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Preemption and the MLR Provision of the Affordable Care Act
Published online by Cambridge University Press: 06 January 2021
Extract
This Note focuses on the medical loss ratio provision (“MLR Provision”) of the Patient Protection and Affordable Care Act (ACA). The MLR Provision states that health insurance companies must spend at least a certain percentage of their premium revenue on “activities that improve healthcare quality” (in other words, meet a minimum threshold medical loss ratio) and comply with reporting requirements determined by the Secretary of the United States Department of Health and Human Services (HHS). Because states have historically had authority over the regulation of health insurance, there is an outstanding question as to whether or not the MLR Provision has legal authority to preempt conflicting state MLR regulations.
Part II of this Note outlines the major requirements in the MLR Provision and discusses the history of MLR regulation in the United States. Part III discusses the likelihood that the courts will soon resolve the question of preemption regarding the MLR Provision.
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References
1 42 U.S.C. § 300gg-18 (2012).
2 Id.
3 MILA KOFMAN & KAREN POLLITZ, GEORGETOWN UNIV., HEALTH INSURANCE REGULATION BY STATES AND THE FEDERAL GOVERNMENT: A REVIEW OF CURRENT APPROACHES AND PROPOSALS FOR CHANGE 1 (2006), available at http://www.allhealth.org/briefingmaterials/HealthInsuranceReportKofmanandPollitz-95.pdf; TARA ADAMS RAGONE, SETON HALL UNIV. SCH. LAW, THE AFFORDABLE CARE ACT AND MEDICAL LOSS RATIOS: FEDERAL AND STATE METHODOLOGIES 2-3 (2012), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2088900; see also AM.'s HEALTH INS. PLANS, STATE MANDATORY MEDICAL LOSS RATIO (MLR) REQUIREMENTS FOR COMPREHENSIVE, MAJOR MEDICAL COVERAGE: SUMMARY OF STATE LAWS AND REGULATIONS (2010), available at http://www.naic.org/documents/committees_e_hrsi_comdoc_ahip_chart_mlr.pdf. Deference to the traditional state authority to regulate insurance has led to the complicated ERISA preemption jurisprudence we have today. See, e.g., infra Part IV.
4 JENNIFER HABERKORN, HEALTH AFF., HEALTH POLICY BRIEF: MEDICAL LOSS RATIOS 1 (Len M. Nichols et al. eds., 2010), available at http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_33.pdf.
5 42 U.S.C. § 300gg-18.
6 RAGONE, supra note 3, at ii.
7 42 U.S.C. § 300gg-18.
8 Id.
9 Id.
10 See id.
11 See generally Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act, 77 Fed. Reg. 28,790 (May 16, 2012) [hereinafter MLR Requirements 2] (codified at 45 C.F.R. pt. 158); Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act, 76 Fed. Reg. 76,574 (Dec. 7, 2011) [hereinafter MLR Requirements 1] (codified at 45 C.F.R. pt. 158).
12 MLR Requirements 2, 77 Fed. Reg. at 28,792; MLR Requirements 2, 76 Fed. Reg. at 76,592.
13 MLR Requirements 2, 77 Fed. Reg. at 28,792; MLR Requirements 1, 76 Fed. Reg. at 76,575.
14 MLR Requirements 1, 76 Fed. Reg. at 76,576.
15 Id.
16 42 U.S.C. § 300gg-18(b)(1)(A)(ii) (2012); 45 C.F.R. § 158.211 (2013); see also GARY COHEN, CTRS. FOR MEDICARE & MEDICAID SERVS., CCIIOO 2012-002, QUESTIONS AND ANSWERS REGARDING THE MEDICAL LOSS RATIO REGULATION 7 (2012), available at http://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-qna-04202012.pdf (clarifying that “HHS will only apply a higher MLR to issuers in States that have taken affirmative action since March 23, 2010 indicating that they have exercised their option pursuant to 45 CFR § 158.211 to require issuers to meet a higher MLR standard for Federal MLR purposes”).
17 42 U.S.C. § 300gg-18(b)(1)(A)(ii); 45 C.F.R. § 158.301; see also 42 U.S.C. § 300gg-18(d) (authorizing HHS to lower a state's minimum MLR threshold if “appropriate on account of the volatility of the individual market due to the establishment of State Exchanges”).
