January 13 Update
Judge Blocks Interim Final Rule On Disclosure By Renal Dialysis Facilities Offering Premium Assistance
On January 12, 2017, Judge Amos Mazzant of the federal court for the Eastern District of Texas entered a temporary restraining order blocking the implementation of an interim final rule promulgated by HHS in December addressing renal dialysis facilities. The rule requires such facilities that make direct or indirect third-party payments for coverage in the individual market to make certain disclosures to patients and to insurers. The lawsuit was brought by a consumer group that represents dialysis patients and a dialysis provider.
Insurers have persistently complained that marketplace risk pools are being destabilized by high-cost consumers who are enrolling in marketplace coverage with premium assistance from third-party payers. In particular, they have complained that renal dialysis facilities are paying, either directly or through charities to which they contribute, the premiums of very high-cost end-stage renal disease (ESRD) patients to allow them to enroll in marketplace plans. The motivation for this practice, it is claimed, is that facilities are paid far more by commercial payers than by Medicare or Medicaid, both of which cover treatment for ESRD. The enrollment of high-cost dialysis patients who would eligible for public coverage, however, significantly increases the cost of those plans to insurers, and ultimately to enrollees.
In August, CMS issued a request for information attempting to learn more about third party payment practices and their effects. On December 13, CMS issued an interim final rule, in its capacity as a regulator of Medicare ESRD facilities, requiring annual disclosures by ESRD facilities both to patients and to insurers of certain information specified in the rule. The interim final rule was promulgated without any prior opportunity for notice and comment on a proposed rule.
Under the interim final rule, facilities must give their patients a disclosure describing how a patient’s access to and cost of ESRD care and other care would be affected by individual market versus Medicare and Medicaid/CHIP coverage, and how each option would affect anticipated pre- and post-transplantation costs. This would include disclosure of potential gaps in coverage or penalties if enrollment in Medicare is delayed. Facilities must also describe their premium assistance programs, including limits on that assistance and potential termination if patients switch facilities. Facilities must, finally, disclose to patients information about “reimbursements for services that the facility receives as a result of subsidizing such enrollment.”
The regulation further requires facilities to disclose to individual market insurers the fact that the facilities are paying premiums, either directly or through charities, and receive assurances from the insurers that the insurer will accept payments throughout the plan year. The facility may not pay the premiums unless such assurances are received. Since insurers actively oppose third party payments, and since CMS has earlier said that it discourages such payments, the predictable effect of the rule would be to end most third party payments for ESRD treatment.
The rule was to have gone into effect on January 13, 2017, but Judge Mazzant’s order blocks implementation of the rule for now. His opinion noted a long history of charitable organizations, such as the American Kidney Fund, assisting ESRD patients with insurance premiums; he also noted that patients have long received donations from dialysis providers; in 1997 the HHS Office of Inspector General issued guidelines regulating these donations.
A party seeking injunctive relief, including temporary restraining orders, must show that it is likely to succeed on the merits, that it is likely to suffer irreparable harm without relief, that the balance of the equities tips in its favor, and that an injunction is in the public interest.
Judge Mazzant held that the plaintiffs established “a reasonable probability of success by showing the Defendants likely violated the procedures of the Administrative Procedures Act (“APA”).” The APA requires federal agencies to go through notice and comment rulemaking when they promulgate rules. The court further observed:
An agency may dispense with the requirements for “good cause” when notice and comment would be “impracticable, unnecessary, or contrary to public interest.” . . . This exception is read narrowly “to avoid providing agencies with an ‘escape clause’ from the requirements Congress prescribed.” . . . . Further, the Rule departs from HHS’s prior guidance without acknowledging that it was doing so.
Judge Mazzant found at least a reasonable probability that the plaintiffs would establish a lack of good cause for publishing a rule without prior notice and comment. Plaintiffs demonstrated irreparable injury, he wrote, because the rule would cause dialysis patients to shift to public insurance options and “many patients would be better served by private insurance options.” The rule could also cause profits for dialysis providers to decline by an estimated $29 million annually.
