Case Information
*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA AMERICAN COUNCIL OF LIFE
INSURERS,
Plaintiff, Civil Action No. 14-cv-1138 (BAH) v. Judge Beryl A. Howell DISTRICT OF COLUMBIA HEALTH
BENEFIT EXCHANGE AUTHORITY, et al. ,
Defendants. MEMORANDUM OPINION
This case raises a constitutional challenge to the funding mechanism enacted by the District of Columbia to continue the operations of the District of Columbia Health Benefit Exchange (the “D.C. Exchange”) beginning on January 1, 2015. The D.C. Exchange was established under the auspices of the Patient Protection and Affordable Care Act (“ACA”) to, inter alia , “[e]nable individuals and small employers to find affordable and easier-to-understand health insurance;” “[f]acilitate the purchase and sale of qualified health plans;” “[r]educe the number of uninsured;” and “[a]ssist individuals and groups to access programs, premium assistance tax credits, and cost-sharing reductions.” Health Benefit Exchange Authority Establishment Act (“Establishment Act”), D.C. Code § 31-3171.02. Indeed, the D.C. Exchange currently facilitates access to health care for approximately 50,000 residents of this jurisdiction. See Compl. ¶ 44, ECF No. 1. To ensure sufficient funding for the operations of the D.C. Exchange when, after December 31, 2014, all federal funding assistance ceases, the District passed two separate laws, the Health Benefit Exchange Authority Financial Sustainability Emergency Amendment Act of 2014 (the “Emergency Amendment Act” or “EAA”), D.C. Act *2 20-356, and the Health Benefit Exchange Authority Financial Sustainability Temporary Amendment Act of 2014 (“TAA”), D.C. Act 20-256, both of which authorize a Health Carrier Assessment (the “HC Assessment”) on health insurance issuers doing significant business in the District, even if those issuers do not participate, or sell products eligible for sale, on the D.C. Exchange. Id. ¶¶ 45-47.
The plaintiff, American Council of Life Insurers (“ACLI”), a trade association with approximately 300 member insurance companies operating throughout the United States, including the District of Columbia, filed this suit against the District of Columbia, the District of Columbia Health Benefit Exchange Authority (the “Authority”) and various D.C. government officials in their official capacities [1] (collectively, “defendants”), alleging that the Emergency Amendment Act violates multiple parts of the U.S. Constitution by authorizing imposition of the HC Assessment on the plaintiff’s members when those members do not participate in, or receive any benefit from, the D.C. Exchange. [2] See Compl. at 22 (“Plaintiff prays for relief . . . [t]hat the *3 Court declare that the Emergency Legislation, as construed by the Authority, is unconstitutional and is preempted by the ACA and is thus unenforceable”). The plaintiff has moved, twice, to enjoin preliminarily the defendants from assessing and collecting the HC Assessment on premiums or other receipts from products that are not sold on the D.C. Exchange, see Compl., ¶ 88; Pl.’s Mot. for Prelim. Inj. (“Pl.’s P.I. Mot.”), ECF No. 11; Pl.’s Emergency Mot. for Prelim. Inj. (“Pl.’s P.I. Emerg. Mot.”), ECF No. 32, and the defendants have moved to dismiss the Complaint, under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted, Defs.’ Mot. to Dismiss (“Defs.’ Mot.”), ECF No. 25. As discussed more fully below, the defendants’ motion is granted, the plaintiff’s motions are denied, and the Complaint is dismissed.
II. BACKGROUND
The plaintiff claims that the HC Assessment on health insurance companies, which do not
participate in, or sell products eligible for sale on, the D.C. Exchange, is preempted by the ACA
and violates the Takings, Equal Protection and Due Process Clauses of the Fifth Amendment to
the U.S. Constitution, as well as the non-delegation doctrine. Evaluation of these constitutional
challenges is aided by review of pertinent provisions in the ACA and the Establishment Act,
which is the law containing both the amendments—the Emergency Amendment and the TAA
expired by its own terms”), dismissal may be avoided with an adequate showing that the law is or will be reenacted
in a form that raises the same issues,
see NextG Networks of NY, Inc. v. City of New York
,
(the “Challenged Amendment”) that is at issue. This statutory review is followed by a summary of the procedural history of this case.
A. The Relevant Statutes
1.
The ACA
The ACA was enacted to “increase the number of Americans covered by health
insurance and decrease the cost of health care.”
Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB)
,
The ACA authorizes initial federal funding to the States and the District for the purpose of establishing State Exchanges. Id. ¶¶ 3, 43. In total, the initial federal funding provided to the States and the District to set up State Exchanges exceeded $4.8 billion. See Pl.’s Mem. in Supp. of Prelim. Inj. Mot. (“Pl.’s P.I. Mem.”), at 8 (citing Daniel H. Schlueter Decl. (“Schlueter Decl.”) Ex. D, Annie L. Mach, et al ., C ONG . R ESEARCH S ERV ., R43066, F EDERAL F UNDING FOR H EALTH I NSURANCE E XCHANGES 4-5 (2014), ECF No. 11-1). All federal funding for State Exchanges *5 ceases, however, after December 31, 2014, at which time the States are expected to operate their Exchanges without federal funding. See id.
The same ACA provision, Section 1311(d)(5)(A), 42 U.S.C. § 18031(d)(5)(A), both terminates federal funding assistance “beginning January 1, 2015” and directs States to take responsibility for the “continued operations” of State Exchanges. This ACA provision is the lynchpin to the plaintiff’s preemption challenge. See id. ¶¶ 3, 29. To ensure adequate funding “to support [the] operations” of State Exchanges, ACA’s Section 1311(d)(5)(A) authorizes the States and the District to allow the State Exchanges “to charge assessments or user fees to participating issuers” and “to otherwise generate funding.” 42 U.S.C. § 18031(d)(5)(A).
2. District Authorizing Laws
One year after Congress enacted the ACA, the District opted to create a local Exchange and passed the Establishment Act, D.C. Code § 31-3171.01 et seq. , declaring the District’s intent to operate the D.C. Exchange. Compl. ¶ 4. The Establishment Act established the Authority and set out the responsibilities of this new entity. See D.C. Code § 31-3171.01. First, the Authority is tasked with maintaining the D.C. Exchange, see Compl. ¶¶ 35-36, and, as part of this responsibility, it must certify QHPs to be sold on the D.C. Exchange based on the plans’ compliance with D.C. and federal regulations. Id. ¶¶ 37-38 (citing D.C. Code § 31-3171.04(a)).
Second, the Authority is responsible for the administration of the Health Benefit Exchange Authority Fund (the “Fund”), which was also created by the Establishment Act to finance the D.C. Exchange. Id. ¶ 39. The Fund derives monies from multiple sources, including:
(1) Any user fees, licensing fees, or other assessments collected by the Authority; (2) Income from investments made on behalf of the Fund; (3) Interest on money in the Fund;
(4) Money collected by the executive board as a result of a legal or other action; (5) Donations;
(6) Grants;
(7) All general revenue funds appropriated by a line item in the budget submitted pursuant to section 446 оf the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 801; D.C. Official Code § 1-204.46), and authorized by Congress for the purposes of the Authority; and
(8) Any other money from any other source accepted for the benefit of the Fund. D.C. Code § 31-3171.03(b); Compl. ¶ 40. The Establishment Act authorizes the Authority to generate funds “necessary to support the operation of the Authority,” D.C. Code § 31- 3171.03(e)(2), by charging “(A) User fees; (B) Licensing fees; and (C) Other assessments on health carriers selling qualified dental plans or qualified health plans in the District, including qualified health plans and qualified dental plans sold outside the exchanges,” id. at (e)(1); see also Compl. ¶ 41.
Facing the December 31, 2014 termination of all federal funding, Compl. ¶ 3, and an estimated $28.75 million in operating costs for the D.C. Exchange in 2015, id. ¶ 44, the Authority appointed the Financial Sustainability Advisory Working Group (the “Working Group”) to develop a plan to fund the D.C. Exchange after federal funding ceased. Id. ¶ 45. The Working Group “consist[ed] of, among others, health insurance issuers offering [QHPs] on the D.C. Exchange.” Id. After weighing several alternatives, the Working Group ultimately proposed a broad assessment that would apply to health insurance issuers generating significant revenues from businesses in the District, regardless of whether they participated in the Exchange or could sell products on the Exchange. See ¶¶ 45-46. To confirm its power to generate funds in the manner proposed, the Authority sought emergency legislation from the D.C. Council to amend the Establishment Act to authorize the imposition and collection of the “Health Carrier Assessment.” Id. ¶ 47. As noted, supra note 2, both the EAA and the TAA were subsequently enacted to provide this expanded authority to the Authority.
The EAA and its successor, the TAA, amend the Establishment Act to enable the Authority to increase the Fund used to sustain the D.C. Exchange by “annually assess[ing], through a ‘Notice of Assessment,’ each health carrier doing business in the District with direct gross receipts of $50,000 or greater in the preceding calendar year an amount based on a percentage of its direct gross receipts for the preceding calendar year.” D.C. Code § 31- 3171.03(f)(1). [3] The EAA and TAA thus expand the Authority’s power under the Establishment Act to charge assessments on issuers of health insurance policies that do not participate in the D.C. Exchange, but that generate significant revenues of $50,000 or more from business in the District. See Compl. ¶ 50. The Authority’s power is, however, constrained in that “[t]he amount assessed shall not exceed reasonable projections regarding the amount necessary to support the operations of the Authority.” Id. ¶ 51 (quoting D.C. Code § 31-3171.03(f)(2)). The plaintiff alleges that, for the 2015 fiscal year, the Authority plans to generate nearly all of its revenue through the HC Assessment, which is paid by both participating and non-participating health issuers generating substantial revenues from business in the District. See id. ; Pl.’s Opp’n to Defs.’ Mot. to Dismiss (“Pl.’s Opp’n”) at 10 (noting that participating issuers are expected to pay “the exact same fee . . . no more than .80% of premiums” as the plaintiff’s members subject to the HC Assessment), ECF No. 28.
