As we covered earlier, the Supreme Court ruled this summer that states could choose whether to participate in the expansion of Medicaid contained in PPACA without jeopardizing their current Medicaid funding.  Under PPACA, states that participate in the full expansion set out in PPACA (increasing eligibility to include families with incomes at or below 138% of the federal policy level) get 100% of the cost of caring for the additional enrollees paid for by the federal government for 2014-2017. 

Until yesterday, there was no clear answer on whether this increased funding would be available for states that expanded eligibility to some level less than 138%.  Reactions to yesterday's announcement have been mixed.  Supporters of broad Medicaid expansion approve of the decision as a means to encourage states to participate in the full expansion program, as noted in the Wall Street Journal.  As reported by the Associated Press, the Republican Governor's Association calls the decision is "disappointing," as several states have indicated interest in only a partial Medicaid expansion due to budget constraints.

The case gets another hearing because it includes issues that were not addressed in the Supreme Court's decision this summer.  As reported in more detail at Squire Sanders' Sixth Circuit Blog, Liberty University asserts that two requirements -- that employers provide insurance or face penalties and that employers provide insurance with contraception coverage -- violate the University's right to free exercise of religion under the First Amendment.  The U.S. Supreme Court held this summer that challenges to PPACA are not premature (the reason Liberty lost at the Court of Appeals last time), but it did not address the employer mandate or the freedom of religion arguments. 

Notably, the Court's ruling does not necessarily indicate that the Justices believe the University's claims should prevail.  Indeed, as reported by Forbes and Reuters, a number of experts believe the lawsuit has little chance of success.

As noted in the Wall Street Journal and Healthwatch, several states had not made any formal declaration as of Thursday.  Some of the uncertainty was caused, as reported by the New York Times, because some Republican-led states "had deferred action" until after the presidential election provided more guidance on the future of the healthcare reform law. 

This past Monday, the Obama administration had announced that states had to declare their intention of running or not running an exchange by November 16, but could delay submitting their plans for state exchanges until December 14.

Yesterday, the administration responded to a request for more time from the Republican Governors Association, as discussed in the Washington Post, and agreed to move the deadline for state-run plans to December 14, with a deadline of February 14 for states to declare if they want to share responsibility for the exchange with the federal government.

In Moore v. John Deere Health Care Plan, the Sixth Circuit provides an almost perfect road map for MCOs to follow when terminating either an incompetent provider or a provider responsible for other incompetent providers.  The court found that both federal and state law provided an HMO with immunity from damages resulting from the HMO’s termination of a provider contract after the HMO received numerous complaints by members about the quality of the provider’s services.

As an owner, director and officer of a health care clinic that was staffed by four doctors and five nurse practitioners, Dr. David L. Moore had contracted with the HMO, John Deere Health Care Plan, Inc., as a network provider.  After receiving numerous complaints regarding the quality of care provided at the clinic, John Deere’s Knoxville Quality Improvement Committee (QI committee) reviewed the complaints and decided to terminate the contracts with Dr. Moore.

As required by law, John Deere submitted an Adverse Action Report to the Healthcare Integrity and Protection Data Bank (HIPDB).  The report documented that Dr. Moore’s contracts were terminated due to member complaints.  The U.S. Department of Health and Human Services allowed Dr. Moore to add a comment disputing the report, but ordered that the report remain in the HIPDB.

Having exhausted John Deere’s internal appeals, Dr. Moore brought a number of state law claims.  John Deere filed a motion for summary judgment asserting immunity under the federal Health Care Quality Improvement Act (HCQIA) and a parallel state law, both of which provide qualified immunity from damages for those who participate in peer review activities.  The district court granted the motion.  On appeal, the Sixth Circuit affirmed the district court.

In obtaining immunity under HCQIA, John Deere demonstrated the right way to terminate an incompetent provider, although its procedures were far from perfect.

