523 F.Supp.3d 731
D. Maryland2021Background:
- Plaintiffs (City of Columbus, several other cities, and two individuals) challenged nine provisions of HHS/CMS’s 2019 Notice of Benefit and Payment Parameters under the Administrative Procedure Act.
- The 2019 Rule made multiple substantive changes affecting Exchanges and Marketplace operations (APTC notices, network adequacy review, direct-enrollment oversight, standardized plan options/display, Navigator selection, SHOP features, income verification, rate-review thresholds/student plans, and MLR/QIA reporting).
- The case proceeded on cross-motions for summary judgment reviewing the administrative record; the court applied Chevron and arbitrary-and-capricious standards.
- The court found Plaintiffs had standing and assessed whether each challenged regulatory change was contrary to law or arbitrary and capricious based on the record and agency responses to comments.
- Remedy analysis applied Allied-Signal factors; the court vacated and remanded provisions it found arbitrary and capricious and vacated the provision it found contrary to law.
Issues:
| Issue | Plaintiffs' Argument | Defendants' Argument | Held |
|---|---|---|---|
| 1. Removal of mandatory direct notice before denying APTC for failure to reconcile | Removal violates statutory requirements / will cause loss of coverage | Rule is consistent with statute; combined notices suffice and direct notices were burdensome to states | Upheld as lawful and not arbitrary; not contrary to law and agency justification adequate |
| 2. Outsourcing federal review of network adequacy to states/accreditors | Outsourcing violates §18031 and leaves consumers with inadequate networks; state/accreditor processes are insufficient | HHS established criteria and may rely on state reviews/accreditation; delegation is application of HHS criteria | Not contrary to law, but arbitrary and capricious due to inadequate response to significant comments; vacated/remanded |
| 3. Reducing federal oversight of direct enrollment auditors (permit issuer-chosen auditors) | Weakens fraud protections and consumer safeguards | New standards for auditors and monitoring suffice; reduces duplicative burden | Upheld; change was reasonably explained and not arbitrary |
| 4. Eliminating standardized plan options and preferential display | Abrupt reversal undermines consumer choice/causes selection paralysis; inconsistent with prior findings | Agency concluded standardized display may chill innovation and other tools suffice | Arbitrary and capricious (unexplained inconsistency with prior factual findings); vacated/remanded |
| 5. Modifying Navigator selection standards (remove two-grantee, nonprofit, physical-presence requirements) | Changes impede Navigators’ statutory duties and consumer access | Statutory duties remain; Exchanges need flexibility to allocate funds and choose best grantees | Upheld; not contrary to law and agency considered comments reasonably |
| 6. Making SHOP functions (employee verification, premium aggregation, online enrollment) optional | Conflicts with SHOP duty to “assist” small employers in facilitating enrollment | "Assist" is broad; basic SHOP functions remain and HHS may set standards—optionality reasonable | Upheld; not contrary to law and not arbitrary |
| 7. New income-verification requirement when gov’t data shows <100% FPL but consumer attests 100–400% | Imposes heavy burdens on low-income applicants, no evidence of fraud, will reduce coverage | Intended to prevent APTC overpayments where Medicaid would apply; threshold/guide will limit burdens | Arbitrary and capricious—agency lacked empirical support and failed to address commenters’ practical evidence; vacated/remanded |
| 8. Curtailing rate review (exempt student plans from pre-issuance review; raise review threshold 10%→15%) | Exemption/threshold undermine statutory duty to monitor unreasonable increases | Statute permits HHS discretion; student plans differ structurally; data show minimal impact from threshold change | Exemption of student plans: not contrary to law and adequately explained; raising threshold: not arbitrary and capricious; upheld |
| 9. Allowing standardized QIA (MLR) reporting as fixed 0.8% rather than actual expenditures | Contrary to §300gg–18 ("expend" requires actual amounts); will reduce rebates and disincentivize QIA | Option reduces issuer burden; historical data show low, consistent QIA spending; option may increase reporting | Contrary to law (term “expend” requires reporting actual spending); also arbitrary and capricious for failing to consider viable alternatives/comments; vacated |
Key Cases Cited
- Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519 (2012) (ACA’s aims to increase coverage and reduce costs)
- King v. Burwell, 576 U.S. 473 (2015) (statutory interpretation of ACA subsidies)
- Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984) (agency deference framework)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary-and-capricious standard)
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016) (reasons required when agency changes policy)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (heightened explanation when changing positions)
- Camp v. Pitts, 411 U.S. 138 (1973) (administrative-record focal point for review)
- Sierra Club v. United States Army Corps of Eng’rs, 909 F.3d 635 (4th Cir. 2018) (vacatur/remand principles)
- Allied-Signal, Inc. v. U.S. Nuclear Reg. Comm’n, 988 F.2d 146 (D.C. Cir. 1993) (vacatur vs. remand test)