Once notified of an assessment, an assessed health insurance issuer has thirty days to pay the assessment, Compl. ¶ 53, or face penalties, id. ¶¶ 55-57 (citing D.C. Code § 31-1204(a)-(b)). Failure to pay the assessment subjects the issuer to a financial penalty “which shall be 10% of *8 the assessment plus interest at one-half of 1% per month for the period between the due date and the date of full payment.” D.C. Code § 31-1204. Additional penalties may also be imposed, subject to the Mayor’s discretion, upon service of a notice of deficiency. Discretionary penalties may include: “suspending or revoking the insurer’s or health maintenance organization’s certificate of authority or license to transact business, or any other appropriate action or sanction authorized under the insurance laws for failure to comply with the District’s Laws, including referring the matter to the Corporate Counsel for legal action to collect the assessment.” D.C. Code § 31-1204. Under an emergency rule adopted by the Authority, assessed parties may appeal an assessment to contest classification as a health carrier subject to the fee, or the calculation of the assessment amount. Compl. ¶ 53; see 61 D.C. Reg. 6236 (June 20, 2014); Pl.’s Mem. in Supp. of Mot. for Emergency Prelim. Inj., (“Pl.’s Emerg. P.I. Mem.”), at ¶ 6, ECF No. 32. [4] Pursuant to the TAA, the Authority began assessing the HC Assessment on August 18, 2014. See Pl.’s Emerg. P.I. Mem. at ¶ 4.
B. Procedural History
As noted, supra note 2, the plaintiff initiated this suit shortly after passage of both the EAA and the TAA, alleging that the power provided to the Authority in the EAA to assess non- participating issuers to fund the D.C. Exchange is (1) preempted under the Supremacy Clause, by the ACA (“Count I”), see Compl. ¶¶ 60-63, and (2) an unconstitutional violation of the (i) Takings Clause (“Count II”), id. ¶¶ 64-68, (ii) Due Process Clause (“Count III”), id. ¶¶ 69-73, (iii) Equal Protection Clause (“Count IV”), id. ¶¶ 74-77, and (iv) the separation of powers principles inherent in the U.S. Constitution and D.C. Home Rule Act, barring delegation of *9 legislative power to an executive officer (“Count V”), id. ¶¶ 78-81. [5] On July 10, 2014, the plaintiff sought a preliminary injunction barring the defendants from assessing, collecting, or enforcing the assessment of the HC Assessment on products that cannot be sold on the D.C. Exchange. See Pl.’s P.I. Mot. The day before the hearing on the plaintiff’s motion for preliminary injunctive relief, the defendants filed a motion to dismiss the Complaint for failure to state a claim fоr relief under Federal Rule of Civil Procedure 12(b)(6). See Defs.’ Mot. The Court indicated at the motions hearing that both pending motions would be considered and resolved together. See Prelim. Inj. Hr’g. Tr. (“P.I. Hr’g”) 77:14-16, July 29, 2014, ECF No. 35. Less than two weeks after the briefing was complete on the defendants’ motion to dismiss, the plaintiff filed a supplemental declaration from a member company that the Authority had issued assessments, at the rate of 1 percent of 2013 gross receipts and required payment by September 30, 2014. Pl.’s Mot. to File Supp. Decl., ¶ 3, ECF No. 30. The day before the assessments were due for payment, the plaintiff filed a second motion for a preliminary injunction, making essentially the same arguments posited in its first motion and in opposition to the defendants’ Motion to Dismiss. See Pl.’s Emerg. P.I. Mot.
Since the defendants’ motion to dismiss is granted for the reasons discussed below, the plaintiff’s motions for injunctive relief are denied as moot.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 8(a)(2) requires that a complaint contain “a short and
plain statement of the claim showing that the pleader is entitled to relief,” to “give the defendant
fair notice of what the . . . claim is about and the grounds upon which it rests.”
Bell Atlantic
*10
Corp. v. Twombly
,
“[B]ecause a court can fully resolve any purely legal question on a motion to dismiss,
there is no inherent barrier to reaching the merits at the 12(b)(6) stage” when no facts are in
dispute.
Marshall Cnty. Health Care Auth. v. Shalala
,
III. DISCUSSION
The parties agree that the ACA requires the D.C. Exchange, as well as other State- operated Exchanges, to wean themselves from federal funding by January 1, 2015, Compl. ¶ 3; Defs.’ Mem. in Supр. Mot. to Dismiss (“Defs.’ Mem.”) at 4, ECF No 26-1, but they dispute the constitutionality of the mechanism adopted by the District to raise the necessary funds to continue operation of the D.C. Exchange when federal funding becomes unavailable. The plaintiff seeks a declaratory judgment that the Challenged Amendment to the Establishment Act authorizing the HC Assessment is unenforceable because the ACA preempts and bars this funding mechanism, which the plaintiff contends is also unconstitutional on other grounds. [6] See *12 Compl., prayer for relief. First, the plaintiff contends that, under the Supremacy Clause, the Challenged Amendment is preempted because “[t]he ACA requires the Exchanges be ‘self- sustaining,’ which means they must ‘generate’ funding from their own operations.” See Pl.’s Opp’n at 1. Notwithstanding this ACA requirement, according to the plaintiff, the Challenged Amendment gives the Authority the power to impose the HC Assessment on “non-participating issuers and policies that are not and cannot be sold on the Exchange.” Id. (emphasis omitted). Second, the plaintiff alleges that the Challenged Amendment violates the Takings, Due Process and Equal Protection Clauses because applying the HC Assessment to non-participating health insurance issuers confers no benefit on those assessed carriers, whose business has no nexus to the operations of the D.C. Exchange. Id. at 20-30. Finally, the plaintiff argues that the Challenged Amendment violates the non-delegation doctrine for failing to provide the Authority with adequate standards in exercising its authority to charge and collect the HC Assessment. Id. at 31-33. Each of the plaintiff’s constitutional challenges is addressed seriatim below.
A. ACA Does Not Preempt Challenged Amendment Count I of the Complaint alleges that the Challenged Amendment is preempted because “the ACA does not authorize the District to impose assessments or user fees on the sale of products that are not sold on the Exchange.” Compl. ¶ 63. The plaintiff relies on Section 1311(d)(5)(A) of the ACA, 42 U.S.C. § 1803(d)(5)(A), together with the interpretation of the ACA by the U.S. Department of Health and Human Services (“HHS”), to assert that the HC and (3) only injunctive and declaratory relief is sought so individual member participation is not necessary. See Pl.’s Opp’n at 12.
Assessment, as applied to non-participating issuers, “conflicts with, stands as an obstacle to, and frustrates Congress’ purposes in the ACA.” Id. Review of general preemption principles is helpful before turning to an analysis of the plaintiff’s preemption claim.
1. Preemption Principles
The Supremacy Clause of the U.S. Constitution establishes that the laws of the United
States “shall be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of any
State to the Contrary notwithstanding.” U.S. C ONST . art. VI, cl.2.;
Wyeth v. Levine
, 555 U.S.
555, 584 (2009) (holding that, under the Supremacy Clause, Congress “may impose its will on
the States”). The critical issue in a preemption case is whether Congress intended a federal
statute to preempt a state law.
See Cipollone v. Liggett Grp., Inc.
,
The D.C. Circuit has outlined “three ways in which a federal statute or regulation can
pre-empt state law.”
Geier v. Am. Honda Motor Co
.,
Second, “Congress [may] regulate[] the field so extensively that it clearly intends the
subject area to be controlled only by federal law,” in what is called “field preemption.”
Geier
,
Finally, “implied or conflict pre-emption [] applies when a state law conflicts with a
federal statute or regulation.”
Geier
,
These categories of preemption are not “rigidly distinct.”
Crosby
,
Set against these preemption principles, the Court now turns to analysis of the plaintiff’s preemption claim.
2. Analysis of Plaintiff’s Preemption Claim The plaintiff does not specify the precise type of preemption invoked – express, field or implied – in support of its preemption claim. Nevertheless, express preemption is clearly *16 unavailable. The ACA amends, in part, the Public Health Services Act, which squarely addresses preemption and provides that: “Nothing in this title shall be construed to preempt any State law that does not prevent the application of the provisions of this title.” 42 U.S.C. § 18041(d); Defs.’ Mem. at 13. [7] Express preemption cannot apply because the ACA explicitly recognizes that State laws may be required to carry out the ACA mandate to provide minimum essential health coverage. Similarly, to the extent the plaintiff seeks to invoke “field” preemption by referencing “the authority of Congress to reserve for itself exclusive dominion over an entire field of legislative concern,” Compl. ¶ 61, this effort is unavailing. The ACA expressly grants the States the choice of operating their own Exchanges, pursuant to state law, rather than adopt a Federal Exchange, id. ¶ 2, plainly undercutting any perceived congressional intent to control the entire field of local Exchanges.
The plaintiff appears to “hedge its bets” and invoke an implied preemption by claiming that the Challenged Amendment “conflicts with, stands as an obstacle to, and frustrates Congress’ purposes in the ACA.” Compl. ¶ 63. The plaintiff reasons that the ACA requirement for State Exchanges to be “self-sustaining” by January 1, 2015 preempts the Challenged Amendment. Pl.’s Opp’n at 13-14. In the plaintiff’s view, this self-sustaining requirement “means [the Exchanges] must ‘generate’ funding from their own operations” and, therefore, “[r]eaching outside the Exchange to commandeer funds from companies that do not sell products on the Exchange is not consistent with that statutory requirement.” Id. at 1; see id . at 13 (“by its plain terms, the statute requires that an Exchange be able to ‘generate’ funds from its own operations”). The plaintiff insists that the use in the ACA’s Section 1311(d)(5)(A) of the term “self-sustaining” is an over-arching limitation on the funding options available to the States in *17 funding local Exchanges, with the result that this section preempts any effort by the District to seek funding outside of the operations of the D.C. Exchange itself. The plaintiff contends that this interpretation of Section 1311(d)(5)(A) is reinforced by: (1) the plain meaning of “self- sustaining,” which is defined as “‘maintaining or able to maintain oneself by independent effort,’” id . at 13 (quoting Merriam-Webster.com, http://merriam-webster.com/dictionary); (2) the express terms of this ACA section, id. at 14; (3) the use of the same term “self-sustaining” in another federal statute, the Independent Offices Appropriations Act (“IOAA”), 31 U.S.C. § 9701, id. ; and, finally, (4) the manner in which Federal Exchanges are operated, id. at 14-15.
