks. His clients include regulated insurers and alternative risk vehicles that provide managed health care coverage. His work for these clients, including preferred provider organizations, has ranged from product development to regulatory counseling.
Lexis.com subscribers can access the complete commentary, Health Insurance at the Intersection of State and Federal Regulation: Confused Regulation of ERISA Fully Insured MEWAs. Additional fees may be incurred. (approx. 39 pages)
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We are pleased to inform you that our firm has obtained a very favorable and significant decision for no-fault insurers on an important issue of first impression. Specifically, on January 7, 2013, in the case of Allstate Ins. Co. v. Elzanaty, the United States District Court for the Eastern District of New York (Honorable Arthur D. Spatt) rejected the defendants' attempt to limit the ability of insurers to seek affirmative recovery for fraud and the verification of compliance with licensing requirements from health care providers licensed pursuant to Article 28 of the New York Public Health Law ("Article 28 Facilities"). The decision is significant because it is the first time a court has extended the reach of State Farm v. Mallela to health care providers other than professional medical corporations.
As you may recall, in Mallela, the New York Court of Appeals ruled that, as of April 5, 2002, fraudulently-incorporated providers, or providers that were violating core licensing requirements, were not entitled to reimbursement under New York's no-fault system. Since that time, many providers have sought, in the context of litigating actions against insurers or defending againstaffirmative recovery actions brought by insurers, to limit the scope and effect of Mallela. In Elzanaty, Allstate's Complaint alleged claims of fraud and violations under the Racketeer Influenced and Corrupt Organizations ("RICO") Act, asserting that the defendants, certain Article 28 Facilities, were improperly licensed and formed as conduits for the defendants' fraudulent no-fault billing. In particular, the Complaint asserted that the defendants were not entitled to no-fault benefits because they had actively participated in fraudulent practices and were established and/or operated in violation of New York's Public Health Law and the rules and regulations promulgated thereunder.
The defendants sought to dismiss the Complaint on various grounds, essentially arguing that certain anti-fraud regulations and Mallela were not applicable to Article 28 Facilities because their formation and structure had already been approved by the State through the Article 28 establishment approval process and subsequent State overview of such facilities. Specifically, they argued that (i) the Court should abstain from exercising jurisdiction under the "Burford abstention" doctrine because a determination of the issue of whether the defendants were properly licensed would reverse the decision of the Department of Health to license those facilities, subvert the Department of Health's jurisdiction over licensing matters and undermine the comprehensive state regulatory process and (ii) the defendants were properly licensed through the Department of Health's establishment process and regulatory overview, and thus eligible to receive no-fault reimbursement.
Burford Abstention: The Court concluded that Burford abstention was not warranted because Allstate was not challenging the "Article 28 regulatory framework" or challenging the "State's authority with regard to licensing determinations." Rather, Allstate's challenge was to the defendants' fraudulent conduct and their ability to receive no-fault reimbursement. The Court explained that a determination with respect to the providers' fraudulent conduct would not disrupt the State's purpose in establishing a coherent public policy with respect to licensing and would not disrupt New York's regulatory scheme.
Licensure: The Court concluded that Allstate properly pleaded its fraud and RICO claims. The Court framed the issue as whether Allstate could "claim that a medical facility did not comply with N.Y. DOH's Article 28 licensing requirements under the auspices of fraud, when the N.Y. DOH has previously confirmed its compliance." The Court answered this question in the affirmative, relying largely on the Mallela decision. The Court explained that Mallela stands for the proposition that an insurer may bring an action for fraud or unjust enrichment, based on fraudulent incorporation, to recover no-fault payments made to fraudulently incorporated providers. Although the defendants in Mallela were licensed as medical corporations and not Article 28 Facilities, the Court found this difference to be "irrelevant." Relying on the operative regulation, 11 N.Y.C.R.R. § 65-3.16(a)(12), the Court concluded that any provider of health services -- a medical corporation, Article 28 Facilities, or otherwise -- was not eligible for reimbursement under the Insurance Law if it failed to meet any New York State or local licensing requirements. In emphasizing this point, the Court expounded that any attempt to limit Mallela only to fraudulent activity of medical corporations, as opposed to other types of health service providers, would "be in direct conflict with the New York Court of Appeals advice that insurers may 'look behind the face of licensing documents to identify willful and material failure to abide by state and local law.'"
