ORDER ON MOTION TO DISMISS
Before the Court is Defendant’s Partial Motion to Dismiss (Docket # 30). For the reasons explained herein, the Court GRANTS the Motion.
I. LEGAL STANDARD
A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) tests the “legal sufficiency” of a complaint. Gomes v. Univ. of Me. Sys.,
However, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
II. BACKGROUND
Plaintiff Maine Education Association Benefits Trust (“MEABT” or the “Trust”) was formed in 1993. The Maine Education Association (“MEA”) is the settlor of the Trust and the Trust furthers MEA’s organizational principle and goals. MEABT is governed by a nine member board of trustees, all of whom are current or retired Maine public school employees.
A. The MEABT Plan
MEABT insures participating employees by purchasing an insurance policy from Anthem, a state regulated insurance eom
Because of the size of the membership pool, MEABT is able to minimize administrative costs and spread the costs of large claims over the group thereby resisting fluctuations in premiums. In furtherance of its cost spreading goals, the MEABT plan is “community-rated” meaning the coverage is priced “based on the total utilization costs for the entire group statewide, without geographic variation or the consideration of individual employers’ demographic mix, prior utilization or loss experience.” (Am. Compl. (Docket #23) ¶ 23.) MEABT’s trustees decided in an exercise of their fiduciary duties to provide insurance coverage on a statewide community-rated basis with the understanding that participants who are actuarially better risks would help subsidize the premiums paid by other members who are actuarially less attractive to insurers and the goal of ensuring that the entire group would have access to reasonably affordable health insurance. The Trustees’ decision to charge one statewide rate for each benefit package is a central part of the plan’s design and well-known by participants and employers.
The alternative to MEABT’s “community-rated” insurance would be “experience-rated” group health insurance — that is, group health insurance coverage rated and priced based on the loss experience of an individual district or other education institution. In general, for a variety of reasons, health care costs and health insurance premium rates in Northern and Eastern Maine are greater, on average, than the costs and premium rates in Southern Maine. As a result, “experience rated” group health insurance would typically be more expensive for a school district in Northern or Eastern Maine than it would be for one in Southern Maine.
B. MEABT’s Position on Loss Information
As defined in Maine statute, “loss information” includes “the amount of premium received, the amount of claims paid and the loss ration” but excludes “any information or data pertaining to medical diagnosis, treatment or health status that identifies an individual covered under the group
Under the MEABT Trust Agreement, the Trustees have “absolute discretion and authority to make all fiduciary decisions, plan provision interpretations and constructions and other determinations under this Trust and any plans maintained under the Trust ... including without limitation, decisions relating to the use and dissemination (if any) of the participant claims experience data under any plan maintained by the Trust.” (Am. Compl. ¶ 85.)
Over the years, various school districts have requested loss information and claims experience data for their district from the Trust. The Trust has responded to each request by indicating that it does not calculate or release loss information for districts or other groups within the Trust. {See Am. Compl. ¶34.) MEABT has deliberating decided that “organizing the experience and claims history date by [district] would undermine the Trust’s ability to charge one statewide rate for insurance coverage.” (Am. Compl. ¶ 36.) As a result, MEABT has always negotiated with its insurer that “loss experience and claims histories for individual employers would not be revealed to anyone, whether outside or inside of Anthem or its predecessors’ organizations, without express permission of MEABT.” (Am. Compl. ¶37.) The current Contract between MEABT and Anthem specifically states:
Ml experience data relative to the MEABT and its subgroups is owned by the Trust, and that data will not be released, either directly or indirectly, by Anthem without the prior written consent of the Trust, and the Trust can withhold its permission for any reason it deems appropriate. Additionally, Anthem agrees not to utilize data relating to specific active subgroups for standalone rating purposes.