• Use a Proper Professional Review Body:  John Deere’s professional review body that conducted the PRA was its formal QI committee.  Although other courts have previously found informal or ad hoc committees to be professional review bodies for HCQIA purposes, the use of formal committees, such as John Deere’s QI committee, leaves an MCO less open to an attack on that ground.
• Act Only Following a Professional Review Action (PRA):  The court found that the QI committee’s termination of Dr. Moore’s contracts constituted a PRA under HCQIA.  Although a PRA does not include an action based “primarily” on “a physician’s association with, supervision of, delegation of authority to, support for, training of, or participation in a private group practice with, a member or members of a particular class of health care practitioner or professional,” the court found that (1) Dr. Moore had treated at least one of the complaining HMO members; and (2) even though he was not the treating physician in all of the complaints, “his decision to staff his clinics with other practitioners and then inadequately supervise them bears upon his professional conduct.”  Because the HMO members’ complained about the quality of care, the court also observed that the decision to terminate Dr. Moore’s contracts improved patient care.  Therefore, the QI committee’s termination of the contracts constituted a PRA under HCQIA.
• Ensure that the PRA Meets HCQIA’s Reasonableness Test:  The PRA was presumed to satisfy HCQIA’s four-factor reasonableness test for immunity; although, here is where John Deere almost misstepped.  A PRA is presumed to satisfy the test unless rebutted by a preponderance of evidence.  The court easily concluded that the PRA met three of the criteria, including that the PRA was taken: (1) in the reasonable belief that the action was in furtherance of quality health care; (2) after a reasonable effort to obtain the facts of the matter; and (3) in the reasonable belief that the action was warranted by the facts known after such reasonable effort to obtain facts and after meeting the requirement for adequate notice and hearing procedures. 

However, it was the fourth criterion – to have adequate notice and hearing procedures – that left John Deere open to attack.  Nevertheless, despite the QI committee’s failure to comply with HCQIA’s requirements to provide Dr. Moore with (1) a letter informing him that it intended to review the complaints and (2) the minimum 30 days’ notice on a couple of occasions, the court noted that HCQIA does not require strict adherence to its procedural requirements.  Rather, HCQIA requires that, by the preponderance of the evidence, the hearing procedures be “adequate.”  In such case, despite the deviations from HCQIA’s procedural requirements, Dr. Moore did not rebut the presumption that the PRA met the reasonableness test.

While Moore v. John Deer Health Care Plan provides an example of an MCO successfully obtaining immunity under HCQIA when terminating an incompetent provider, it also serves as a warning for other MCOs.  The Sixth Circuit could have found that the QI committee’s deviations from HCQIA’s procedural requirements caused the committee’s procedures to be inadequate.  In such case, John Deere would have been at risk of losing its immunity.  Further, when terminating a contract with a provider, based, at least in part, on the actions of other providers, MCOs must carefully consider the relationship between the contracted provider and those other providers.

This case also serves as a clear warning to health care providers.  Even if a provider has not directly provided incompetent health care services, the provider must carefully supervise any other provider for whom the provider is responsible.  HCQIA may limit the provider’s legal options if an MCO terminates the provider’s contracts as a result of another provider’s incompetent services.

In a total of 187 pages of opinion, the decision is an unexpected 5-4, with Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan in the majority.  Jusices Scalia, Kennedy, Thomas, and Alito dissented.  Below is a brief overview of the key rulings, and additional detail can be found on the SCOTUS blog. 

In the next few days and weeks, we will post more detailed analyses and discuss what the decision means for the various stakeholder groups.

1.   The Individual Mandate

In a somewhat unexpected turn, the PPACA decision was decided as a Taxing Power case, rather than a Commerce Clause case.  Only four Justices would have found that the law was permissible as a regulation of interstate commerce; the rest concluded in separate opinions that the government was improperly trying to create commerce in order to regulate it.

But the Court determined that the individual mandate was still constitutional because it was a lawful exercise of the Taxing Power.  The majority held that all a statute has to do to come within the taxing power is levy a tax.  The penalty if one does not buy insurance was held to be a tax because the payment was not so high that it essentially forced purchase of insurance, the penalty is not related to unlawful conduct or willful violation of the law, and it is collected by the IRS through the typical taxation process.

Because the individual mandate was upheld, there was no need to address the severability issues.  PPACA survives as a whole.

2.  The Medicaid Expansion

The bottom line for the Medicaid expansion is that the government may withhold federal funding for the expansion from states that don't participate in the expansion, but existing Medicaid funding will not be affected if a state does not participate in the expansion. 

