State of Texas v. United States of America
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State of Texas v. United States of America is a case that was decided by the United States District Court for the Northern District of Texas on August 4, 2016. The case involved the Health Insurance Providers Fee (HIPF). Under the Affordable Care Act, the insurers were charged a fee in order to fund advanced premium tax credits for individuals purchasing insurance on health insurance exchanges. The fee was collected in 2014, 2015, and 2016. The fee was not assessed in the year 2017 in a temporary moratorium under the Consolidated Appropriations Act of 2016.[1][2][3]
Case background
The Actuarial Standards Board is an independent, private organization created by the American Academy of Actuaries to set actuarial standards of practice.[4] In March 2015, the board established Actuarial Standard of Practice Number 49 and notified states that they were responsible for paying HIPF under the Affordable Care Act in order to continue using managed care organizations (MCOs) like Medicaid and the Children's Health Insurance Program (CHIP).[1][3]
On February 24, 2016, the states of Texas, Kansas, Indiana, Nebraska, Louisiana and Wisconsin sued the U.S. Department of Health and Human Services over the fee in the United States District Court for the Northern District of Texas. The states alleged that they had already paid millions of dollars to MCOs to cover the fee. The states claimed that the aggregate amount paid to cover the fee was $8 billion in 2014, and they anticipated the figure would be $14.3 billion by 2018. The states further alleged that because the U.S. government could withhold Medicaid funds if states did not pay the fee, the provision was coercive. The U.S. government contended that the states did not have the legal standing necessary to sue, and that their alleged injury from paying HIPF relied on their choice to pay it, which was not legally required—the states were allowed to contract with other providers. The government also argued that the states' claims failed on the merits—"[t]he actuarial-soundness requirement is precisely the type of restriction on the use of federal funds that National Federation of Independent Business (NFIB) v. Sebelius (2012) recognized as valid, as it offers federal funding for managed-care contracts with rates that are actuarially sound and withholds funding for those that are not."[1][5][6]
Outcome
The Northern District of Texas partially denied and partially granted the government's motion to dismiss the plaintiffs amended complaint. Judge Reed O'Connor delivered the court's opinion:[1][3]
| “ | [H]ere, like in Texas, Plaintiffs properly seek "judicial review of an agency rule when later sought to be applied to a particular situations." Texas, 749 F.2d at 1146. Plaintiffs allege Defendants have acted, or applied the ASOP to the HIPF, by requiring the MCO payments be actuarially sound as defined by the Academy. See generally Am. Compl., ECF No. 19. Therefore, preventing judicial review would "effectively deny" Plaintiffs "an opportunity to question its validity." Id. Accordingly, the Court finds that the application of ASOP 49, beginning in 2015, is sufficiently distinct to begin the statute of limitations period no earlier than the HIPF's promulgation in 2010. Defendants' Motion to Dismiss is DENIED as to Plaintiffs' Counts One through Five, to the extent Defendants challenge the timeliness of Plaintiffs' claims.
... [T]he Court finds that Plaintiffs have stated a claim that the HIPF is not "directly related," let alone "reasonably related," to the Medicaid program, as the purpose of the HIPF is to generate revenue due to expected enrollment in ACA insurance programs, rather than to generate revenue related to the federal interest in advancing Medicaid services. Pls.' Resp. 17, ECF No. 29; see also Am. Compl. ¶ 18, ECF No. 19. Therefore, at this preliminary stage, Defendants' Motion to Dismiss is DENIED. ... The Court agrees that at this stage of the litigation, Plaintiffs have alleged that Congress has not clearly expressed its intent to condition the grant of federal Medicaid funds on the states paying the HIPF, such that States have had an opportunity to "knowingly decide" whether or not to accept these funds. Pennhurst, 451 U.S. at 24. To the extent actuarial soundness requirements or the Medicaid Act's blanket provision that allowing for at-will alterations has existed for some time, the HIPF's pass through requirement materialized with the ASOP 49, as