(Contract (Docket # 1-2) at 5.) MEABT avers that an identical provision has appeared in each contract since 2005. Pursuant to this provision, MEABT and Anthem consider the loss information and claims history of individual districts to be the confidential property of the Trust and a trade secret owned by the Trust. As an asset of the Trust, the Trustees are obligated to manage this information for the sole benefit of the beneficiaries and plan participants.
C. LD 1326
In this case, MEABT seeks to challenge sections of the State of Maine’s L.D. 1326, “An Act to Mlow School Administrative Units to Seek Less Expensive Health Insurance Mternatives” (hereinafter “LD 1326”). LD 1326 was passed by the Maine Legislature on June 16, 2011, signed into law on June 21, 2011, and became effective on October 1, 2011. In this case, MEABT seeks to challenge the portions of that state law that are codified at 20-A M.R.S.A. § 1001(14)(D) and 24-A M.R.S.A. § 2803-A(2).
As amended 20-A M.R.S.A. § 1001(14)(D) reads:
Insurance purchase by competitive bidding....
D. In order to facilitate the competitive bidding process in procuring health insurance for a school administrative unit’s employees under this subsection, the administrator for an individual school plan or for a group plan for a multiple-school group shall seek and obtain competitive bids through a request for proposal process from qualified insurers at least once every 5 years commencing July 1, 2012. The administrator for any such group plan shall make the request for proposal responses available to requesting school administrative units, excluding any portions of the request for proposal responses considered to be confidential proprietary information by the submitting insurers. If any such individual school plan or group plan is subsequently self-insured, in whole or in part, the school board shall compare the overall cost of such a self-insured plan, including projected claims, all administrative expenses and reinsurance expenses, to the cost of insured products at least once every 5 years commencing July 1, 2012.
Id.
As amended 24-A M.R.S.A. § 2803-A(2) reads:
Disclosure of basic loss information.
Upon written request, every insurer shall provide loss information concerning a group policy or contract to its policyholder, to a former policyholder or to a school administrative unit pursuant to Title 20-A, section 1001, subsection 14, paragraph E within 21 business days of the date of the request. This subsection does not apply to a former policyholder whose coverage terminated more than 18 months prior to the date of a request.
Id. Together, these statutory sections allow school districts to obtain their own aggregate loss information from health insurers and essentially mandate that school districts use this information to obtain competitive bids for employee health insurance every five years. Ultimately, the Trust anticipates that LD 1326 will result in the withdrawal of districts with favorable loss experience from the MEABT thereby shrinking the number of participants in the pool and eliminating the economic advantage MEABT currently secures for its plan participants.
On October 6, 2011, Regional School Unit # 23 invoked the new disclosure rules and wrote to Anthem requesting disclosure of the loss information for its own school administrative unit. (See Ltr. from Sharon LaFlamme (Docket # 1-3).)
D. Procedural History
In response to districts seeking to invoke the new state law, MEABT filed this action on October 12, 2011 naming Eric Cioppa, the Superintendent of Insurance of the State of Maine, as Defendant. The Amended Complaint (Docket # 23) asserts that LD 1326 should be declared invalid on multiple bases. Count I asserts that the provisions are preempted by the Employee Retirement Income Security Action (“ERISA”), 29 U.S.C. § 1144(a). Count II claims that the LD 1326 amounts to an unlawful taking under both the Fifth Amendment of Unites States Constitution and the analogous provision of the Maine Constitution. Count III alleges a deprivation of property without due process in violation of the United States Constitution and the Maine Constitution. Count IV alleges that the state statutes create an impairment of contract in violation of the Contract Clauses of both the United States and Maine Constitutions. Count V asserts a claim under 42 U.S.C. § 1983 based on the previously asserted constitutional violations.
In connection with the Complaint, Plaintiffs moved for preliminary injunctive relief. Defendant agreed to hold off on any enforcement of the newly-enacted statute pending the resolution of the initial round of motion practice. (See Oct. 24, 2011 Report (Docket #20) at 1.) Defendant then filed the pending motion to dismiss in connection with responding to the still pending motion for preliminary injunction, which is the subject of a separate order.