Getting there, though, was complicated.  Three separate groups of Justices came to three separate concludsions on whether the Medicaid expansion was unconstitutional in whole or in part.  The ultimate outcome was the result of a majority (Chief Justice Roberts and Justices Breyer, Ginsburg, Sotomayor, and Kagan) that concluded that the remedy, if the law was unconstitutional, was to strike only the provision that allowed the federal government to withhold existing Medicaid funding if a state did not participate in the expansion.

3.  The Anti-Injunction Act

The Court concluded that it would not violate the Anti-Injunction Act to decide the case at this time because the individual mandate penalty was called a "penalty."  Even though that label was not controlling for purposes of the constitutionality of the law under the Taxing Power, it was controlling for purposes of the Anti-Injunction Act because the law only applies to things Congress formally labels as "taxes."

Stay tuned as we provide further analysis of the opinion and its effect for providers, hospitals, insurers, patients, and more.

So, stay tuned for Thursday. We will post a summary of the decision shortly after it is announced, with more detailed analyses of the decision's implications to follow.

Notably, the continuing benefits are those that are very popular, are already in place, and are already factored into the insurers' business model.  As reported by McClatchy/Kaiser Health News, AP story carried by the New York Times, and the Wall Street Journal, the commitments differ slightly by insurer.  In their press statements, UnitedHealthcare and Humana committed to:

• allow children to stay on their parent's insurance until age 26;
• not go back to lifetime coverage limits;
• continue preventative screenings and immunizations without requiring a copay;
• continue third-party appeal processes for denied claims; and
• not retroactively cancel policies already issued, except in cases of fraud by the consumer.

Aetna has agreed to all of the above, except its statement does not address retroactive cancellation or lifetime limits. 

The continued benefits do not address coverage for individuals with preexisting conditions, general affordability issues, or current requirement that insurers reimburse members based on their medical loss rations (if they spend less than 80% or 85% of premium dollars for health-related costs).  The commitments to continued benefits also do not apply to self-insured plans, which are typically offered by large employers and control the benefits provided. 

Related links:  http://www.healthcare.gov/law/features/rights/consumer-assistance-program/

http://cciio.cms.gov/programs/consumer/capgrants/index.html

The afternoon session focused on the less well publicized aspect of PPACA -- the requirements that states expand Medicaid coverage if they want to continue receiving any federal Medicaid funding.  Although these provisions have received less press coverage, they are key issues for state governments.  The audio and transcript for the afternoon session are also available from the Court.

Notably, press coverage of the third day of arguments is markedly less, though CNN and the
Washington Post have pieces on the final day's issues. 

The Justices will preliminarily vote on the case at the end of the week, which will be followed by a period for the Justices and their clerks to write and circulate opinions until the decision is finalized.  ETA on the ruling is sometime in June, when this term ends.

Tomorrow's arguments focus on two questions: (1) whether, if the individual mandate is unconstitutional, just that portion can be severed and stricken or whether it is so entwined with the rest of PPACA that the whole Act would have to go; and (2) whether Congress can require states to expand Medicaid coverage by threatening to withhold federal Medicaid funds if they don't.

Not a great deal of action today, particularly since both the government and the PPACA challengers want the Court to decide the case now.  Due to this unusual alignment, the Court had to appoint an attorney, Robert A. Long, to argue that the case should not be heard until after 2014.  Given the Court's questions, many consider that the Court is inclined to decide the constitutional question now, which will provide some much-needed predictability, as noted in these articles from the Washington Post, New York Times, and NPR.

Tomorrow's topic -- constitutionality of the individual mandate -- will be the main event.  Stay tuned.

(1) Whether the PPACA lawsuits are premature, due to the Anti-Injunction Act (90 minutes);

(2) Whether PPACA's individual mandate is constitutional (2 hours);

(3) Whether any unconstitutional portions of PPACA can be severed from the remainder of the Act or whether the entire Act must be stricken if one part is unconstitutional (90 minutes); and

(4) Whether PPACA's Medicaid expansion (states must expand Medicaid coverage to continue receiving federal Medicaid funds) is constitutional (1 hour).

As the excitement builds, so does the pre-argument coverage.  Among recent articles are pieces about Solicitor General Don Verilli (NPR), former Solicitor General Paul Clement (Washington Post), what will happen if PPACA is unconstitutional (Washington Post), and how specific Justices might vote (New York Times).