The defendants, on the other hand, assert that the “plain language of the ACA clearly defeats this claim” because “the ACA specifically grants power to the Authority to generate funding from sources in addition to imposing user fees on health insurance companies selling policies through the D.C. Exchange.” Defs.’ Mem. at 13 (emphasis in original). According to the defendants, the term “self-sustaining” means simply that the State must operate the Exchange independent of federal government funds.
Each party’s construction of ACA’s Section 1311(d)(5)(A) turns on the meaning of the term “self-sustaining.” While the definition of “self-sustaining” is undisputed, the crux of the instant dispute is whether this term as used in ACA limits the manner in which a local Exchange may be funded by the State or, instead, requires the State to fund the local Exchange independently of the Federal government. In other words, does the “self” in “self-sustaining” refer to the Exchange or the State? The plaintiff’s arguments on this issue, while forceful, are ultimately unpersuasive.
In considering the parties’ respective interpretations of the ACA, the follоwing
principles of statutory interpretation are instructive. When dealing with a complex statutory
*18
scheme, like that reflected in the ACA, issues related to particular provisions must be examined
in context with the overall statute and as part of “a symmetrical and coherent regulatory
scheme.”
See FDA v. Brown & Williamson Tobacco Corp.
,
(a) ACA’s Purpose and the Plain Language of ACA Section 1311(d)(5)(A) As noted, the key ACA provision requiring, as of January 1, 2015, non-federal funding to operate State Exchanges, including the D.C. Exchange, is Section 1311(d)(5)(A), which states in full:
(5) FUNDING LIMITATIONS
(A) NO FEDERAL FUNDS FOR CONTINUED OPERATIONS.— In establishing an Exchange under this section, the State shall ensure that such Exchange is self-sustaining beginning January 1, 2015, including allowing the Exchange to charge assessments or user fees to participating health insurance issuers, or to otherwise generate funding, to support its operations.
42 U.S.C. § 18031 (d)(5)(A).
The plaintiff focuses on this provision’s explicit authorization for the Exchange to “charge assessments or user fees to participating health insurance issuers,” 42 U.S.C. § 18031 (d)(5)(A), as reinforcing the meaning of the term “self-sustaining” that the Exchange is limited to raising funds by “ generat [ing] fees through its actual operations.” Pl.’s Opp’n at 14 (emphasis in original). Certainly, this statutory provision makes clear that charging user fees on participating health issuers that sell their products on a State Exchange, is one valid mechanism to generate the necessary funds to operate State Exchanges.
The plaintiff’s heavy reliance on the example of “charg[ing] assessments or user fees to participating health insurance issuers,” however, discounts the significance of the broader authorization that follows, namely: “to otherwise generate funding” in order to fund the Exchange’s operations. With respect to this latter phrase, the plaintiff argues that the Exchange, “not the District as a whole,” is authorized “to otherwise generate funding,” id. at 15, and оffers several examples of alternatives to assessments on non-participating issuers that the Exchange could employ to generate funds. [8] Even if the statutory provision at issue speaks to what the Exchange may do, as the plaintiff contends, the latter phrase “to otherwise generate funding” gives States the “green light” to authorize their Exchanges to raise funds “to support [their] operations” in any way that the State believes is necessary. See Defs.’ Mem. at 13 (“[T[he Authority, in addition to imposing user fees on the several health carriers selling insurance through the D.C. Exchange may ‘otherwise generate funding[,] to support its operations.’” (quoting 42 U.S.C. § 18031(d)(5)(A))).
*20
The plaintiff contests this reading of the statute, arguing that allowing States to authorize
Exchanges to generate funds from outside of the Exchanges’ operations violates “multiple
canons of contract construction.” Pl.’s Opp’n at 16. At the outset, interpretive canons are
employed when the meaning or intent of the statutory language is ambiguous. The Supreme
Court has observed that interpretive canons “are quite often useful in close cases, or when
statutory language is ambiguous. But . . . such ‘interpretative canon[s are] not a license for the
judiciary to rewrite language enacted by the legislature.’”
United States v. Monsanto
, 491 U.S.
600, 611 (1989) (quoting
United States v. Albertini
,
The congressional intent is consistent with the purpose of the ACA to increase health care
accessibility.
NFIB
,
The plaintiff’s construction of the term “self-sustaining” would undermine the viability of the D.C. Exchange’s continued operations, unless rates for D.C. residents obtaining health insurance on that Exchange were substantially increased, thereby reducing the accessibility to affordable insurance. These adverse effects would undermine both the ACA’s purpose and the District’s efforts to further that purpose by setting up the D.C. Exchange. The defendants pointed out at the motions hearing that should the plaintiff prevail, “essentially the state exchange in [the] jurisdiction will fail, and, therefore the District of Columbia is [going to] have to go back to the federal exchange.” [9] The District “will be taking many steps backwards if that’s the result of this motion and that’s not . . . what Congress wanted to happen.” See P.I. Hr’g 68:18-20.
In the face of clear Congressional purpose in the ACA and the District’s effort to fulfill
the mandate of ACA with the Challenged Amendment, the plaintiff responds with reference to
certain canons of statutory construction that reflect a facility with Latinate phrases more than the
*22
applicability of those canons here. While these canons are undoubtedly serviceable devices in
certain contexts, they are poor weapons to attempt to blow holes through such expressly stated
Congressional intent or defeat the plain meaning of ACA’s Section 1311(d)(5)(A). The plaintiff
contends, for example, that the canon
expressio unius est exclusio alterius
(i.e., “expressing one
item of [an] associated group or series excludes another left unmentioned,”
United States v.
Vonn
,
To apply the plaintiff’s suggested canon to restrict funding optiоns available to States
would violate another principle of statutory construction: namely, not reading an implied
negative inference into a statute unless such a meaning is clear. As the Supreme Court recently
explained, “[t]he force of any negative implication” created by including one example of funding
as opposed to another “depends on context.”
Marx v. Gen. Revenue Corp.
,
The plaintiff also argues that reading the phrase “to otherwise generate funding” as
granting broad funding authority for State Exchanges would violate the interpretative canons of
noscitur a sociis
(i.e., “a word may be known by the company it keeps,”
Graham Cnty. Soil &
Water Conservation Dist. v. United States ex rel. Wilson
,
Given the purpose of the ACA and clear Congressional intent to encourage States and the District to set up and fund their own Exchanges, the plaintiff’s restrictive reading of “self- sustaining” to require each State Exchange to generate funds only from the Exchange’s own operations, must be rejected. Moreover, as discussed next, the plaintiff’s interpretation of this ACA provision is contrary to that given by HHS in this agency’s implementing regulations.
(b) ACA’s Implementing Regulations
The parties dispute the import of the ACA’s implementing regulations for the proper construction of Section 1311(d)(5)(A). The defendants contend that “the plain reading of the . . . implementing regulations show that Congress and HHS intended to provide the States with broad discretion to develop a wide range of options for funding plans” to ensure that the Exchange could operate after December 31, 2014 when federal funding ceases. Defs.’ Mem. at 15. The plaintiff, on the other hand, posits that HHS regulations, “if anything, [] only make more clear that an Exchange must ‘generate’ funding from its own operations.” Pl.’s Opp’n at 18. Review of these regulations shows that the plaintiff’s position is simply wrong.
The Final Rule promulgated by HHS to implement the ACA provides significant guidance on a number of issues related to this new, complex law and, in particular, its “direct effects on the distribution of power and responsibilities among the state and federal governments . . . relating to health insurance coverage (that is, for QHPs) that is offered in the individual and small group markets.” 77 Fed. Reg. 18310, 18443 (“HHS Final Rule”) (March 27, 2012). Any Federalism implications were considered “substantially mitigated because under the statute, States have choices regarding the structure and governance of their Exchanges” and are “not require[d] [] to establish an Exchange.” Id . Indeed, the Final Rule makes clear that the regulations are intended “ to afford States substantial discretion in the design and operation of an *25 Exchange , with greater standardization provided where directed by the statute or where there are compelling practical, efficiency or consumer protection reasons.” Id . at 18311 (emphasis supplied). This emphasis on State discretion in administering the operations of State Exchanges is reflected throughout the HHS Final Rule because “States are best equipped to adapt the minimum Exchange functions to their local markets and the unique needs of their residents,” due to the States’ “significant experience performing many key functions.” Id. at 18313. Consequently, “where possible,” HHS “finalized provisions of the proposed rule that provided significant discretion for States to go beyond the minimum standards in implementing and designing an Exchange.” Id.
The HHS Final Rule further addresses the Federalism implications of the ACA and implementing regulations, observing that “[b]ecause States have flexibility in designing their Exchange, State decisions will ultimately influence both administrative expenses and overall premiums.” Id . at 18443. With respect to the funding of State Exchanges, the rule describes the breakdown of funding sources between the Federal and State governments, such that “much of the initial costs to the creation of Exchanges” would be funded by federal grants and “[a]fter this time, Exchanges will be financially self-sustaining with revenue sources at the discretion of the State.” Id . The HHS Final Rule states that “[c]urrent State Exchanges charge user fees to issuers,” id ., but does not indicate that a State’s discretion in tapping “revenue sources” is in any way limited to such user fees.