III. DISCUSSION
Defendant has moved to dismiss three counts of Plaintiffs’ five-count Amended Complaint. Specifically, Defendant argues
A. Count I: ERISA Preemption
Plaintiffs invoke two different types of ERISA preemption: express preemption and conflict preemption.
1. Express Preemption
While ERISA expressly preempts state laws to the extent that they “relate to any employee benefit plan” governed by ERISA, ERISA also contains a “savings clause” which exempts from preemption “any law of any State which regulates insurance.” 29 U.S.C. § 1144(a) & (b)(2)(A). In Kentucky Association of Health Plans v. Miller,
Plaintiffs argue that LD 1326 does not meet Miller’s requirement of a substantial effect on the risk pooling arrangement between insurer and insured. Instead, Plaintiffs assert that LD 1326 is significantly different from other cases cited by Defendants that found state laws saved from preemption under the two-prong Miller test. Plaintiffs invite the Court to reach the same result reached by the Third Circuit in Barber v. Unum Life Ins. Co.,
While neither the parties nor this Court have found a previously reported case holding that ERISA’s savings provision applies to a state law similar to LD 1326, this lack of on-point precedent does not prevent the Court from finding that Plaintiffs have failed to state a claim for express preemption under ERISA. The fact remains that Maine has regulated the disclosure of loss information by insurers for many years. See 1995 Me. Laws, ch. 71 § 2 (codified as amended at 24-A M.R.S.A. § 2803-A). As Defendant indicates in his Motion to Dismiss, LD 1326 was designed to address a “loophole” in section 2803-A
2. Conflict Preemption
The Court next considers whether LD 1326 is subject to conflict preemption. Under the doctrine of conflict preemption a state law is preempted if “it actually conflicts with federal law” thereby making “compliance with both state and federal law ... impossible” or “when the state law stands as an obstacle to the accomplishment and execution of the full purposes of Congress.” Fitzgerald v. Harris,
Plaintiffs argue that LD 1326 conflicts with 29 U.S.C. § 1182, which essentially prohibits a group health plan from creating eligibility rules for plan participants that are based on a variety of “health status-related factors,” including medical conditions, claims experience, medical history, genetic information or disability. See 29 U.S.C. § 1182(a)(1). Section 1182 was enacted as part of the Health Insurance Portability and Accountability Act (“HIPAA”), Pub.L. No. 104-191, 110 Stat. 1936 (1996).
However, Plaintiffs argue that “giving effect to [LD 1326] will pose an ‘obstacle’ to achieving the essential policy the federal law was enacted to promote.” (Pis. Response at 5.) Specifically, Plaintiffs argue that the purpose of LD 1326 “is to create
Therefore, the Court concludes that Plaintiffs have failed to state a claim for ERISA preemption and Defendant is entitled to the dismissal of Count I.
B. Count III: Due Process
The Trust’s due process claim presents a substantive due process challenge. (See Am. Compl. ¶ 79.) In responding to Defendant’s Motion to Dismiss, Plaintiffs readily acknowledge that “the battle of anyone challenging a statute of due process grounds is an uphill one.” (Pis. Response (Docket # 45) at 18.) Nonetheless, Plaintiffs assert that the facts alleged in their Amended Complaint “augmented by the evidence before the Court in connection with Plaintiffs’ Motion for Preliminary Injunction, suffices to state a claim upon which relief can be granted.”
