Two of the figures in this case are...
1. Linda Lacewell
2. Neal Katyal
Three federal appeals court judges
who were nominated by Democratic presidents have sided with UnitedHealth
Group in a dispute with New York state insurance regulators.
A panel at the 2nd U.S. Circuit Court of
Appeals has agreed with UnitedHealth that the superintendent of the New York
State Department of Financial Services needed, and lacked, clear, formal
approval from the U.S. Department of Health and Human Services (HHS) to add a
state-level adjustment mechanism to the Affordable Care Act (ACA)
risk-adjustment program.
In a ruling posted today, the 2nd Circuit
panel reversed a district court dismissal and sent the case back to the
district court for further consideration.
Resources
The case is UnitedHealthcare of New York v.
Lacewell (Case Number 18-2583).
The three judges who served on the 2nd Circuit
panel are Rosemary Pooler; who was appointed by former President Bill Clinton;
Susan Carney, who was appointed by former President Barack Obama; and Raymond
Lohier, who was also appointed by Obama.
Neal Katyal, a partner at Hogan Lovells, and
Steven Rosenbaum, a partner at Covington & Burling, have been representing
the UnitedHealth units involved in the case, UnitedHealthcare and Oxford.
Steven Wu has been representing New York’s
financial services superintendent, Linda Lacewell.
The ACA
Risk-Adjustment Program
Starting in January 2014, the ACA has
eliminated many of the defenses health insurers once used to limit medical
claim costs, such as the ability to reject people who are about to get liver
transplants, or the ability to charge more for people who have hemophilia.
Insurers have had to price new individual and
small-group coverage without considering any personal health factors other than
location, age and tobacco use.
The ACA risk-adjustment program was supposed
to compensate health insurers that ended up with more than their fair share of
the enrollees with serious health problems.
Program managers worked with the plans to
assign every enrollee a risk score. It then came up with a formula for pulling
cash from plans with relatively low enrollee risk levels and pushing the cash
to plans with relatively high levels of enrollee risk.
Critics have questioned whether the risk
scores adequately reflect the relative risk of enrollees; whether the scoring
system is fair to new or rapidly growing plans, which may have little information
about enrollees’ health; and whether program managers’ risk-adjustment
formula is fair to plans with low average premiums.
New York State’s
Risk-Adjustment Fix
Maria Vullo, who was New York state’s
financial services superintendent in 2016, imposed an emergency regulation in
an effort to keep ACA risk-adjustment surprises from pushing some carriers out
of the state’s individual health insurance market.
Vullo gave herself the authority to collect up
to 30% of ACA risk-adjustment program payments and redistribute the cash to
other health insurers.
UnitedHealth’s UnitedHealthcare and Oxford
units asserted that the state’s emergency regulation was preempted by the
federal regulations, and that the New York department’s approach amounted
to an unconstitutional taking of the companies’ property.
The Ruling
Lohier writes, in an opinion for the panel,
that one question was whether the ACA risk-adjustment regulations preempted the
state-level risk-adjustment adjustment effort, and another question was whether
HHS had approved New York state’s effort.
“There is some genuine ambiguity in HHS’s
various prior pronouncements and the regulations themselves about whether
states may act as New York did without first getting federal approval,” Lohier
writes. “HHS could have been clearer in its statements.”
But HHS said, in a friend of the court brief,
that it believes New York state should have gotten a more formal form of
approval for its adjustment effort, Lohier writes.
“Here, HHS has provided an interpretation of
its regulations in an amicus brief that represents the agency’s authoritative
or official position and that clearly implicates HHS’s substantive expertise in
administering the very risk-adjustment scheme at issue,” Lohier writes.
The HHS brief is not simply an after-the-fact
rationalization of what it thinks now, Lohier writes.
Mid-level New York officials did talk to
mid-level HHS officials and get their blessing, but New York regulators needed
to do more than that to make a major change to how the ACA risk-adjustment
program works,” Lohier writes.
The Implications
Commercial health insurers once appeared to
see having a strong risk-adjustment program as critical to the stability of the
ACA framework.
In recent years, the only ACA market
stabilization program that has worked more or less as expected has been the ACA
individual major medical insurance premium tax credit.
In spite of the problems with the other
stabilization programs, big, publicly traded health insurers have reported
strong profits in recent years, and most commercial health insurers seem to be
on track to maintain or expand their commercial health insurance market
operations in 2021.
In the next few years, because of insurers’
growing emphasis on the importance of the premium tax credit subsidy program,
court rulings on the ACA risk-adjustment may have only a minimal effect on the
commercial health insurance market.
In the long run, however, lingering problems
with market risk allocation could lead to new problems with some insurers
assuming too medical enrollee risk, failing, and dropping out of the
market.
Both Republicans and Democrats in Congress
have supported the idea of strengthening the ACA risk-adjustment program,
if the current ACA framework stays in place.
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