Supreme Court Declines To Review Montana Preemption Case

The United State Supreme Court will not review a ruling from the United States Court of Appeals for the Ninth Circuit that the Employee Retirement Income Security Act (“ERISA”) does not preempt a Montana state unfair insurance practices statute that bars insurers from engaging in “unfair discrimination” when charging policy premiums to similarly situated individuals. See Blue Cross and Blue Shield of Montana Inc. v. Fossen, U.S., No. 11-1144, cert. denied 1/22/13.
By way of background, the lawsuit at issue was originally filed in a Montana state court by Dale Fossen and his company. Fossen claimed that his health insurer, Blue Cross and Blue Shield of Montana Inc. (“BCBSM”), violated Montana Code Ann. §33-22-526(2)(a) by increasing the premiums for Fossen's business by 21 percent, allegedly due at least in part to the health status of one of Fossen's employees. After BCBSM removed the case to federal court, the district court agreed with Fossen that Montana's “little HIPAA” law would fall under ERISA's insurance savings clause. However, the court eventually determined that, even if the law were saved from ERISA preemption, ERISA would still bar application of the Montana law because it was duplicative of ERISA Section 702. The district court subsequently found that BCBSM did not violate ERISA Section 702. Fossen then appealed to the Ninth Circuit. In support of Fossen's appeal, the Department of Labor filed an amicus brief asking the Ninth Circuit to reverse the lower court's ruling on ERISA preemption.
The Ninth Circuit ruled in 2011 that the Montana unfair insurance practices statute was “saved” from ERISA preemption because it applied without regard to the existence of an ERISA plan and therefore fell within ERISA Section 514(a)’s savings clause for state laws regulating insurance. The Ninth Circuit also held that Montana’s “little HIPAA” statute was completely preempted by the federal Health Insurance Portability and Accountability Act (the “HIPPA statute”).  The Ninth Circuit determined that ERISA completely preempted Fossen's claim challenging BCBSM’s conduct under Montana's “little HIPAA” statute. The court found that Fossen could have brought the action under ERISA Section 502(a) and that the state law claim was identical to the federal HIPAA claim he could have filed. However, the Ninth Circuit reversed the district court's ruling on the unfair insurance practices claim against BCBSM, remanding that claim to the district court. According to the Ninth Circuit, the statute was exempt from preemption under ERISA's insurance savings clause because it applied without regard to the existence of an ERISA plan and because it “creates a right that is separate from and could not possibly be remedied under ERISA.”
Following the Ninth Circuit's decision, the Supreme Court declined to review the Ninth Circuit's preemption ruling on Montana's “little HIPAA” statute in June 2012. However, the high court invited the U.S. solicitor general to weigh in on the unfair insurance practices law, expressing the federal government's opinion on whether a substantive state insurance law that is saved from ERISA preemption can be enforced through state law remedies or whether ERISA's enforcement scheme necessarily would apply. Ultimately, the Court declined to grant certiorari.

Notre Dame Might Win the National Championship - But It Loses to the Government In Lawsuit Seeking To Challenge Contraception Provisions of Affordable Care Act

The United States District Court for the Northern District of Indiana dismissed the University of Notre Dame's action against the United States Department of Health and Human Services Secretary Kathleen Sebelius (and others) on December 31, 2012, stating that the University does not have standing to challenge the validity of an Affordable Care Act provision that requires large employers to provide employees with no-cost insurance coverage for contraceptives, contraceptive devices, sterilizations, and patient counseling on such matters.  See University of Notre Dame v. Sebelius, N.D. Ind., No,: 3-12-cv-253 (Dec. 31, 2012).

In dismissing the University's lawsuit, the Court found that the University could not show a concrete and imminent injury-in-fact because it was protected from enforcement by a temporary safe harbor adopted in February 2012. The safe harbor delays enforcement of the mandate against certain employers until the beginning of their first plan year after Aug. 1, 2013. It is expected to remain in effect until the women's preventive services mandate is amended to reflect the concerns of organizations like the University. The court also said the case was not ripe for judicial resolution, because the federal government has issued an advance notice of proposed rulemaking in furtherance of an anticipated amendment. According to the Court, “[t]he present regulatory requirement isn't sufficiently final for review to be ripe, because the defendants have announced it will be modified.”

The Court also asserted that “Notre Dame's claims aren't ripe, and they don't have standing to bring them.” Both conclusions, it said, flowed “from the government's creation of a safe harbor for certain employers (including Notre Dame) while it re-works the regulation.” The school faced “no penalty or restriction based on the existing regulation,” the court said.

By way of explanation, according to the Court, to have standing to maintain such lawsuits, a plaintiff must show a concrete and imminent injury-in-fact, a causal relationship between the injury and defendants' challenged conduct, and a likelihood that a favorable decision would redress the claimed injury. A plaintiff challenging an administrative regulation also must show that its claim is ripe—that is, that the regulation is sufficiently final that the controversy is ready for judicial review, it said. The Court found that the women's preventive services mandate was not sufficiently final to allow the University to show injury. Although the current regulation is final, the court said, “events following the regulation's adoption make clear that it isn't final.” Those events included the government's adoption of the safe harbor and announcement of its intention to change the rule to address concerns voiced by organizations like Notre Dame, it said. Although the Court conceded that “an agency can't ‘stave off judicial review of a challenged rule simply by initiating a new proposed rulemaking that would amend the rule in a significant way,'” the court noted that the government has taken “prompt and concrete action” that supported its intention to reconsider and modify the mandate.