As a legislative act that “adjust[s] the burdens and benefits of economic life,” LD 1326 is entitled to a “presumption of constitutionality.” Concrete Pipe and Prods. of Cal. v. Constr. Laborers,
Quite simply, Plaintiffs’ Amended Complaint does not state a plausible claim that LD 1326 is arbitrary and irrational and thereby violates substantive due process. Even if Plaintiffs could prove, as argued in their Response, that the legislative debate on LD 1326 included “false and incendiary” statements and that the proponents of LD 1326 were “cavalierly uninformed” and/or politically motivated, LD 1326 still reflects a rational approach to insurance regulation and regulation of public school districts. As Defendant points out in the Motion to Dismiss, MEABT’s case is “premised on the notion” that by allowing school districts access to loss information LD 1326 will provide them the information to shop for and perhaps choose other less expensive health insurance choices for covering employees. (Def. Mot. at 20.) In short, rational people could believe (as MEABT apparently does) that LD 1326 will lead to some school districts exploring and ultimately choosing health insurance plans that are cheaper than the MEABT plan. Because LD 1326 passes the necessary threshold for minimal rationality, the Court concludes that Defendant Cioppa is entitled to dismissal of Count III.
C. Count IV: Impairment of Contract
The Constitution provides that “[n]o state shall ... pass any ... law impairing the obligation of contracts.” U.S. Const, art. 1, § 10, cl. 1. “Though seemingly absolute in its prohibition, the Contracts Clause ‘must be accommodated to the inherent police power of the State to safeguard the vital interest of its people.’ ” Alliance of Auto. Mfrs. v. Gwadosky,
MEABT argues that LD 1326 impairs its Contract with Anthem, its Trust Agreement and the collective bargaining agreements between the Trust’s beneficiaries and the employers of those beneficiaries. The Court considers each of those contracts in light of the Contract Clause analysis just described.
1. The Contract with Anthem
As to the Contract between Anthem and MEABT, there is no constitutionally cognizable impairment. In Texaco, Inc. v. Short,
The Court declines to read the Amended Complaint as actually including an allegation that MEABT is also alleging impairment of its earlier “essentially identical” contracts with Anthem. (Pis. Reply to Mot. for Prelim. Injunction (Docket # 43) at 16.) First, it is clear that the Amended Complaint focuses its impairment allegations on the current contract with Anthem. None of the prior contracts are attached or explicitly referenced. Moreover, the current Contract expressly “supersedes” all prior contracts between MEABT and Anthem. Thus, it would appear that the current Contract would render the prior contracts moot to the extent that those contracts contained similar provisions regarding the ownership and disclosure of loss information. Rather, Anthem clearly would rely on the current Contract in declining a request for disclosure of loss information, even if that information related to pre-July 2011 claims.
2. The Trust Agreement
Plaintiffs next argue that LD 1326 impairs the absolute discretion afforded to the Trustees to “make decisions relating to the use and dissemination of ... any participant claims experience data under any plan maintained under the Trust.” (Am. Compl. ¶ 85.) In the Court’s assessment, LD 1326 does not work a substantial impairment on the Trust Agreement or the discretion afforded the Trustees under the Agreement. First, Plaintiffs’ expectations as to their ability to absolutely control dissemination of loss information is necessarily adjusted downward because insurance is heavily regulated and the Trust’s loss information is compiled by an insurance company subject to such regulation. Second, viewing LD 1326 in the context of the entire Trust Agreement, the Court concludes that any impairment of the Agreement is minimal. The Trustees still maintain their absolute discretion on a wide variety of other issues. Additionally,
3. The Collective Bargaining Agreements
In the Amended Complaint, Plaintiffs also allege that LD 1326 “substantially impair[s] the contract rights of MEABT’s enrollees who have purchased health insurance through the MEABT understanding and relying on its statewide community-rated design, and their employers, who have collectively bargained to contribute to its cost, by effectively eliminating that feature of their respective contracts.” (Am. Compl. ¶ 86.)