Moreover, the HHS Final Rule’s discussion of the specific regulation implementing ACA’s Section 1311(d)(5)(A) is notable in the agency’s responses to comments recommending non-approval of State plans absent “a clear plan to achieve financial sustainability” and “specific recommendations on how Exchanges should generate revenue.” Id . at 18322-23. The agency *26 rejected the invitation in the comments to impose restrictions on States’ funding options for State Exchanges. Instead, the HHS Final Rule states that the “ACA directs Exchanges to be self- sustaining and provides flexibility for Exchanges to generate support for continued operation in a variety of ways, such as through user fees.” Id . at 18323. Consequently, in accord with the statutory terms, the regulations “do not limit Exchanges’ options in the final rule by prescribing or prohibiting certain approaches.” Id. On the contrary, maximum flexibility was provided because “user fees parameters, as well as the need for other revenue-generating strategies, may vary by State depending upon several factors such as the number of potential enrollees and the Exchange’s operational costs.” Id .
Several comments and responses are particularly pertinent to the instant challenge to the District’s funding mechanism for the D.C. Exchange. In response to “concerns about specific approaches for generating revenue, such as a provider or general tax,” the agency described “Exchange flexibility in funding ongoing operations” as “critical,” and observed “that the ability to pursue specific funding strategies may vary by State.” Id. Rather than bar any funding option, the agency merely “encourage[d] Exchanges to consider the implications of various fee structures on all stakeholders before making a selection” and, again, stressed “that the Exchange has discretion to set parameters related to assessments.” Id.
Another comment addressed “recommendations regarding the types of issuers that should be subject to any assessments established by the Exchange,” with “the majority of commenters advocat[ing] for a broad-based approach in which all issuers would be subject to the assessment” and “[f]ewer commentators recommend[ing] a narrower approach,” in which “certain plans, such as excepted benefit plans, [would] be excluded.” Id . Other than urging that the “Exchange should identify the issuers that are subject to any user fees or other assessments, if applicable,” *27 id ., the agency left the option of imposing assessments on non-participating issuers up the States. Indeed, the agency’s response indicates that issuers subject to fees or assessments “could include all participating issuers . . . or a subset of issuers identified by the Exchange,” or “an Exchange could exempt certain issuers from assessments.” Id. The agency stressed that “Exchange discretion is important with respect to issuer participation so that Exchanges can consider a broad range of user fee and assessment alternatives.” Id.
Consistent with HHS’ explanations and responses to comments discussed in the Final
Rule, the final regulation regarding “Financial support for continued operations,” codified at 45
C.F.R. § 155.160, requires that each State “ensure its Exchange has sufficient funding in order to
support its ongoing operations beginning January 1, 2015,”
id
. at § 155.160 (b), and provides
that “States may generate funding, such as through user fees on participating issuers, for
Exchange operations,”
id
. at § 155.160 (b)(1);
see also
HHS Final Rule,
The implementing regulations for the ACA, generally, and Section 1311(d)(5)(A), in particular, make amply clear that States were afforded the utmost flexibility in determining how to fund State Exchanges rather than, as the plaintiff urges, limited in how they may raise the funds to operate their Exchanges. See Defs.’ Mem. at 14.
(c) Use of “Self-Sustaining” Term in IOAA
The plaintiff also looks to the use of the term “self-sustaining” in an entirely different federal statute, the IOAA, to support its position that Congress’ directive that the “State shall ensure that such Exchange is self-sustaining beginning January 1, 2015” means that the D.C. Exchange must generate funding from its own operations. This argument misses the mark.
The IOAA, enacted over sixty years ago in 1952, admonishes federal agencies to recover
the cost of providing services and purports to authorize agency discretion in setting fees. This
statute provides, in full, that “[i]t is the sense of Congress that each service or thing of value
provided by an agency (except a mixed-ownership Government corporation) to a person (except
a person on official business of the United States Government) is to be
self-sustaining to the
extent possible
.” 31 U.S.C. § 9701(a) (emphasis added). “The IOAA describes only in the most
general terms how this desideratum of agency self-sufficiency is to be accomplished; agencies
are statutorily instructed to be fair in imposing any fee regime and to consider such factors as
costs to the Government, the value of the service to the recipient, the public policy or interest
being served, and ‘other relevant facts.’”
Cent. & S. Motor Freight Tariff Ass’n v. United States,
Significantly, the IOAA is interpreted “narrowly to avoid constitutional problems.”
Nat’l
Cable Television Ass’n v. United States
,
The IOAA is nowhere referenced in the ACA, which does not make this “sense of
Congress,” 31 U.S.C. § 9701(a), applicable to the States or State Exchanges. Indeed, the
plaintiff concedes, as it must, that the IOAA applies to federal agencies and not to State
Exchanges. Pl.’s Opp’n at 14. Nonetheless, the plaintiff insists that because “self-sustaining”
has an acquired meaning as used in the IOAA, that same meaning must apply to the use of the
term “self-sustaining” in the ACA.
See id.
As an initial matter, while a standard principle of
statutory interpretation is that identical phrases appearing in the
same
statute ordinarily bear a
consistent meaning,
see Powerex Corp. v. Reliant Energy Services, Inc.
,
Moreover, the plaintiff’s argument that the same constraints placed by the IOAA on
Federal agencies also apply to State Exchanges because the same term “self-sustaining” is used
in both the IOAA and the ACA stretches the reach of the IOAA too far. The ACA directive that
State Exchanges be “self-sustaining” does not involve the appropriation or taxing powers of
Congress and, in fact, is triggered by the cessation of
any
federal funding by January 1, 2015.
Thus, the ACA raises none of the same constitutional concerns over exceeding the fee-for-
service authorization in the IOAA that requires the latter statute to be read narrowly. Instead, the
*30
Court looks to the text of the ACA and the context in which that term is used to discern its
meaning.
See King v. St. Vincent's Hosp.
,
(d) Funding of Federal Exchanges Is Irrelevant
Finally, the plaintiff argues that its “interpretation of the statute is consistent with HHS’ own actions in setting up the funding mechanism for the Federal Exchanges, which impose fees solely in relation to products actually sold on such an Exchange.” Pl.’s Opp’n at 14. The plaintiff summarily states that the operations of the Federal Exchanges supports the interpretation that “self-sustaining refers not to the need for States to sustain their Exchanges without federal funding . . . but rather to the need for Exchanges to sustain themselves through their own operations.” Id. at 15.
The manner in which Federal Exchanges are operated is not the appropriate lens through which to view Congress’ intent regarding how States may exercise their discretion and authority to fund State Exchanges. Federal Exchanges may provide a model for State Exchanges but that is a far cry from the plaintiff’s claim that States are restricted to that model. Whatever funding limitations or requirements Congress may impose on Federal Exchanges does not necessarily extend to the States. As discussed, supra , in Part III.A.2(a), Congress plainly gave the States the flexibility in ACA’s Section 1311(d)(5)(A), to determine how their local Exchanges would *31 “otherwise generate funding to support [their] operations” and the States are not limited to user fees or assessments on participating issuers.
* * *
The plaintiff has utterly failed to overcome the “presumption against preemption.”
Biotech. Indus. Org.
,
Moreover, the “case for federal pre-emption is particularly weak where Congress has
indicated its awareness of the operation of state law in a field of interest, and has nonetheless
decided to ‘stand by both concepts and to tolerate whatever tension there [is] between them.’”
Bonito Boats, Inc. v. Thunder Craft Boats, Inc.
,
Accordingly, the ACA does not preempt the Challenged Amendment, as the ACA reflects the intent of Congress for the States to have broad flexibility to implement and operate State Exchanges.
B. The Challenged Amendment Does Not Violate Other Constitutional Provisions
In addition to arguing that the Challenged Amendment is preempted by the ACA under the Supremacy Clause of the U.S. Constitution, the plaintiff attacks the Challenged Amendment as an unconstitutional violation of (1) the Takings Clause of the Fifth Amendment, in Count II, Compl. ¶¶ 64-68; (2) the Due Process Clause of the Fifth Amendment, in Count III, id. ¶¶ 69-73, (3) the Equal Protection Clause of the Fifth Amendment, in Count IV, id. ¶¶ 74-77, and (4) the separation of powers inherent in the U.S. Constitution, due to an alleged improper delegation of legislative power to an executive agency, in Count V, id. ¶¶ 78-81. These claims also fail, for the reasons discussed below.
1.
Takings Clause Claim
Count II of the Complaint alleges that the HC Assessment constitutes a taking of property
without just compensation, in violation of the Fifth Amendment to the U.S. Constitution.
Compl. ¶ 68. The Takings Clause applies to the States as well as the federal Government,
Chicago, B. & Q.R. Co. v. City of Chicago
,
The plaintiff alleges that the Challenged Amendment amounts to an unconstitutional taking because the HC Assessment “is imposed without regard to whether the underlying product was, or even could be, sold on the D.C. Exchange, and thus without regard to what, if any, benefit the assessed issuer received from the Exchange.” Compl. ¶ 67. In the plaintiff’s view, the HC Assessment is a user fee imposed on the plaintiff’s members that “is constitutional only if there is a meaningful nexus between the fee imposed and the benefits supplied in return.” Pl.’s Opp’n at 21. Under this articulation of the applicable constitutional standard, the plaintiff contends, the District has “failed” to “demonstrate some meaningful nexus between those it discretely burdens for an assessment and the benefits that flow from what the assessment funds.” Id. at 23.