18 MARK A. HALL & MICHAEL J. MCCUE, ESTIMATING THE IMPACT OF THE MEDICAL LOSS RATIO RULE: A STATE-BY-STATE ANALYSIS 10 (2012), available at http://www.commonwealthfund.org/∼/media/Files/Publications/Issue%20Brief/2012/Mar/1587_Hall_medical_loss_ratio_ib.pdf; SUZANNE KIRCHHOFF & JANEMARIE MULVEY, CONG. RESEARCH SERV., MEDICAL LOSS RATIO REQUIREMENTS UNDER THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA): ISSUES FOR CONGRESS 13 (2012), available at http://www.fas.org/sgp/crs/misc/R42735.pdf. The seven states to which HHS granted lower minimum MLR thresholds were Georgia, Iowa, Kentucky, Maine, North Carolina, New Hampshire, and Nevada. Id. The minimum MLR thresholds were lowered for individual groups and range from 65% to 75% in 2011. Id. The ten states denied lower minimum MLR thresholds for individual policies were Delaware, Florida, the territory of Guam, Indiana, Kansas, Louisiana, Michigan, North Dakota, Oklahoma, Texas, and Wisconsin. Id.
19 KIRCHHOFF & MULVEY, supra note 18, at 3.
20 Id. at 3-4.
21 See supra note 3.
22 KOFMAN & POLLITZ, supra note 3, at 1. Beginning in 1974, the federal government “took a more active role in areas of insurance regulation” by passing the Employee Retirement Income Security Act (ERISA) and “establishing minimum national standards for group health insurance.” Id.
23 See Markham, Wesley D., Healthcare Reform's Mandatory Medical Loss Ratio: Constitutionality, Policy, and Implementation, 46 U.S.F. L. REV. 139, 142 (2011)Google Scholar.
24 See MICHAEL J. MCCUE & MARK A. HALL, INSURERS’ RESPONSES TO REGULATION OF MEDICAL LOSS RATIOS 5 exhibits 2 & 3 (2012), available at http://www.commonwealthfund.org/∼/media/Files/Publications/Issue%20Brief/2012/Dec/1634_McCue_insurers_responses_MLR_regulation_ib.pdf.
25 See Ben Nelson, About the NAIC, NAT’L ASS’N OF INS. COMM’RS, jrawww.naic.org/index_about.htm (last visited May 7, 2014).
26 Id.
27 AM.'s HEALTH INS. PLANS, supra note 3, at 2-3.
28 Id. at 1-2.
29 KIRCHHOFF & MULVEY, supra note 18, at 23.
30 Id.
31 Id.
32 Id.
33 42 U.S.C. § 300gg-18 (2012). See also generally RAGONE, supra note 3.
34 HABERKORN, supra note 4, at 2; RAGONE, supra note 3, at 3.
35 See HABERKORN, supra note 4, at 3-4; Markham, supra note 23, at 147.
36 Markham, supra note 23, at 147.
37 See KIRCHHOFF & MULVEY, supra note 18, at 18.
38 See HABERKORN, supra note 4, at 3-4; Markham, supra note 23, at 147-48.
39 See Markham, supra note 23, at 170.
40 See KIRCHHOFF & MULVEY, supra note 18, at 2; supra Part III.A.
41 MCCUE & HALL, supra note 24.
42 Id.
43 See id. at 7 (noting, for example, that reduced profits in the individual markets resulting from the MLR provision may encourage insurers to withdraw from the market, leaving consumers with fewer insurance package options and higher insurance premiums).
44 See 42 U.S.C. § 300gg-18 (2012); KIRCHHOFF & MULVEY, supra note 18, at 18-21 (observing that there are concerns about insurer compliance with the MLR Provision regarding brokers’ fees, high deductible health plans, and MLR rates for nonprofit insurers).
45 See, e.g., Joint Pub. Hearing of Fla. Office of Ins. Regulation & the Fla. Health Ins. Advisory Bd. (Fla. 2010) (testimony of Steve Dziedzic, Chief Actuary of Assurant Health), available at http://www.floir.com/siteDocuments/MedicalLossRatio/MLRTestimonies.pdf; Joint Public Hearing of Florida Office of Insurance Regulation and the Florida Health Insurance Advisory Board (Fla. 2010) (comments of Marke LaBorde, President of Aetna Inc., Fla.), available at http://www.floir.com/siteDocuments/MedicalLossRatio/MLRTestimonies.pdf; Letter from Douglas Lynch, Dir. & Senior Actuary, Blue Cross Blue Shield of Fla., to Kevin McCarty, Comm’r, Fla. Office of Ins. Regulation (May 7, 2010), available at http://www.floir.com/siteDocuments/MedicalLossRatio/MLRTestimonies.pdf.