* * * *
This decision constitutes the first judicial ruling addressing the scope of available relief under Mallela against health service providers other than professional medical corporations. The decision is critical to no-fault insurers because entities that have attempted to shield their fraudulent activity through professional corporations will have no incentive to shift such fraudulent conduct to an Article 28 structure. This decision helps provide insurers with another tool to fight the proliferation of no-fault fraud.
If you have any questions concerning the decision, or require assistance in no-fault or other health care/insurance issues generally, please do not hesitate to contact an attorney from the Health Care and Not-for-Profit Group at Cadwalader.
William J. Natbony +1 212 504 6351 bill.natbony@cwt.com
Jared L. Facher +1 212 504 6494 jared.facher@cwt.com
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By Stephanie A. Kennan, Brian Looser, Vincent A. Dongarra and R. Brent Rawlings
Intro:
On June 28, 2012, the Supreme Court of the United States issued its opinion in the case of National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al. [enhanced version available to lexis.com subscribers], ruling on the constitutional challenges to the federal health reform law, the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 (the ACA). The Court upheld the controversial "individual mandate" as constitutional under Congress's tax power and permitted the ACA's Medicaid expansion to continue, but only on a voluntary basis by the states.
The Anti-Injunction Act Does Not Bar a Decision
Question before the Court: Does the Supreme Court have the authority to consider the constitutionality of the individual mandate given the penalties for non-compliance do not take effect and would not have been paid until 2015? The Anti-Injunction Act (AIA) provides that the taxpayer must pay the tax before being able to challenge it. So is the penalty a tax?
Decision: The Court held that the AIA did not bar a decision because-for purposes of the AIA only-the penalty for failing to obtain health insurance under the individual mandate is not a tax. Chief Justice Roberts, writing the only portion of the opinion in which all the justices joined, disagreed stating that the AIA and ACA "are creatures of Congress's own creation. How they relate to each other is up to Congress, and the best evidence of Congress's intent is the statutory text." Opinion of Roberts, C.J. at 13. In other words, when analyzing the individual mandate under the rules of the congressionally-created AIA, it is more important that Congress referred to it as a "penalty" instead of a "tax," even though it effectively functions as a tax.
Policy Perspective of Decision: The Court's ruling on this question does not cause a change in policy or implementation.
The Individual Mandate is Constitutional as a Tax
Question before the Court: Can the federal government require Americans to obtain health insurance by January 1, 2014 or pay a penalty? The Court reviewed Congress's power to institute the individual mandate under the Commerce Clause, Necessary and Proper Clause, and the Taxing and Spending Clause.
Decision: The Court upheld the individual mandate, not under the Commerce Clause or the Necessary and Proper Clause, but as a valid exercise of Congress's enumerated power to collect taxes under the Taxing and Spending Clause.
The Court held that the individual mandate could not be sustained as a valid exercise of Congress's authority under the Commerce Clause because a necessary precursor of that authority is some existing activity that affects interstate commerce. The Court reasoned that the individual mandate does not regulate an existing activity; rather, it compels individuals to become involved in an activity and that "[C]onstruing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority." Opinion of Roberts, C.J. at 13.
The Court also dismissed arguments that the individual mandate could be sustained as a valid exercise of the Necessary and Proper Clause. The Court reasoned that, while the individual mandate may be "necessary" to the guaranteed-issue and community-rating provisions, it is not "proper" because the necessity is based upon the guaranteed-issue and community rating provisions themselves.
Click here to read more of McGuireWoods on the Supreme Court's Federal Health Care Reform Law Decision.
Register TodayEarn Free CME Credits by reading the latest medical news in your specialty.Sign UpBy Mary Agnes Carey, Julie Appleby, and Jenny Gold, Kaiser Health News
Testing of computer systems and training of consumer assistance guides are behind schedule, but the Obama administration has met other deadlines in its efforts to open new marketplaces where millions of consumers might shop for insurance starting this fall, according to a Government Accountability Office report released Wednesday.
The federal government expects to operate these marketplaces, also called exchanges, in 34 states that opted not to run their own. Seven of those states are working as partners with the federal government. The other 16 states are setting up marketplaces on their own with federal funding.
The report said that the Centers for Medicare & Medicaid Services, or CMS, "has many key activities remaining to be completed," including those that deal with eligibility and enrollment in the exchanges, development and implementation of a "data hub" that will connect the exchanges with other federal and state agencies to determine applicants' eligibility, and review and certification of the health insurance plans offered to consumers.
"Much remains to be accomplished within a relatively short amount of time" for the exchanges to work properly on Oct. 1, the GAO said. The "still unknown and evolving scope" of activities that CMS must provide in states that have chosen not to participate is problematic, investigators said, as are the "large number of activities remaining to be performed -- some close to the start of enrollment."