The defendants counter that the HC Assessment is not a “user fee” but rather merely a monetary obligation and, as such, “cannot violate the Fifth Amendment Takings Clause.” Defs.’ Mem. at 19. If the Takings Clause does apply to the monetary exaction on non-participating issuers subject to the HC Assessment, the defendants posit that the District need only show “the assessment[] imposed on health insurance companies doing business in the District is ‘reasonably related’ to the benefits of the D.C. Exchange under the ACA.” Id . at 21. Contrary to the plaintiff’s conclusion, the defendants assert that the HC Assessment meets this standard and, in any event, “[t]here is a meaningful nexus between the assessments to be issued by the District and the benefits that ACLI’s members will receive with a successful and viable D.C. Exchange.” Defs.’ Reply in Supp. Mot. Dismiss (“Defs.’ Reply”) at 10.
In short, the parties fundamentally disagree about whether the HC Assessment is a user fee or, instead, a form of monetary exaction immune from the Takings Clause and, even if the HC Assessment is subject to the Takings Clause, what the applicable analytical standard is and whether the HC Assessment would meet that standard and comport with the Takings Clause.
At the outset, before turning to the areas of disagreement between the parties, the Court notes one issue on which both parties agree: the HC Assessment is not a tax. Pl.’s Opp’n at 23 n.19 (“[a]t the hearing on Plaintiff’s motion for preliminary injunction . . . the District concede[d] that the [HC Assessment] is not a tax”) (citing P.I. Hr’g 54:24: Defense counsel stating: “it’s not a tax.”)). [10] The Court will therefore assume for purposes of resolving the pending motion that the HC Assessment is not a tax. [11]
*35 While agreeing that the HC Assessment is not a tax, the parties vehemently disagree over whether this assessment is a “user fee.” The plaintiff insists that the HC Assessment is a “governmental user fee that fails to bear a sufficient relationship to the value received or fails to provide a fair approximаtion of the costs of benefits supplied,” thereby resulting in an unconstitutional taking. Compl. ¶ 66. Indeed, the plaintiff makes the bold assertion that the HC Assessment “‘walks, talks, and squawks’ exactly like a user fee” because it is called a “user fee” for issuers participating on the D.C. Exchange and “is imposed as a percentage of actual premiums sold .” Pl.’s Opp’n at 20 (emphasis in original). The defendants contest this characterization by pointing out the obvious: the HC Assessment “cannot constitute a ‘user fee’ because . . . the assessment applies to health carriers that do not ‘use’ the D.C. Exchange.” Defs.’ Mem. at 18. The plaintiff concedes as much since the gravamen of their complaint about the HC Assessment is its application to non-participating issuers. See Compl. ¶10 (“In effect, the Emergency Legislation imposes ‘user fees’ on non-users, i.e., on companies and products that are ineligible for participation on the Exchange and beyond the Authority’s power to regulate.”). Indeed, if the HC Assessment were a “user fee,” the Challenged Amendment would be superfluous since the Establishment Act already granted the Authority the power to assess such fees. S ee 42 U.S.C. § 18031 (d)(5)(A); D.C. Official Code § 31-3171.03(b)(1); Defs.’ Mem. at 18 (“the Council was not of the view that the imposition of an assessment was a user fee because, if it did, it would have had no reason or need to pass the Emergency Act”).
The defendants have the more persuasive argument on this particular issue and the Court finds that the HC Assessment is not a “user fee.” The plaintiff’s effort to squeeze the HC Assessment into the “user fee” mold has the transparent purpose of triggering the constitutional FCC regulatory order “does not effect a taking of property under the Fifth Amendment” because “a rate providing for the recovery of fully allocated cost, including the actual cost of capital” is not confiscatory).
analysis applicable to user fees. Under this standard, the Supreme Court has held that, while the
amount of a user fee need not be “precisely calibrated to the use that a party makes of
Government services,” such a fee is required to be “a ‘fair approximation of the cost of benefits
supplied.’”
United States
v.
Sperry Corp.
,
The defendants eschew any need to undertake a takings analysis if the HC Assessment is
not a user fee. Since this assessment is the “‘mere imposition of an obligation to pay money,’”
Defs.’ Mem. at 19 (quoting
Commonwealth Edison Co. v. United States
,
The plaintiff contests this reading of the law, stating that “numerous binding Supreme
Court and D.C. Circuit cases readily refute” the defendants’ position that a government-imposed
obligation to pay money cannot be a taking. Pl.’s Opp’n at 21. Nevertheless, the plaintiff
hedges its position by noting that “even if a monetary exaction did have to burden a particular
piece of property, this case, like
Koontz v. St. Johns River Water Mgmt. Dist.
,
The parties’ dispute over the standard applicable to analyzing the HC Assessment under
the Takings Clause is not just skilled litigation posturing but stems from the difficulties in sorting
through the muddle of what commentators have called “famously incoherent” and “a mess” of
Takings Clause jurisprudence. Steven A. Haskins,
Closing the
Dolan
Deal—Bridging the
Legislative/Adjudicative Divide
, 38 U RB . L AW 487, 487 (Summer 2006) (internal quotations and
citations omitted). The Supreme Court’s recent decision in
Koontz
provides general guidance on
three analytical rubrics applicable to judicial review of Takings Clause challenges to different
forms of government action.
[14]
First, if the government “directly seize[s]” a tangible property
interest, such as real property or an easement or lien, then “it would have committed a
per se
taking.”
Koontz
,
Second, if the government does not directly seize property and instead conditions the
receipt of a government benefit on the relinquishment of a property interest, another form of
per
se
taking may occur. The Supreme Court explained that “the government can pressure an owner
into voluntarily giving up property for which the Fifth Amendment would otherwise require just
compensation.”
Koontz
,
The second analytical rubric is not limited to protecting only real property under the
Takings Clause. The
Koontz
Court held that the same “
per se
takings approach” articulated in
Dolan
and
Nollan
“is the proper mode of analysis,” “when the government commands the
*40
relinquishment of funds linked to a specific, identifiable property interest such as a bank account
or parcel of real property.”
Id
. at 2600-01 (citing
Brown v. Legal Foundation of Washington
,
Short of a
per se
taking, the
Koontz
Court also identified a third analytical rubric that
applies to “a regulatory taking.”
Koontz
, at 2600. Determining whether a regulatory taking has
occurred “necessarily entails complex factual assessments of the purposes and economic effects
of government actions.”
Brown
,
Significantly for this case, the
Koontz
Court expressly declined to address whether “the
government can commit a regulatory taking by directing someone to spend money.”
Koontz
, 133
S. Ct. at 2600. Describing “
Penn Central’s
essentially ad hoc, factual inquir[y]” as “difficult and
uncertain,” the
Koontz
Court refused to “extend” that rule “to the vast category of cases in which
someone believes that a regulation is too costly.”
Id.
(alterations in original) (internal quotations
and citations omitted). Thus, the majority of the
Koontz
Court left intact the plurality view
reflected in
Eastern Enterprises v. Apfel
,
Even though the Koontz majority stressed throughout its opinion that the linkage between the monetary exaction and real property was critical to triggering the Dolan/Nollan per se takings analysis, this emphasis was confusingly undermined by the majority’s footnote stating that “this case does not implicate the question whether monetary exaсtions must be tied to a particular parcel of land in order to constitute a taking.” Id . at 2600 n.2. Consequently, the dissent cautioned that “[t]he boundaries of the majority’s new rule are uncertain.” Id. at 2604 (Kagan, J., dissenting). These are the boundaries tested in the instant case, where the HC Assessment is a monetary exaction that is not linked either to any real estate parcel or other “specific, identifiable property interest.”
Given that
Koontz
did not alter the majority view of the Supreme Court, as reflected by
the plurality in
Eastern Enterprises
, however, the defendants, again, have the more persuasive
argument that a general monetary exaction does not qualify as “a specific, identifiable property
interest,”
Koontz
,
In any event, even if the HC Assessment “could be viewed as the first step in a
‘regulatory taking,’”
Brown
,
With respect to the second
Penn Central
factor, given the highly regulated nature of the
insurance industry, the HC Assessment does not interfere with any investment-backed
*44
expectations of the plaintiff’s members. As the D.C. Circuit explained in
District Intown
Properties
,
Finally, with respect to the final Penn Central factor, the nature and purpose of the HC Assessment does not involve any physical invasion of the plaintiff’s members’ property and is intended to advance the public purpose of extending health insurance to the uninsured in the District. Even the plaintiff concedes that this is a legitimate public purpose. Pl.’s Opp’n at 25 (“[T]he relevant question is not whether funding the Exchange is a rational government objective; of course it is.”); P.I. Hr’g 38:4-9 (acknowledging that plaintiff does not dispute the D.C. Exchange provides a public benefit)). Thus, consideration of all three Penn Central factors strongly militates against any finding of a regulatory taking.
The conclusion that the HC Assessment is not a regulatory taking is confirmed by the
Supreme Court’s reasoning in
Brown v. Legal Foundation of Washington.
There, the Court
examined the claim that a State court’s confiscation of the “interest on lawyers’ trust accounts,”
(“IOLTA”),
In sum, the HC Assessment does not constitute either a per se or regulatory taking. Accordingly, the plaintiff’s takings claim in Count Two of the Complaint must be dismissed.
2.
Due Process Clause Claim
Count III of the Complaint alleges that the HC Assessment “is imposed without regard to
whether the underlying product was, or even could be sold on the DC Exchange, and thus
without regard to what, if any, benefit the assessed issuer received from the Exchange.” Compl. ¶
72. Extrapolating from this allegation, the Complaint further claims that the HC Assessment
“bears an insufficient relationship to the government’s intended purpose of defraying the
regulatory and administrative costs of operating the D.C. Exchange” and “therefore violates
carriers’ right to due process . . .”
Id
. ¶¶ 72-73. Consequently even if the defendants can
overcome a Takings Clause challenge, the plaintiff contends that the funding mechanism adopted
in the Challenged Amendment runs afoul of the Fifth Amendment’s Due Process Clause.
[18]
The
Court first addresses the appropriate standard for evaluating the plaintiff’s due process claim
of the way the IOLTA program operates, the compensation due [the plaintiffs] for any taking of their property would
be nil” and, consequently, “[t]here was [] no constitutional violation when they were not compensated.”