Notably, there will be no television coverage of the arguments or real-time audio available.  In a recent announcement, the Court has promised that audio recordings and rough transcripts will be made available later the same day.  We will be updating here daily to stay on top of the action. You can read about the issue of press coverage in the LA Times op ed piece by noted constitutional scholars Erwin Chemerinsky and Eric J. Segall.  

The Seven-Sky case will likely be the subject of a prompt petition to the U.S. Supreme Court for review.  The other cases are currently pending for consideration by the Supreme Court of whether (or which) of the cases it will take up on appeal. 

Until now, most commentators have assumed that we would get a decision from the Supreme Court about whether Congress can constitutionally require individual participation in insurance -- the only real question was whether the Court would rule before the 2012 elections or postpone the case until next term (yielding a decision in 2013).

Since the Liberty University decision, though, a previously-ignored theory under the Anti-Injunction Act has gotten more traction.  The argument goes that the that the Supreme Court should ultimately dismiss any case it takes right now for the technical reason that the lawsuit premature.  Under the Liberty University court's reading of the Anti-Injunction Act, the federal court can’t get involved in pre-enforcement litigation because the penalty for not having insurance by 2014 is an “exaction” (often thought of as a “tax"). 

Under this theory, challengers of the law would have to wait until someone is assessed the penalty (after the law goes into effect in 2014), pays the penalty, and then sues the government for a refund.  Including time for filing a lawsuit and litigating it through the courts of appeals into the Supreme Court (again), this process could easily extend a final decision on the individual mandate into 2016 or later. 

The issue has been raised in both the government's request (pdf) for Supreme Court review of the Florida v. HHS case and during oral arguments in the Seven-Sky v. Holder case in the D.C. Circuit.  Detailed discussion of these issues can be found at this story by BNA and recent postson the ACA Litigation Blog.  There isn't much law on this subject, so it may be the type of thing the Supreme Court would be interested in resolving -- which way the decision might go is anyone's guess.

In the 11th Circuit case, Florida v. DHHS, the government filed (much earlier than expected) a petition (pdf) for the U.S. Supreme Court to hear the case.  The government wants the Court to overrule what is currently the only appeals court ruling (pdf) that the individual mandate is unconstitutional.  Interestingly, the government also invited the Supreme Court to decide the question of whether the constitutional dispute can be heard at all before the law goes into effect in 2014.  This issue is based on arguments adopted in the Liberty University v. Geithner (pdf) case recently decided by the 4th Circuit but not at the Supreme Court yet.  More on this issue later.

Two other petitions for Supreme Court review of Florida v. DHHS also hit the Supreme Court yesterday, one by the plaintiff states (pdf) and one by the plaintiff trade organization (pdf).  In these, the plaintiffs argued that the 11th Circuit was correct that the individual mandate exceeded Congress' power but that the entire law should have been struck down as a result, which was the trial court;s ruling.  The 11th Circuit had severed the mandate from the rest of PPACA and allowed the remainder of the law to go into effect.

In a separate filing (pdf) in the Thomas More v. Obama case, the government submitted its response to the plaintiff's request to have that case heard by the U.S. Supreme Court.  The government urged the Court not to take the Thomas More case (where the court of appeals ruled (pdf) in the government's favor), but instead to decide the constitutional issues, if at all, through the Florida v. DHHS case.   

For more on these filings, check out the aca litigation blog, SSD's Sixth Circuit blog, and Lyle Denniston's postson the SCOTUS blog.  News coverage is everywhere, including Adam Liptak's article in the New York Times and Brent Kendall's article in the Wall Street Journal.

• 6th Circuit says the mandate is lawful (Thomas More Law Ctr v. Obama.pdf);
• 11^th Circuit says the mandate is beyond Congress' power, but decided that only the individual mandate was a problem and the rest of the act didn’t have to be stricken as the trial court had initially ruled (Florida v. DHHS.pdf); and
• 4^th Circuit didn’t decide the constitutional question but ruled in two separate decisions that the federal courts lacked jurisdiction to decide the question at this point due (Virginia v. Sebelius.pdf on standing grounds and Liberty University v. Geithner.pdf due to the Anti-Injunction Act).  We’ll be posting more on the impact of Liberty University separately, as it has implications for when (and if) we’ll see a decision on the individual mandate from the U.S. Supreme Court.