46 Letter from Steven Kelmar, Senior Vice President, Gov't Affai rs & Pub. Policy, Aetna Ins., to the U.S. Dept. of Health & Human Servs. (Jan. 31, 2011), available at http://www.aetna.com/healthreform-connection/documents/mlr-comment-letter-1-31-11.pdf.
47 Richard A. Epstein, Impermissible Ratemaking in Health-Insurance Reform: Why the Reid Bill is Unconstitutional 2 (Univ. Chi. Law & Econ., Olin Working Paper No. 506; Univ. Chi., Pub. Law Working Paper No. 288, 2009), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1527128.
48 See Markham, supra note 23, at 158-59.
49 H.R. 2077, 112th Cong. (2011); see also H.R. 1206, 112th Cong. (2012).
50 MLR Requirements 1, 76 Fed. Reg. 76,574, 76,592 (Dec. 7, 2011) (codified at 45 C.F.R. pt. 158).
51 45 C.F.R. § 160.203(b) (2013).
52 See Olinde, John F. & McCard, Hal, Understanding the Boundaries of the HIPAA Preemption Analysis: Who is Regulated by the Privacy Rule and What Information Does HIPAA Protect?, 72 DEF. COUNS. J. 158, 158 (2005)Google Scholar.
53 MLR Requirements 1, 76 Fed. Reg. at 76,592 (emphasis added).
54 45 C.F.R. § 160.203 (emphasis added).
55 See Olinde & McCard, supra note 52, at 158.
56 See Michael W. Drumke, A HIPAA Primer, 37-SPG BRIEF 34, 35 (2008).
57 Health Insurance Portability and Accountability Act (HIPAA), Pub. L. No. 104 -191, 110 Stat. 1936, 1936 (1996); see also Buckman, Deborah F., Annotation, Validity, Construction, and Application of Health Insurance Portability and Accountability Act of 1996 (HIPAA) and Regulations Promulgated Thereunder, 194 A.L.R. FED. 133 (2004)Google Scholar.
58 26 U.S.C. §§ 9801-02 (2012); Drumke, supra note 56, at 35 (discussing the HIPAA privacy and security rules).
59 See Drumke, supra note 56, at 36-38.
60 See id.
61 Smith v. Am. Home Prod. Corp., 855 A.2d 608 (N.J. Super. Ct. 2003).
62 Id. at 610.
63 Id.
64 Id.
65 Id. at 625 (citing Stempler v. Speidell, 495 A.2d 857, 865 (N.J. 1985)).
66 Smith, 855 A.2d at 626.
67 Id.
68 See 42 U.S.C. § 300gg-18 (2012).
69 See Arthur D. Postal, PPACA: HHS Says MLRs Will Be Flexible, LIFEHEALTHPRO (Oct. 1, 2010), http://www.lifehealthpro.com/2010/10/01/ppaca-hhs-says-mlrs-will-be-flexible.
70 Smith, 855 A.2d at 626.
71 Nw. Mem’l Hosp. v. Ashcroft, 362 F.3d 923 (7th Cir. 2004).
72 Id. at 924.
73 Id.
74 Id. at 925.
75 Id. at 933.
76 Id.
77 See id.
78 See id.
79 See generally AM.'s HEALTH INS. PLANS, supra note 3 (comparing state MLR regulations to the ACA's MLR guidelines and reporting requirements).
80 See Nw. Mem’l Hosp., 362 F.3d at 923-24.
81 See In re Grand Jury Proceedings, 450 F. Supp. 2d 115 (D. Me. 2006).
82 Id.
83 Id. at 119.
84 Id. at 118.
85 Id. at 117-18.
86 See id. at 117-18 (accepting as reasonable HHS's interpretation of HIPAA as not intending to create reverse-preemption).
87 See, e.g., id.; Nw. Mem’l Hosp. v. Ashcroft, 362 F.3d 923 (7th Cir. 2004); Smith v. Am. Home Prod. Corp., 855 A.2d 608 (N.J. Super. Ct. 2003).
88 In re Grand Jury Proceedings, 450 F. Supp. 2d at 118 (quoting Nat’l Abortion Fed’n v. Ashcroft, No. 03 Civ. 8695(RCC), 2004 WL 555701, at *5 (S.D.N.Y. Mar. 19, 2004)).
89 See generally In re Grand Jury Proceedings, 450 F. Supp. 2d at 115; Nw. Mem’l Hosp., 362 F.3d at 923; Smith, 855 A.2d at 608.