enforced through the HIPF. Plaintiffs have alleged this requirement unlawfully "surpris[ed] participating States with post-acceptance or 'retroactive' conditions." NFIB, 132 S. Ct. at 2606. Therefore, at this stage, Defendants' Motion to Dismiss is DENIED as to Count One. ... Accordingly, the Court finds that Plaintiffs have pleaded a violation of the intergovernmental tax immunity doctrine, and Count Six is accordingly DENIED. To the extent Plaintiffs similarly plead that the alleged direct tax imposed through § 9010(f) of the ACA violates the Tenth Amendment, the Court finds for the same reasons that § 9010 may not be constitutionally applied to deny a refund. Accordingly, Plaintiffs' alternative argument under Count Ten is also DENIED. ... Under the principles established in American Association of Railroads, the Court finds that Plaintiffs have sufficiently stated a claim that Congress delegated rulemaking authority to an independent, private organization, in direct contravention of Article I, Section 1 of the United States Constitution. Defendants' Motion is DENIED as to Count Five as to Plaintiffs' constitutional claim. Plaintiffs also bring a statutory claim under Count Five, which the Court will address below. See infra Section III.B.3.a. ... The Court has already found that Plaintiffs have sufficiently stated that ASOP 49, as enforced through the actuarial soundness requirement and the HIPF, results in a substantial alteration of the HIPF's text. See supra, e.g., Section III.A.1.a.i; III.B.2.a.i. Therefore, the Court finds that Plaintiffs sufficiently alleged, at this stage, that HHS has significantly revised its interpretation of the HIPF, as it integrates the ASOP 49, without providing the requisite notice-and-comment period. Therefore, Defendants' Motion to Dismiss Count Three is DENIED. ... Here, by asserting that HHS has "alter[ed] the text of Congress by shifting the full liability for the HIPF from MCOs to Plaintiff States," the Court finds that Plaintiffs have sufficiently alleged at this stage that HHS has acted arbitrarily or capriciously, such that the decision to rely on ASOP 49 in enforcing the HIPF may not be an "accommodation . . . that Congress would have sanctioned" or a "reasonable" decision by the Secretary of HHS. Tex. Comm., 197 F. Supp. at 596; Chevron, 467 U.S. at 844. Accordingly, Defendants' Motion to Dismiss is DENIED as to Count Two. Because the Court finds that at this preliminary stage, that if Chevron were to apply, that Plaintiffs have stated a claim, the Court need not analyze at this stage whether implementation of the HIPF is subject to Chevron deference. Therefore, the Court DEFERS ruling on Count Five as to Plaintiff's statutory claim until trial. See Fed. R. Civ. P. 12(i). ... Based on the foregoing, Defendants' Motion to Dismiss Plaintiffs' Amended Complaint (ECF No. 26) is GRANTED in part and DENIED in part. In summary, Defendants' Motion is: (1) DENIED as to Count One; (2) DENIED as to Count Two; (3) DENIED as to Count Three; (4) DENIED as to Count Four; (5) DEFERRED in part and DENIED in part as to Count Five; (6) DENIED as to Count Six; (7) GRANTED as to Count Seven; (8) DENIED as to Count Eight; (9) DENIED as to Count Nine; and (10) GRANTED in part and DENIED in part as to Count Ten.[7] |
” |
| —Judge Reed O'Connor | ||
Click here to read the detailed orders in the court's opinion.
See also
External links
- Search Google News for this topic
- U.S. District Court for the Northern District of Texas, Texas v. United States, decided August 4, 2016
- U.S. District Court for the Northern District of Texas, "State of Texas v. United States of America, FIRST AMENDED COMPLAINT FOR DECLARATORY, INJUNCTIVE, AND MONETARY RELIEF," filed February 24, 2016
- Law360, "Texas Leads $150M Dispute Of ACA Insurance Provider Fees," October 22, 2015
- NFIB v. Sebelius (2012)
Footnotes
- ↑ 1.0 1.1 1.2 1.3 U.S. District Court for the Northern District of Texas, "State of Texas v. United States of America, FIRST AMENDED COMPLAINT FOR DECLARATORY, INJUNCTIVE, AND MONETARY RELIEF," filed February 24, 2016
- ↑ HNI, "Congress Delays the Cadillac Tax and Other ACA Fees," January 1, 2016
- ↑ 3.0 3.1 3.2 U.S. District Court for the Northern District of Texas, Texas v. United States, decided August 4, 2016
- ↑ Actuarial Standards Board, "Home," accessed March 28, 2025
- ↑ Law360, "Texas Leads $150M Dispute Of ACA Insurance Provider Fees," October 22, 2015
- ↑ U.S. Supreme Court, NFIB v. Sebelius, decided June 28, 2012
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