While the deadlines missed so far may not affect the law's implementation, "additional missed deadlines closer to the start of enrollment could do so," GAO found.
In a response included in the report, the Department of Health and Human Services said the agency has made progress in establishing exchanges and that the exchanges would be up and running in all states by Oct. 1.
Opponents of the health law said the report proves the measure won't work as intended and that Americans will suffer. "News of delays and missed deadlines are now just as prevalent as reports of Obamacare's broken promises and the looming rate shock in store for millions of Americans," House Energy and Commerce Committee Chairman Fred Upton, R-Mich., said in a statement.
Upton, along with Rep. Darrell Issa, R-Calif., who chairs the House Oversight and Investigations Committee, and Sen. Orrin Hatch, R-Utah, who is the top Republican on the Senate Finance Committee, requested the study.
The GAO reports that CMS is behind schedule on consumer assistance activities to the states with federal exchanges. For example, CMS was 2 months late in announcing funds to "navigators" -- community organizations and nonprofits that will hire and train people to help consumers sign up for health insurance. CMS had planned to issue the funding announcement in February, allowing enough time for two rounds of awards in July and September. Instead, the agency did not announce the grants until April, leaving time for only one round of awards, which is expected on Aug. 15.
The navigator grants will total up to $54 million for the federally run marketplaces -- "a drop in the bucket," according to Stan Dorn, a senior fellow at the nonpartisan Urban Institute. Some states received as little as $600,000. That's far less than states running their own marketplaces. California, for example, is spending $50 million to fund in-person help for consumers.
All navigators are expected to complete a web-based training and certification course. CMS had expected to begin training by July, but the course may not be ready until August.
Nonetheless, CMS officials indicated that the navigators would be available by Oct. 1, when enrollment for 2014 plans begins, according to the GAO report.
Insurers that want to sell health coverage on the exchanges had to apply by May 3, and CMS, along with help from a contractor, expects to evaluate and certify those plans by July 31, according to the GAO report. Information about those plans is expected to be available on the exchange website by Sept. 15.
The GAO analysis also took a close look at the status of the complicated technology that will be needed for the exchanges. GAO said that some limited testing has begun of the information technology systems needed to determine whether consumers seeking coverage in the marketplaces are eligible for federal subsidies and to enroll them in health coverage. But it noted that much more needs to be done before October.
"While CMS has met project schedules, several critical tasks, such as final testing with federal and state partners, remain to be completed," the report said.
Critics said the report shows that CMS and other agencies are falling behind, but others said the conclusion was that much progress has been made.
"It is the GAO's job to outline problems that could occur," said Dan Mendelson of the private consulting firm Avalere Health, but the report's conclusions are "getting spun through this lens of political discontent, so as a result, everyone is freaking out about it."
States, he said, are rightly concerned that delays in the income and eligibility information technology might not operate efficiently at first.
"That would force them to do manual enrollment -- get on the phone with people -- and that's expensive," said Mendelson, who oversaw health programs at the Office of Management and Budget during the Clinton administration.
Mark McClellan, who was in charge of the rollout of the Medicare drug benefit in 2006 for the George W. Bush administration, said testing of some IT systems for that project began not long after the law was passed in 2003. But, he said, work continued right up to and even after the program began. That rollout was initially marked by glitches that included enrollment problems, and some seniors who qualified for subsidized coverage were mistakenly told they didn't have it when they showed up at pharmacy counters.
"You are limited in what you can test ahead of time," said McClellan. Once real data starts flowing through a system, unexpected problems crop up because real data is always messier than test data sets, he said.
While the Obama administration still has time to get the testing done, McClellan said, he cautioned that "it is tight."
The GAO report also states that CMS has spent $394 million from fiscal year 2010 through March 31 of this year on various activities to get the federal funded exchanges established and listed the major contracts. CMS officials said the totals did not include agency salaries or other administrative costs.
The report on the federal insurance marketplaces was one of two on health law implementation released by GAO Wednesday. The other report looked at federal and state efforts to establish the Small Business Health Options Programs (SHOPS) in which small employers can buy coverage for their workers. In that report, GAO found that "CMS and states have made progress in establishing SHOPS, although many activities remain to be completed and some were behind schedule."
This article, which first appeared June 19, 2013, was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.
By R. Dean Conlin, Partner, Locke, Lord, Bissell & Liddell, L.P.