90 Smith, 855 A.2d at 626.
91 See generally In re Grand Jury Proceedings, 450 F. Supp. 2d at 115; Nw. Mem’l Hosp., 362 F.3d at 923; Smith, 855 A.2d at 608
92 HABERKORN, supra note 4.
93 29 U.S.C. § 1001 (2012).
94 Id. § 1001(b).
95 Some of the benefits directly provided by ERISA are rights to “disclosure of important plan information, a timely and fair process for benefits claims, elect to temporarily continue group health coverage after losing coverage, a certificate evidencing health coverage under a plan, and recover benefits due under the plan.” Health Plans & Benefits, U.S. DEPT. OF LABOR, http://www.dol.gov/dol/topic/health-plans/participantrights.htm (last visited May 7, 2014).
96 PETER D. JACOBSON, O’NEILL INST. NAT’L & GLOBAL HEALTH LAW, THE ROLE OF ERISA PREEMPTION IN HEALTH REFORM: OPPORTUNITIES AND LIMITS 5-6 (2009), available at https://www.law.georgetown.edu/oneillinstitute/research/legal-solutions-in-healthreform/Papers/ERISA.pdf.
97 Id. at 6-7.
98 Id. at 5.
99 29 U.S.C. § 1144 (2012).
100 Id. § 1144(a). Specifically, the relate to clause states that “the provisions of this title … shall supersede any and all State laws insofar as they may now of hereafter relate to any employee benefit plan.” Id. (emphasis added).
101 Id. § 1144(b)(2)(A).
102 Id. § 1144(b)(2)(B).
103 N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).
104 Id. at 649, 658.
105 Id. at 651-52.
106 Id. at 654.
107 Id. at 662.
108 Id.
109 42 U.S.C. § 300gg-18 (2012).
110 Nat’l Fed’n of Indep. Bus. (NFIB) v. Sebelius, 132 S.Ct. 2566, 2580 (2012) (Roberts, C.J.).
111 See generally MCCUE & HALL, supra note 24.
112 See Travelers, 514 U.S. at 662.
113 See id. at 661-62.
114 See id.
115 Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002).
116 Id. at 360.
117 Id. at 362.
118 Id. at 363-64.
119 Id. at 387.
120 Id.
121 42 U.S.C. § 300gg-18 (2012).
122 See generally AM.'s HEALTH INS. PLANS, supra note 3 (describing the different approaches states have taken in implementing their own MLR provisions).
123 See Moran, 536 U.S. at 387.
124 Ky. Ass’n. of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003).
125 Id. at 331-33.
126 Id. at 332-34.
127 Id. at 341-42.
128 McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15 (2012).
129 Id. §§ 1011-12.
130 See 29 U.S.C. § 1001 (2012) (stating that the policy goal of ERISA is to protect interstate commerce, the federal taxing power, and the interests or participants in employee benefit plans or private pension plans, along with their beneficiaries); Health Insurance Portability and Accountability Act (HIPAA), Pub. L. No. 104-191, 110 Stat. 1936, 1936 (1996) (stating that the purpose of HIPAA is “to improve portability and continuity of health insurance coverage … [and] to combat waste, fraud, and abuse in health insurance and health care delivery”).
131 29 U.S.C. § 1144.
132 Retail Indus. Leaders Ass’n v. Fielder, 475 F.3d 180 (4th Cir. 2007).
133 Id. at 183.
134 Id.
135 Id.
136 Id. at 193-94, 196-97.
137 Golden Gate Rest. Ass’n v. City & Cnty. of S.F., 546 F.3d 639 (9th Cir. 2008).
138 Id. at 642-43.
139 Id. at 644-45.
140 Id. at 645.
141 Id. at 642.
142 Id. at 661.
143 Id.
144 Id. at 660-61.
145 Golden Gate, 546 F.3d at 643; Retail Indus. Leaders Ass’n v. Fielder, 475 F.3d 180, 183 (4th Cir. 2007).
146 Golden Gate, 546 F.3d at 643; Fielder, 475 F.3d at 183.
147 Golden Gate, 546 F.3d at 643; Fielder, 475 F.3d at 183; 42 U.S.C. § 300gg-18 (2012).
148 Fielder, 475 F.3d at 194.
149 Id. at 197.
150 See Golden Gate, 546 F.3d at 639.
151 Id. at 661.
152 Id. at 648.
153 Id. at 661.