First and foremost, the Court does not believe that Plaintiffs have standing to assert an impairment claim when Plaintiffs themselves are not parties to the contracts in question. See Mercado-Boneta,
Assuming for the moment that Plaintiffs had standing, the claim that LD 1326 substantially impairs an undisclosed number of existing collective bargaining agreements is implausible on the face of the Amended Complaint. LD 1326 does not eliminate the MEABT plan, nor does it require MEABT to change the design of its plan. Nonetheless, because of the regulated nature of the insurance industry, the parties to those collective bargaining agreements should readily expect that changes in insurance regulation may change the nature of the health insurance benefits as well as the cost of those benefits in coming years. In fact, Plaintiffs’ Response highlights some other legislative changes that are set to take effect in coming years. (See Pis. Response (Docket # 45) at 14-15 (discussing the Patient Protection and Affordable Care Act).) In short, it is implausible for Plaintiffs to generally aver that the employers and employees who are parties to the collective bargaining agreements do not foresee that
Even if Plaintiffs could pass over the substantial impairment hurdle, the Court would still find that LD 1326 serves the legitimate public purpose already described and that Maine is entitled to have this Court defer to its legislative judgment that LD 1326 is a necessary and reasonable mechanism for achieving that important purpose.
IV. CONCLUSION
For the reasons just given, Defendant’s Motion to Dismiss is hereby GRANTED and Counts I, III & IV are hereby DISMISSED.
SO ORDERED.
Notes
. Each of the trustees is separately named as a plaintiff in this action.
. Plaintiffs attached the Contract and certain other exhibits to their initial Complaint (Docket # 1). To the extent that the Amended Complaint references those same exhibits, the Court has reviewed and considered them in connection with the pending Motion. See Trans-Spec Truck Service, Inc. v. Caterpillar Inc.,
. Specifically, an insurer required to comply with 24-A M.R.S.A. § 2803-A would not be able to offer MEABT or any other group of school districts an agreement containing the language found of Section 5 of the current Contract. (See Contract (Docket # 1-2) at 5.)
. Congress included a specific section with respect to preemption of state law that applies to Section 1182. 29 U.S.C. § 1191(a) reads:
Continued applicability of State law with respect to health insurance issuers
(1) In general
Subject to paragraph (2) and except as provided in subsection (b) of this section, this part shall not be construed to supersede any provision of State law which establishes, implements, or continues in effect any standard or requirement solely relating to health insurance issuers in connection with group health insurance coverage except to the extent that such standard or requirement prevents the application of a requirement of this part.
(2) Continued preemption with respect to group health plans Nothing in this part shall be construed to affect or modify the provisions of section 1144 of this title with respect to group health plans.
29 U.S.C. § 1191(a). While Defendant argues that Section 1191(a) is "fatal to the Trust’s argument,” (Def. Mot. at 11.) the Court does not believe that this express HIPAA-specific preemption clause forecloses any and all arguments regarding conflict preemption related to 29 U.S.C. § 1182(a)(1).
. Persons with the factors listed in Section 1182 generally incur more health-related expenses and, thus, have more health insurance claims. Thus, health status related factors are usually reflected in loss information.
. The Court notes that if it were to accept Plaintiffs’ invitation to "augment” the record to include all of the materials submitted in connection with the Motion for Preliminary Injunction, it would be required to convert the Motion to Dismiss to a motion for summary judgment in accordance with Federal Rule of Civil Procedure 12(d). See Trans-Spec Truck Service, Inc.,
. Because the Agreement between Anthem and MEABT is private, there is "no appreciable danger” that the State of Maine enacted LD 1326 "to profiteer or otherwise serve its own pecuniary interest.” Houlton Citizens’ Coalition,
. The Court notes that at least four school districts have intervened as Defendants in this matter and now assert the position that LD 1326 does not impair their respective collective bargaining agreements. (See Intervenor Defs. Reply (Docket # 53) at 6.)
. Because the Court defers to the judgment of the Maine Legislature in choosing the mechanism for increasing the benefit options school district can offer employees, it does not address Plaintiffs multiple allegations that LD 1326 lacks the requisite reasonableness and necessity. (See Pis. Response at 11-16.)