392 F. Supp. 3d 22
D.C. Cir.2019Background
- In 1996 HIPAA exempted "short-term, limited duration insurance" (STLDI) from individual-market rules but did not define it; agencies later defined STLDI as <12 months (with renewals) in 1997/2004.
- The ACA (2010) left the STLDI exemption intact while imposing market-wide reforms (guaranteed issue, community rating, essential health benefits, exchanges, subsidies); the individual mandate penalty was reduced to $0 by 2019.
- In 2016 HHS/Treasury/DOL limited STLDI to <3 months (effectively prohibiting renewals) citing Exchange stabilization concerns; the Trump Administration proposed and finalized (Aug. 2018) a rule returning to an initial <12-month term and capping total duration (with renewals) at 36 months (the 2018 Rule).
- Plaintiffs (insurer, provider, and consumer groups) sued under the APA, arguing the 2018 Rule conflicts with HIPAA/ACA and is arbitrary and capricious; plaintiffs sought summary judgment; the Departments cross-moved.
- The district court (Leon, J.) granted summary judgment for the Departments, finding plaintiffs had competitor standing (for insurer plaintiffs) but that the 2018 Rule falls within agencies’ delegated authority and survives Chevron and arbitrary-and-capricious review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing | ACAP insurers lacked injury; broader plaintiffs needed standing. | 2018 Rule increases competition; insurers are direct competitors (competitor standing). | Insurer plaintiffs have competitor standing; court need not assess others. |
| Scope of Delegation / Chevron Step Zero | Agencies exceeded Congress's intent; changing STLDI definition alters ACA's structure. | Congress left STLDI undefined; agencies long exercised interpretive authority; no "major questions" bar. | Agencies retained authority to define STLDI; not an extraordinary delegation; Chevron applies. |
| Chevron Step One (Ambiguity) | "Short-term, limited duration" unambiguously means very short, nonrenewable coverage (<=3 months). | Phrase is ambiguous; past agency practice and state definitions support <12 months initial term and renewals. | Statute is ambiguous as to term/duration; not unambiguously preclusive of the 2018 Rule. |
| Chevron Step Two / Arbitrary & Capricious | 2018 Rule undermines ACA goals and risks destabilizing Exchanges; agencies failed to justify change from 2016 Rule. | Rule is a permissible construction ("short-term" = <12 months; "limited duration" = capped total duration), reasoned decisionmaking considered effects and alternatives. | 2018 Rule is a permissible interpretation and supported by reasoned analysis; not arbitrary or capricious. |
Key Cases Cited
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (injury-in-fact, causation, redressability standing requirements)
- Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (agency deference framework)
- King v. Burwell, 576 U.S. 473 (2015) (major-questions framework; significance of statutory context for ACA interpretation)
- Util. Air Regulatory Grp. v. EPA, 573 U.S. 302 (agency cannot claim extraordinary regulatory power absent clear congressional authorization)
- FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (agency power limited where historical disavowal and extraordinary political significance)
- Verizon v. FCC, 740 F.3d 623 (D.C. Cir.) (contextual deference where Congress legislated against backdrop of agency practice)