300 F. Supp. 3d 810
N.D. Tex.2018Background
- Six states (Texas, Indiana, Kansas, Louisiana, Nebraska, Wisconsin) sued HHS and the U.S. asserting they were coerced into paying the ACA Health Insurance Providers Fee (HIPF) because CMS required private actuarial certification for Medicaid managed-care capitation rates.
- ACA §9010 exempted states from the HIPF; CMS regulation 42 C.F.R. §438.6 (the “Certification Rule”) required rates be "actuarially sound" and certified by actuaries who follow Actuarial Standards Board (ASB) practice standards.
- The private Actuarial Standards Board (ASB), via ASOP 49 (Mar. 2015), required inclusion of non-deductible taxes (like the HIPF) in capitation rates; CMS guidance endorsed ASOP 49, and states thereafter included HIPF in rates or risked loss of Medicaid funding.
- Plaintiffs challenged both the HIPF (statute) and the Certification Rule and sought declaratory and injunctive relief; the court addressed jurisdictional defenses (standing, AIA, statute of limitations) before merits.
- The Court found states had Article III and prudential standing; the Anti‑Injunction Act did not bar the suit under the Regan exception; certain HHS actions in 2015 restarted APA limitation periods.
- On the merits, the Court upheld the HIPF as a constitutional tax but held that the Certification Rule unlawfully delegated legislative power to a private entity (ASB) and thus set aside the portion of the regulation requiring private certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing (Article III & prudential) | States were injured by being forced to pay HIPF; injury traceable to Certification Rule and redressable by invalidating rule or tax | No injury or manufactured; other options (switching providers) avoid injury | States have Article III and prudential standing; injury is concrete, traceable, redressable |
| Anti‑Injunction Act (AIA) jurisdictional bar | AIA inapplicable because states are not "persons" required to pay and have no alternate forum | AIA bars suits restraining tax collection; Congress intended "person" to include states | Regan exception applies; AIA does not bar Certification Rule claims or this suit |
| Non‑delegation (private delegation to ASB) | Certification Rule effectively vests binding lawmaking and veto power in private ASB/actuaries (ASOP 49) — unconstitutional delegation | The rule merely enlists technical expertise; agency retains ultimate review and authority | Certification Rule §438.6(c)(1)(i)(C) unlawfully delegates legislative power to a private entity; set aside under the Constitution and APA |
| Validity of HIPF under Spending Clause and Tenth Amendment | HIPF (as applied via Certification Rule) coerces states, lacks clear notice as a spending condition, and discriminates against states | HIPF is a federal tax (not a spending condition); ACA expressly exempts states; HIPF does not discriminate because incidence falls on private MCOs | HIPF is a valid federal tax; Spending Clause and Tenth Amendment challenges to the statute fail (injury attributable to the regulation, not the tax) |
Key Cases Cited
- A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (struck down private delegation as unconstitutional)
- Carter v. Carter Coal Co., 298 U.S. 238 (private delegation problematic for constitutional reasons)
- Whitman v. American Trucking Ass'ns, 531 U.S. 457 (nondelegation principles and limits)
- National Federation of Independent Business v. Sebelius, 567 U.S. 519 (Spending Clause limits; coercion in Medicaid expansion)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (agency statutory interpretation / deference)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requirements)
- Bennett v. Spear, 520 U.S. 154 (final agency action test)
- INS v. Chadha, 462 U.S. 919 (legislative veto principles)
- McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (intergovernmental tax immunity / Supremacy Clause)