Oral arguments before the D.C. Circuit in the Seven-Sky v. Holder case were held last Friday, September 23.  The 8^th Circuit will hear arguments about standing issues in Kinder v. Geitner on October 20, 2011.  In both cases, we probably won't see a decision for several months.

Even though there is a circuit split (6^th versus 11^th), the Supreme Court still has discretion over whether to hear any of the cases on further appeal.  The request for Supreme Court review in the Thomas Moore case is currently pending, with the government having received an extension on its brief to the end of September.  Briefs about whether the Court should hear the Florida v. HHS case or the two 4^th Circuit cases aren’t due for several months and likely wouldn’t be considered by the Court in time to have those cases heard and decided by this summer.

On its way to the appellate courts is the case recently decided by the federal court in Pennsylvania, Goudy-Bachman v HHS.pdf.  There, the trial court ruled that the individual mandate was unconstitutional because it governed conduct that preceded any transaction that could be properly reached by Congress’ Commerce Clause powers.  The court also ruled that the community rating and pre-existing condition portions of PPACA were inextricably connected to the individual mandate, so they were also stricken.  It will be several months at least before there is significant action on this case in the court of appeals.

More details on these cases can be found at the SSD Sixth Circuit blog or on the ACA Litigation blog.

Despite affirming the U.S. District Court for the Northern District of Florida holding with respect to the unconstitutionality of the individual mandate, the appellate court reversed the district court’s holding that the individual mandate was not severable from the remainder of PPACA.  Rather, the court held that the individual mandate was severable because it concluded that Congress would have enacted the remaining provisions independently of the individual mandate.

The court also held that PPACA’s expansion of Medicaid eligibility and subsidies is constitutional.  The 26 State plaintiffs had argued that the expansion was “unduly coercive,” but the court rejected this argument “not without serious thought and some hesitation.”  The court found several factors as determinative.  First, Congress had warned participating states that it has the right to make changes to the Medicaid program.  Second, the federal government will bear most of the costs of the expansion other than incidental administrative costs.  Third, participating states have four years to decide whether to continue participating in Medicaid.  Fourth, a state’s refusal to participate in the expansion does not mean it will be guaranteed to lose all of its Medicaid funding but such decision was in the discretion of the U.S. Department of Health and Human Services.  Based on these factors, the court believed that Medicaid-participating states have a “real choice” to participate in the expansion.  Accordingly, the court concluded, “Where an entity has a real choice, there can be no coercion.”

After this decision, it becomes more likely that the U.S. Supreme Court will need to resolve the differences of opinion among the lower courts.  Stay tuned for future developments.

The battle is now headed to the next level, with the plaintiffs from the Thomas Moore case having filed their petition for Supreme Court review in late July.  The government will likely not be far behind in filing their petition for Supreme Court review of today's ruling.

You can find further detail on the decisions at the SSD Sixth Circuit Blog or the ACA Litigation Blog.

As reported by Brent Kendall in his article for the Wall Street Journal, the Court did so without any recorded vote or statement and apparently all nine Justices participated in the decision.  Controversy has arisen regarding whether Justice Kagan (former United States Attorney General) and Justice Thomas (whose wife is an outspoken critic of the law) should participate in any review of PPACA.

The constitutionality of PPACA will still likely be decided by the Supreme Court -- Monday's order likely only delays the matter until later this year or early next year.  The various PPACA cases (including the Virginia case) will continue through the usual appeals process, with at least three being argued in May or June.  After those decisions come down, we will likely see one or more cases taken up by the high Court.  There are currently cases involving some kind of challenge to PPACA pending in approximately half of the US Courts of Appeals.  For an excellent listing of the various cases and upcoming deadlines, see the ACA Litigation Blog.

Squire Sanders is pleased to announce that we have started a new blog to discuss the developing ACO regulations, so stop by our new blog and give us your thoughts.  These are proposed regulations, so the various agencies are open to comments on their proposals before they finalize the rules.  Our goal is to create a forum on our new blog to discuss ideas and possible comments to the agencies as we work our way through the regulations and the new ACO environment.