Id.
at 240.
[18]
While due process claims are typically analyzed under the Constitution’s Fourteenth Amendment, the District of
Columbia, which is not a State, is subject to the Due Process Clause of the Fifth Amendment.
See Atherton v. D.C.
Office of the Mayor
,
before turning to evaluate the parties’ arguments regarding application of this standard to the Challenged Amendment.
(a) Applicable Standard
The Complaint alludes to the standard for success on the plaintiff’s due process claim, stating that “due process requires a sufficient relationship between the target of the fee and the benefit the government seeks to fund.” Compl. ¶ 71. The plaintiff explains that this analysis “impose[s] the same nexus requirement on assessments directed at a subset of the population as the Takings Clause.” Pl.’s Opp’n at 22. Although somewhat opaque, the plaintiff’s proffered standard suggests that a “sufficient relationship” to satisfy the due process clause exists when the assessed organization enjoys a direct benefit from the program funded by a regulatory monetary exaction. By contrast, the defendants argue that the due process claim should be rejected on grounds that “the assessments are rationally related to a legitimate state interest” and “are constitutional unless they are arbitrary or the classification imposed for the assessment bears no reasonable relation to the goal.” Defs.’ Mem. at 22. The defendants’ articulation of the appropriate standard is much closer to the mark.
The Due Process Clause of the Fifth Amendment protects citizens against deprivation of
“life, liberty, or property without due process of law.” U.S. C ONST . amend. V. The Fifth
Amendment’s application is therefore limited to those cases where “the plaintiff has been
deprived of a protected interest in ‘property’ or ‘liberty.’”
Ralls Corp. v. Comm. on Foreign Inv.
In U.S.
,
Thus, to sustain its substantive due process claim, the plaintiff bears the burden of
showing “that there is no ‘rational relationship between [the challenged statute] and some
legitimate governmental purpose.’”
Gordon v. Holder
,
In particular, when the challenged statute or regulation imposes a monetary exaction, any
burden on the government “to justify its actions” is “only very slight.”
Emory v. United Air
Lines, Inc
.,
violation to establish that the legislature has acted in an arbitrary and irrational way.”
Usery v.
Turner Elkhorn Mining Co.
,
In the face of this well-settled precedent on application of the rational basis standard to
economic regulation, the plaintiff heavily relies on three pre-1930 cases in which the Supreme
Court invalidated government regulations that imposed monetary assessments on a select portion
of the population.
See
Pl.’s Opp’n at 22 (citing
Norwood v. Baker
,
Over one-hundred years ago, in
Lochner v. New York
,
*50 With the applicable standard of review settled, the Court next considers whether the plaintiff has met its burden of establishing that “there is not any reasonable conceivable state of facts that could provide a rational basis for the” Challenged Amendment. Hettinga , 677 F.3d at 479 (internal quotations and citation omitted); see also Armour v. City of Indianapolis , 132 S. Ct. 2073, 2082 (2012) (“burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it”) (quotations and citations omitted).
(b) Rational Relationship Between HC Assessment and Legislative Purposes
When assessing a rational relationship between a challenged legislative action and a
legitimate governmentаl purpose, the court is not “restricted to the stated reasons for passing a
law,”
Gordon v. Holder
,
To withstand a substantive due process challenge, economic legislation “must meet the test [of] a legitimate legislative purpose furthered by rational means.” Gen. Motors Corp. , 503 U.S. at 191. In this case, the Challenged Amendment authorizing the HC Assessment was not an arbitrary choice but resulted from a survey of funding options compiled and analyzed by the Working Group, at the request of the Authority, which sought to fulfill its statutory mandate of ensuring adequate funds for the D.C. Exchange. See Compl. ¶ 45. The Working Group rejected *51 approaches that would have assessed hospital revenue, increased general taxes or limited funding sources to those issuers offering plans on the D.C. Exchange. Pl.’s P.I. Mot., Schlueter Decl., Ex. E (“Pl.’s P.I. Mot. Ex. E”) at 2, ECF No. 11-6. [21] A funding option to assess only participating issuers would have required double-digit percentage assessments on participating issuers in 2015 and resulted in a concomitant increase in costs for those seeking insurance on the D.C. Exchange and the consequent adverse effect on the affordability of such insurance plans in the year that federal funding ceases. Id . at 4, 12. [22] These results would have undermined the goals of both the ACA and the Establishment Act to expand health insurance coverage to uninsured and make such insurance more affordable for both individuals and small businesses. See Defs.’ Mem. at 23 (“[s]uch an approach would have added significantly to the cost of the policies available to enrollees, and thus defeat a primary purpose of the ACA.”). Instead, the Working Group unanimously recommended that “if additional revenue is required, [it] should be raised from an assessment on all health insurance premiums written in the District.” Pl.’s P.I. Mot., Ex. E at 1; Compl. ¶ 45. The Challenged Amendment authorizing the Authority to impose the HC Assessment reflects this recommendation and imposes a small assessment on health insurance *52 issuers generating significant revenues from operations in the District to further the purposes of the D.C. Exchange. As one health insurance provider acknowledged, ensuring all District residents have health insurance will “stabiliz[e] the risk pool, reduc[e] health care costs, and eliminat[e] uncompensated losses.” Defs.’ Mem. at 24 (citing Letter, dated March 28, 2014, from Laurie G. Kuiper, Senior Director, Government Relations, Kaiser Foundation Health Plan of Mid-Atlantic States, Inc., to Mary Beth Senkewicz of the Authority).
In sum, the Challenged Amendment reflects a considered, and not an arbitrary, choice by the District that is rationally related to, and intended to further the goals of, the ACA and the Establishment Act to facilitate access to affordable health insurance for underserved District residents and small businesses.
In addition to meeting the low substantive due process threshold reflected in the rational basis standard, the defendants go further to proffer multiple ways in which the continued operations of the D.C. Exchange funded by the HC Assessment benefits even non-participating assessed issuers. See Defs.’ Reply at 9-13. For example, the defendants proffer, first, that “the Exchange creates direct and clear benefits for carriers of supplemental insurance, which include some of the companies in [plaintiff’s] membership” because increasing the availability of affordable major medical insurance plans will advance the market for supplemental insurance. See id. at 10. More affordable major medical plans for small employers, for example, may enable such employers to offer benefits to employees that include both major and supplemental medical benefits and thereby provide a competitive advantage for businesses within this jurisdiction. Id. at 11 (the D.C. Exchange may “free up resource[s] to be redistributed towards supplemental health plans” offered by employers). These “free[d] up resources” may, in turn, *53 increase the business of plaintiff’s members that sell such supplemental insurance products. Id . [23] The defendants further point out that certain excepted benefit products, such as hospital indemnity coverage, cannot be sold to individuals who do not already have major medical insurance, which the D.C. Exchange provides. See Defs.’ Mem. at 21.
Second, the D.C. Exchange creates a healthier population by providing affordable minimum essential health insurance. This healthier D.C. population may directly benefit issuers of supplemental insurance products because “numerous supplemental benefit plans pay claims upon the onset of a disability or upon death, which may be avoided in the case of a disability, or in either case have a later onset after more premiums [have] incurred.” Defs.’ Reply at 12. Relatedly, the D.C. Exchange not only increases coverage but also offers more comprehensive coverage which, according to the defendants, could reduce the cost to issuers of certain supplemental products offered by the plaintiff’s members, such as long-term care. Id.
Finally, by creating another marketplace for major medical plans, the D.C. Exchange enhances competition, which in turn lowers prices and enables consumers to save money that could be used to buy supplemental health products offered by the plaintiff and its members. Id. at 13.
The plaintiff rejects the likelihood of these anticipated benefits because they “simply do
not extend to the vast majority of non-participating issuers and products” subject to the HC
Assessment, Pl.’s Opp’n at 26, and are purely “speculative,”
id.
at 27. Even if the defendants
“got it wrong,” however, and none of the anticipated benefits to the assessed issuers come to
fruition, this is not the applicable test for a substantive due process violation and does not
warrant striking down the Challenged Amendment as unconstitutional. As Judge Mikva
*54
explained over thirty years ago, “[u]ndoubtedly, the political process sometimes gets it wrong,
but the Constitution presumes that, as long as the groups involved have a fair chance to fight in
the political arena, the democratic process will right itself. Legislatures may change flawed laws,
or voters may even ‘throw the bums out.’”
Beach Commc’n, Inc. v. FCC
,
All that is required to pass constitutional muster, under the Fifth Amendment’s Due
Process Clause, is a non-arbitrary, rational relationship between the Challenged Amendment and
the purpose of operating the D.C. Exchange. This standard is clearly met. Therefore, the Court
will not second-guess the legislature to find a substantive due process violation. The fact that
assessments are charged to non-participating health issuers deriving significant revenues from
the District is simply not enough to impugn this rational relationship.
See Ass’n of Bituminous
Contrs. v. Apfel
,
3. Equal Protection Clause Claim
Count IV of the Complaint alleges that the Challenged Amendment “creates an unreasonable classification that is not rationally related to the District’s objective” by “impos[ing the HC Assessment] on certain D.C. businesses without regard to whether the products they sell are, or even could be, sold on the D.C. Exchange” when this assessment “is not imposed on other similarly situated businesses in the District that cannot sell their products on the D.C. Exchange.” Compl. ¶ 76. According to the plaintiff, this “violates carriers’ right to equal protection . . . .” Id. ¶ 77. The defendants counter that “[b]ecause there is a rational relationship between the assessment and the legitimate governmental purpose of maintaining the D.C. Exchange, [the plaintiff] does not—and cannot—come close to meeting” its burden of establishing an equal protection violation. Defs.’ Mem. at 26. The defendants are correct.