According to Judge Mazzant, the balance of the hardships and public interest supported granting a temporary restraining order. He therefore barred the implementation or enforcement of the rule nationwide until further order of the court.
A Signal Of A Potential Obstacle To One Tack The Trump Administration Might Take To Quickly Undo ACA Regulations? The court’s decision is of particular interest at this point in time because there is discussion of the Trump administration quickly repealing or amending regulations promulgated under the ACA without going through the lengthy notice and comment rulemaking process, presumably using interim final rules. Judge Mazzant’s order serves as a reminder that the “good cause” exception allowing interim final rules without prior notice and comment can only be used in very exceptional circumstances and is particularly inappropriate when the rule would abandon or contradict earlier agency positions. A change of administration is certainly not in itself “good cause” for amending a rule without notice and comment—and a thorough justification of the proposed change.
House Takes Up ACA Repeal
On the afternoon of January 13, 2017, the House joined the Senate in passing the resolution that begins the budget reconciliation process to repeal, and possibly replace, the Affordable Car Act. The budget resolution reportedly passed 227 to 198, with 9 Republicans joining all Democrats in opposing the measure. House and Senate Committees will now begin work on drafting the particular provisions of the repeal legislation.
Original Post
On December 20, 2016, two beneficiaries of reduced cost sharing under the Affordable Care Act (ACA) asked the D.C. Circuit court of appeals to allow them to intervene in House v. Burwell. The lower court had ruled in this case brought by the House of Representatives that the Obama administration could not legally reimburse health insurers for reducing cost sharing because Congress had not appropriated money for the reimbursement. The Obama administration had been vigorously pursuing an appeal of this decision, but with the election of Donald Trump the House had asked the court to put the case on hold pending a possible settlement. Two beneficiaries asked to intervene, asserting that their interests would be seriously injured if the appellate court allowed the lower court’s decision for the House to go into effect, and that the Trump administration did not adequately represent their interests.
The court asked the House and the Obama administration to respond to the intervention motion. Both filed responses on January 6, 2017. The Obama administration acknowledged the truth of the interveners’ claims that allowing the injunction to go into effect would cause major disruption in insurance markets, but claimed that the position of the Trump administration was still not clear and asked that the motion be held until the litigation resumed or, alternatively, be denied for now pending further litigation steps.
The House, by contrast, filed a lengthy brief contesting every element of the interveners’ petition. Any injury to the interveners from their insurers losing billions of dollars of reimbursement for reducing the cost sharing of consumers was merely speculative. Whether or not the House and the Trump administration would come to an agreement to stop the payments, as the House had asserted they might in its motion for delay, was also purely speculative. Moreover, the Trump administration could cut off the cost-sharing payments independent of the litigation and if it chose to do so through a settlement, the interveners could not stop it. Finally, the motion to intervene had not been filed in time and the interveners could not assert an interest independent of the government.
The interveners’ reply brief asked incredulously how the House could deny that recipients of cost-sharing reduction payments would not be harmed if the CSR payments suddenly ceased. The insurers would not idly stand by reducing cost sharing for low-income consumers and absorb a $7 billion loss. Moreover how could the House claim that the incoming Trump administration would adequately represent the interests of low-income consumers when the House had asserted in its motion to stay the litigation that the incoming administration might settle the litigation? The reply further contended that the application to intervene had been timely and that all other requirements had been met.
On January 12, 2017, the D.C. Circuit denied the motion to intervene in a one paragraph unsigned order stating that the requirements for intervening on appeal had not been met, with no further explanation. This litigation is now in the hands of the Trump administration and the House. It is clear that a settlement that would immediately terminate the cost-sharing reduction payments would very quickly unravel the individual insurance markets. Insurers would in all likelihood withdraw from the marketplaces, and from the entire individual market, as quickly as they could and as many as 20 million Americans would be left without coverage. Those who will lose their coverage will now not be represented in court to plead for the court’s protection.