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American Council of Life Insurers v. District of Columbia Health Benefit Exchange Authority

United States District Court, D. Columbia.

November 13, 2014

AMERICAN COUNCIL OF LIFE INSURERS, Plaintiff,
v.
DISTRICT OF COLUMBIA HEALTH BENEFIT EXCHANGE AUTHORITY, et al., Defendants

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For AMERICAN COUNCIL OF LIFE INSURERS, Plaintiff: A. Pilar Mata, Todd A. Lard, Vanessa A. Scott, LEAD ATTORNEYS, PRO HAC VICE, SUTHERLAND, ASBILL & BRENNAN LLP, Washington, DC; Barbara A. Smith Grieco, LEAD ATTORNEY, BANCROFT PLLC, Washington, DC; Daniel H. Schlueter, LEAD ATTORNEY, James J. Briody, SUTHERLAND, ASBILL & BRENNAN, L.L.P., Washington, DC.

For DISTRICT OF COLUMBIA HEALTH BENEFIT EXCHANGE AUTHORITY, MILA KOFMAN, in her official capacity as Executive Director of the District of Columbia Health Benefit Exchange Authority, EXECUTIVE BOARD OF THE DISTRICT OF COLUMBIA HEALTH BENEFIT EXCHANGE AUTHORITY, DIANE C LEWIS, in her official capacity as Chairperson of the District of Columbia Health Benefit Exchange Authority, VINCENT C. GRAY, in his official capacity as Mayor of the District of Columbia, DISTRICT OF COLUMBIA, Defendants: William F. Causey, LEAD ATTORNEY, OFFICE OF THE ATTORNEY GENERAL FOR THE DISTRICT OF COLUMBIA, Washington, DC; Andrew J. Saindon, D.C. OFFICE OF ATTORNEY GENERAL, Washington, DC.

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MEMORANDUM OPINION

BERYL A. HOWELL, United States District Judge.

This case raises a constitutional challenge to the funding mechanism enacted by the District of Columbia to continue the operations of the District of Columbia Health Benefit Exchange (the " D.C. Exchange" ) beginning on January 1, 2015. The D.C. Exchange was established under the auspices of the Patient Protection and Affordable Care Act (" ACA" ) to, inter alia, " [e]nable individuals and small employers to find affordable and easier-to-understand health insurance; " " [f]acilitate the purchase and sale of qualified health plans; " " [r]educe the number of uninsured; " and " [a]ssist individuals and groups to access programs, premium assistance tax credits, and cost-sharing reductions." Health Benefit Exchange Authority

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Establishment Act (" Establishment Act" ), D.C. Code § 31-3171.02. Indeed, the D.C. Exchange currently facilitates access to health care for approximately 50,000 residents of this jurisdiction. See Compl. ¶ 44, ECF No. 1. To ensure sufficient funding for the operations of the D.C. Exchange when, after December 31, 2014, all federal funding assistance ceases, the District passed two separate laws, the Health Benefit Exchange Authority Financial Sustainability Emergency Amendment Act of 2014 (the " Emergency Amendment Act" or " EAA" ), D.C. Act 20-356, and the Health Benefit Exchange Authority Financial Sustainability Temporary Amendment Act of 2014 (" TAA" ), D.C. Act 20-256, both of which authorize a Health Carrier Assessment (the " HC Assessment" ) on health insurance issuers doing significant business in the District, even if those issuers do not participate, or sell products eligible for sale, on the D.C. Exchange. Id. ¶ ¶ 45-47.

The plaintiff, American Council of Life Insurers (" ACLI" ), a trade association with approximately 300 member insurance companies operating throughout the United States, including the District of Columbia, filed this suit against the District of Columbia, the District of Columbia Health Benefit Exchange Authority (the " Authority" ) and various D.C. government officials in their official capacities[1] (collectively, " defendants" ), alleging that the Emergency Amendment Act violates multiple parts of the U.S. Constitution by authorizing imposition of the HC Assessment on the plaintiff's members when those members do not participate in, or receive any benefit from, the D.C. Exchange.[2] See Compl. at 22 (" Plaintiff

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prays for relief . . . [t]hat the Court declare that the Emergency Legislation, as construed by the Authority, is unconstitutional and is preempted by the ACA and is thus unenforceable" ). The plaintiff has moved, twice, to enjoin preliminarily the defendants from assessing and collecting the HC Assessment on premiums or other receipts from products that are not sold on the D.C. Exchange, see Compl.,¶ 88; Pl.'s Mot. for Prelim. Inj. (" Pl.'s P.I. Mot." ), ECF No. 11; Pl.'s Emergency Mot. for Prelim. Inj. (" Pl.'s P.I. Emerg. Mot." ), ECF No. 32, and the defendants have moved to dismiss the Complaint, under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted, Defs.' Mot. to Dismiss (" Defs.' Mot." ), ECF No. 25. As discussed more fully below, the defendants' motion is granted, the plaintiff's motions are denied, and the Complaint is dismissed.

II. BACKGROUND

The plaintiff claims that the HC Assessment on health insurance companies, which do not participate in, or sell products eligible for sale on, the D.C. Exchange, is preempted by the ACA and violates the Takings, Equal Protection and Due Process Clauses of the Fifth Amendment to the U.S. Constitution, as well as the non-delegation doctrine. Evaluation of these constitutional challenges is aided by review of pertinent provisions in the ACA and the Establishment Act, which is the law containing both the amendments--the Emergency Amendment and the TAA (the " Challenged Amendment" ) that is at issue. This statutory review is followed by a summary of the procedural history of this case.

A. The Relevant Statutes

1. The ACA

The ACA was enacted to " increase the number of Americans covered by health insurance and decrease the cost of health care." Nat'l Fed'n of Indep. Bus. v. Sebelius (NFIB), 132 S.Ct. 2566, 2580, 183 L.Ed.2d 450 (2012). To this end, the law requires that (1) States create their own Exchange in compliance with federal regulations or that (2) the Secretary create a federally-managed program (a " Federal Exchange" ) in the State. Compl. ¶ ¶ 1, 28. Only those health insurance plans that meet certain minimum requirements established by federal law are eligible for sale as Qualified Health Plans (" QHPs" ) on either State or Federal Exchanges. Generally, QHPs are comprehensive health plans that offer " essential health benefits" and meet other federal and state regulatory standards. Id.¶ 30 (citing 42 U.S.C. § 18031(a)-(d)). Plans that do not meet these requirements, called " Excepted Plans," ...


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