Under the equal protection clause, “no State shall ‘deny to any person within its
jurisdiction the equal protection of the laws,’ which is essentially a direction that all persons
similarly situated should be treated alike.”
City of Cleburne, Tex. v. Cleburne Living Ctr.
, 473
U.S. 432, 439 (1985) (quoting
Plyler v. Doe
,
This case involves neither a suspect class entitled to special scrutiny nor a fundamental
right. Instead, the Challenged Amendment merely imposes a monetary exaction against all
health insurance issuers generating significant revenues from their operations in the District. The
plaintiff’s equal protection claim is based on the differential treatment of assessed issuers from
other “businesses in the District that cannot sell their products on the D.C. Exchange,” Compl. ¶
76, but, at base, this difference affects only a purely economic interest. As the D.C. Circuit
explained, “the equal protection component of the Fifth Amendment’s Due Process Clause does
not require that all persons everywhere be treated alike. Instead, it imposes the rather more
modest requirement that government not treat similarly situated individuals differently without a
rational basis.”
Noble v. United States Parole Comm’n
,
Despite the plaintiff’s protestations about the unfairness resulting from imposition of the
HC Assessment on its members, the Challenged Amendment is subject to the same “highly
deferential rational basis standard” of review applicable to the due process clause claim, and “the
District’s policy . . . is entitled to a presumption of rationality.”
Dixon
,
The burden is particularly onerous for the plaintiff in this сase since, as noted in the
discussion of the plaintiff’s substantive due process claim, courts “grant statutes involving
*58
economic policy a ‘strong presumption of validity.’”
Hettinga
,
Courts have recognized that the legislature is often left “striv[ing] for the best possible
outcome under the circumstances . . . [b]ecause the only alternative would be to discourage
legislators from making even an attempt to address complicated social and economic problems.”
Beach Commc’ns, Inc.
,
The plaintiff may indeed be correct that a better fit exists but this is not sufficient to “overcome the presumption of rationality that applies to government classifications.” Dixon , 666 F.3d at 1342 (internal quotations and citation omitted). As ample post- Lochner era precedent counsels, the courts should not—and this Court will not—second-guess a lеgislature’s policy choice, if supported by any conceivable set of facts, absent a showing that the choice made burdens protected classes or rights. That is the mandate of rational basis review. Set against these principles and in view of the defendants’ plausible justifications for assessing the HC Assessment against non-participating health insurance issuers generating significant revenue in the District, see, infra , Part III.B.2(b), the HC Assessment survives the plaintiff’s equal protection challenge. This claim in Count IV of the Complaint is, therefore, dismissed.
4. Non-Delegation Doctrine Claim
In Count V of the Complaint, the plaintiff alleges that the Challenged Amendment granting the Authority the power to impose the HC Assessment “unlawfully and unconstitutionally delegates to the Authority an arbitrary and unlimited legislative power,” in violation of the United States Constitution and the D.C. Home Rule Act. Compl. ¶¶ 80-81. In support of this claim, the plaintiff makes two arguments: first, the Authority’s power to charge the assessment cannot be checked by a political process, since the plaintiff’s members “are *60 wholly outside the Authority’s regulatory ambit,” see Pl.’s Opp’n at 31; and, second, the Challenged Amendment does not provide the Authority with intelligible standards to apply in exercising its discretion to impose the HC Assessment, id. Both arguments are unavailing and do not save the plaintiff’s last claim.
At the outset, the parties do not dispute that legislation enacted by the District is subject
to the non-delegation doctrine inherent in the tripartite structure and terms of the United States
Constitution.
See
U.S. C ONST . art I, § 1 (providing that “[a]ll legislative Powers herein granted
shall be vested in a Congress of the United States”). “Through the Home Rule Act, Congress
delegated some, but not all, of its Article I ‘exclusive’ legislative authority over the District of
Columbia to the D.C. Council.”
Marijuana Policy Project v. United States
,
The plaintiff’s first argument is that “delegation concerns are at their zenith” in this case
because “an agency seeks to exercise power over third parties that have no relationship with or
meaningful ability to influence the agency exercising that power.” Pl.’s Opp’n at 31. In support
of this argument, the plaintiff relies on the seminal case of
McCulloch v. Maryland
,
Indeed, the plaintiff concedes that, as the Supreme Court recognized in McCullough , the political process “is in general, a sufficient security against erroneous and oppressive taxation,” id. at 428, but contends that “the Authority has strong incentives to capitulate to the demands of participating issuers that it wants and needs to continue selling their products on the Exchange.” Pl.’s Opp’n at 31-32. According to the plaintiff, the Working Group, which recommended implementation of a broad-based HC Assessment rather than raising fees on participating issuers, included representatives from participating issuers that sell products on the Exchange. See Pl.’s Opp’n at 9-10 (“[n]otwithstanding the readily available alternatives . . . the Working Group recommended the third option, which allowed the providers who actually participated in the group to decrease their own contributions to the costs of the Exchange . . . by outsourcing these costs to providers who do not and cannot participate on the Exchange”) (emphasis omitted). *62 Even if the plaintiff is correct that the Working Group participants had an incentive to curb the fees assessed on participating issuers by adopting a recommendation for a more broad-based funding mechanism, this is an insufficient basis to hold the Challenged Amendment unconstitutional. While the plaintiff’s criticism of the Working Group may have validity, the Challenged Amendment was only enacted after review in the normal, legislative process. As a rеsult, the dynamics animating the Supreme Court’s concern in McCulloch are not present in the instant action and all that is needed are intelligible standards to overcome the plaintiff’s non- delegation challenge.
The plaintiff’s second argument is that the District’s grant of such broad power to the
Authority to impose the HC Assessment through the Establishment Act and the Challenged
Amendment amounts to an unconstitutional delegation of legislative authority. Pl.’s Opp’n at
37-39. In evaluating this argument, the Court is mindful that “the test is whether Congress has
set forth ‘an intelligible principle to which the person or body authorized to act is directed to
conform.’”
Taxpayers of Michigan Against Casinos v. Norton
,
The plaintiff insists that the standards set out in the Establishment Act and the Challenged
Amendment are insufficient. Pl.’s Opp’n at 37-39. A finding of excessive delegation of
authority is extremely rare, however, given the low threshold that legislation must meet to
overcome a non-delegation doctrine claim.
See United States v. Ross
,
Review of the Establishment Act and the Challenged Amendment reveals sufficient guidance for the Authority’s exercise of its discretion in funding the operations of the D.C. Exchange. For example, any money collected in the Fund to operate the Exchange “shall not revert” and is only available for the purpose of funding the D.C. Exchange. D.C. Code § 31- 3171.03(c). In addition, the Challenged Amendment provides guidance on the timing and application of the HC Assessment, authorizing the Authority to charge an annual assessment on “each health carrier doing business in the District with direct gross receipts of $50,000 or greater” based on gross receipts from the preceding fiscal year. D.C. Code § 31-3171.03(f)(2). Finally, the Authority’s power is further restricted to assess fees only up to the amount necessary to operate the Exchange, stating that “[t]he amount assessed shall not exceed reasonable projections regarding the amount necessary to support the operation of the Authority.” Id. *64 (emphasis supplied). The cost of the Exchange is not capped, however, and therefore, no maximum exists on how much can be assessed each year based on reasonable projections. [26]
Regulations containing similarly broad standards limiting agency charges to the amount
necessary to fund an administrative activity have been upheld in the face of a non-delegation
doctrine challenge.
See, e.g.
,
Skinner
,
IV. CONCLUSION
For the foregoing reasons, the Challenged Amendment authorizing the HC Assessment is neither preempted by the ACA nor an unconstitutional violation of the Takings, Due Process and Equal Protection Clauses, or the non-delegation doctrine. Accordingly, the defendants’ motion to dismiss for failure to state a claim is granted and the plaintiff’s motions for preliminary injunctions are denied as moot.
An order consistent with this Memorandum Opinion will be contemporaneously entered. Date: November 13, 2014
__________________________ BERYL A. HOWELL United States District Judge
Notes
[1] The individuals named as defendants are Mila Kofman, in her official capacity as Executive Director of the Authority; the Executive Board of the Authority; Diane C. Lewis, in her official capacity as Chairperson of the Executive Board of the Authority; and Vincent C. Gray, in his official capacity as Mayor of the District of Columbia.
[2] The Emergency Amendment Act was passed by the D.C. Council on May 22, 2014 and remained in effect for only
90 days, expiring on August 20, 2014. EAA, D.C. Act 20-329, 61 D.C. Reg. 5363 (providing that it “shall remain in
effect for no longer than 90 days, as provided for emergency acts of the Council of the District of Columbia in
section 412(a) of the District of Columbia Home Rule Act, approved December 24, 1973 (87 Stat. 788; D.C. Official
Code § 1–204.12(a))”);
see also
Pl.’s Mem. in Supp. of Prelim. Inj. (“Pl.’s P.I. Mem.”) at 14, n.12, ECF No. 11. On
June 18, 2014, the D.C. Council passed the TAA, which became effective on August 8, 2014, after a 30 day
Congressional review period, and expires after 225 days, on March 21, 2015. TAA, D.C. Act 20-356 (providing that
“[t]his act shall expire after 225 days of its having taken effect”);
see also
Pl.’s P.I. Mem. at 14, n.12. Even though
both the Emergency Amendment Act and the TAA were enacted by the time this lawsuit was initiated on July 3,
2014, the Complaint challenges only the Emergency Amendment Act, which is no longer in effect. Indeed, the
plaintiff recognized the inevitable expiration of the Emergency Amendment Act in its Complaint, Compl. ¶ 47, n.1,
but has taken no steps to amend the Complaint to challenge the TAA, the law currently in effect authorizing the HC
Assessment, a deficiency not addressed by the defendants. Rather, the plaintiff simply asks the Court to assume the
relief sought applies to both the expired law and the law currently in effect, even though the Complaint only seeks
relief from the former.
See
Prelim. Inj. Hr’g Tr. (“P.I. Hr’g”) 11:15-21 (The Court: “So part of your injunction is
asking me to stop enforcement of the emergency amendment and the temporary legislation. Is that right?” Pl.’s
Counsel: “Your Honor, to the extent, yes, that the assessments would come under the temporary legislation rather
than the emergency legislation.”), ECF No. 35. While the principle is well established that a challenge to an expired
law is moot,
see, e.g.
,
Burke v. Barnes
,
[3] The Challenged Amendment provides the following definitions for two key terms: (1) “Health Carrier” is defined as “an entity subject to the insurance laws and regulations of the District that contracts, or offers to contract, to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, including: (A) An accident and sickness insurance company; (B) A health maintenance organization; (C) A hospital and medical services corporation; or (D) Any other entity providing a health benefit plan,” D.C. Code § 31-3171.01(6); and (2) “Direct gross receipts” mean “all policy and membership fees and net premium receipts or consideration received in a calendar year on all health insurance carrier risks originating in or from the District of Columbia,” D.C. Code § 31- 3171.01(3A).
[4] In support of its request for injunctive relief, the plaintiff has highlighted that “[n]either the legislation enacting the [HC Assessment] nor the Emergency Rule authoriz[es] the Exchange to issue a refund of fees paid.” Pl.’s Emerg. P.I. Mem. at ¶ 6.
[5] The plaintiff initially incorporated a request for a preliminary injunction in the Complaint (“Count VI”), but subsequently complied with Local Civil Rule 65.1(c) by filing a separate motion for preliminary injunctive relief. See LCvR 65.1(c) (“an application for a preliminary injunction shall be made in a document separate from the complaint”); Pl.’s Mot. Prelim. Inj., ECF No. 11.
[6] Although the defendants’ mention that the plaintiff failed to present “facts relating to ACLI’s members specific to
this case,” Defs.’ Mem. at 2, n. 2, they do not expressly challenge or examine the bases for the plaintiff’s standing,
see generally
Defs.’ Mem.; P.I. Hr’g 6
:
11-12 (Plaintiff’s counsel noting, “I don’t think the District is in any way
contesting [the associative standing issue].”). The Court does not have that luxury. “[T]he requirement that a
claimant have ‘standing is an essential and unchanging part of the case-or-controversy requirement of Article III.’”
Davis v. FEC
,
[7] The plaintiff appears to concede this point, arguing that the lack of express preemption “is not the end of the inquiry” because the state law must comply with rather than conflict with the ACA. Pl.’s Opp’n at 19.
[8] The plaintiff suggests, “[f]or instance, an Exchange could [generate funding] by investing its surplus funds, offering services to other Exchanges (call center, computer, etc.), advertising, imposing assessments on purchasers, or operating stand-alone marketplaces (e.g., vision), as some States are contemplating.” Pl.’s Opp’n at 17.
[9] The D.C. Circuit recently held that the ACA does not allow federal tax credit subsidies for insurance purchased on
Federal Exchanges.
See Halbig v. Burwell
,
[10] The plaintiff explains, and the defendants do not dispute, that D.C. law precludes the characterization of the
assessment as a tax because local law limits taxes on insurance companies to a 2 percent premium tax. Pl.’s Opp’n
at 24 n.19 (citing D.C. Code § 47-2608 (a)). While D.C. Code § 47-2608 (a)(1)(B) authorizes, in addition to the
premium tax, the imposition of “fees and charges provided by the insurance laws of the District including
amendments made to such laws by this chapter,” counsel for the defendants stated at the motions hearing that the
HC Assessment does not fall under this provision. P.I. Hr’g. 55:14-16. Notably, the parties’ agreement on this issue
confirms the observation by the Supreme Court that “teasing out the difference between taxes and takings is more
difficult in theory than in practice.”
Koontz v. St. Johns River Water Mgmt. Dist.
,
[11] In determining whether an assessment is a tax or a regulatory fee, “[t]here is no single test to evaluate the
assessment's character,”
Thomas v. Network Solutions
,
[12] The plaintiff raises this argument only in a footnote in its opposition. The D.C. Circuit has instructed that “the
court generally declines to consider an argument if a party buries it in a footnote and raises it only in a conclusory
fashion.”
Nat’l Oilseed Processors Ass’n v. Occupational Safety & Health Admin.
, No. 12-1228, 2014 WL
5393871, at *9 (D.C. Cir. Oct. 24, 2014) (citing
CTS Corp. v. EPA
,
[13] The plaintiff seems to concur that its Takings Clause claim should be evaluated, as the defendants suggest, under the “reasonably related” standard, indicating that the same standard applies to its takings, equal protection and due process claims. Pl.’s Opp’n at 22 (“bedrock due process and equal protection principles impose the same nexus requirement on assessments directed at a subset of the population as the Takings Clause”). At the same time, the plaintiff does not explain precisely what the difference is, if any, between the “reasonably related” standard and the standard it also articulates as applicable, namely “a meaningful nexus between the fee imposed and the benefits supplied in return,” id. at 21; id . at 25, such that the benefit to the plaintiff’s members are not “vastly out of proportion” to the cost of the HC Assessment, id . at 27.
[14] The Ninth Circuit recently “enter[ed] the doctrinal thicket of the Supreme Court’s regulatory takings
jurisprudence,” and discerned “three ‘relatively narrow categories’ of regulations which work a categorical, or per
se, taking:” “the first category . . . holds that permanent physical invasions of real property work a per se taking.
The second . . . teaches that regulations depriving owners of all economically beneficial use of their real property
also work a per se taking. The third line of cases, represented by
Nollan
and
Dolan
, articulate a more nuanced rule
[and] hold that a condition on the grant of a land use permit requiring the forfeiture of a property right constitutes a
taking unless the condition (1) bears a sufficient nexus with and (2) is roughly proportional to the specific interest
the government seeks to protect through the permitting process. If those two conditions are met, then the imposition
of the conditional exaction is not a taking.”
Horne v. USDA
,
[15] In
Eastern Enterprises
, the Supreme Court struck down a statute that retroactively imposed on a former mining
company an obligation to pay for the medical benefits of retired miners and their families, with a four-Justice
plurality concluding that the statute violated the Takings Clause and Justice Kennedy concurring in the result on Due
Process, rather than Takings Clause, grounds.
[16] The parties presented no analysis of the HC Assessment as a regulatory taking since the plaintiff contends that the Dolan/Nollan per se takings analysis applies and the defendants contend, correctly under current—though somewhat “uncertain”—Supreme Court jurisprudence, that the assessment is not the type of property interest that triggers a Takings Clause claim.
[17] While the IOLTA program was not a regulatory taking, the Brown Court concluded that it could be a per se taking due to the transfer of the beneficial ownership of interest funds from specific, identifiable IOLTA accounts for a public use. Id. at 235. Nevertheless, the Court found no compensatory taking occurred, explaining that “[b]ecause
[19] The plaintiff explains that “the point is not that [the plaintiff] was denied an opportunity to participate in the process through which the District arrived at its misguided solution. No amount of process allows the government
[20] Another Judge concurring in the
per curiam
opinion in
Hettinga v. United States
, declined to join in Judge
Brown’s concurring opinion, citing “the Supreme Court's long-standing approach to claims of economic liberty” and
this “broad area of the Supreme Court's settled jurisprudence.”
[21] Although matters outside the pleadings generally must be excluded when evaluating the sufficiency of a
Complaint on a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), courts may review materials
referenced in the Complaint, particularly where, as here, the plaintiff has presented the document to the Court in
support of its claims.
See Abhe & Svoboda, Inc. v. Chao
,
[22] The plaintiff indicates that “the District’s funding problem was a temporary one of its own creation.” Pl.’s Opp’n at 9; id . at 10 (“the funding problem the Exchange faces is plainly a temporary one of the District’s own making”). This argument is immaterial since the focus of rational basis review is not whether policy-makers in the District could have performed better but whether the legislative choice made bears a reasonable relationship to the policy goal.
[23] The defendants note, for example, that Unum, the company that the plaintiff relied upon to establish organizational standing in this matter, only offers products through employers. See Defs.’ Reply at 11 n.11.
[24] The Fourteenth Amendment’s Equal Protection Clause, by its terms, applies only to the States, but the Fifth
Amendment’s due process clause is applicable to the District of Columbia and “has been construed to incorporate a
guarantee of equal protection of the law.”
United States v. Jackson
,
[25] The Home Rule enumerates certain subjects that are not considered “rightful” and the Council may not legislate on those subjects, including imposing a commuter tax on non-residents or authorizing the construction of buildings taller than permitted by the monument restriction. See D.C. Code Ann. § 1-206.02(a)(4), 1-206.02(a)(8).
[26] The plaintiff points out that, in 2013, the Authority projected annual operating costs in 2014-2016 for the D.C. Exchange to be between $20 and $25 million but that cost estimate has already increased with a projected operating budget for the D.C. Exchange in 2015 of $28.75 million. Pl.’s Prelim Inj. Mem. at 11 (citing Schlueter Decl. Exh. E, D.C. Health Benefit Exchange Authority, Recommendations of the Working Group on Financial Sustainability to the District of Columbia Health Benefit Exchange Authority (May 23, 2013) at 3). Moreover, the plaintiff cites statistics showing that the D.C. Exchange “is the second most expensive in the country,” id. , and that, by comparison, Vermont's local Exchange is estimated to cost “only $10.6 million—even though it has more than three times as many private enrollees as the District,” Pl.'s Reply Mem. Supp. Mot. Prelim. Inj., at 31, ECF No. 24. The plaintiff’s concerns regarding the Authority's management of the D.C. Exchange are legitimate, in view of these growing expense projections, particularly in comparison to other State Exchanges serving substantially greater numbers of enrollees, and these concerns may even raise issues warranting increased oversight, but nevertheless do not amount to a constitutional violation.