Health Reform WK-EDGE Sovereign immunity blocks reinsurance fee refund case
Thursday, September 29, 2016

Sovereign immunity blocks reinsurance fee refund case

By Sarah E. Baumann, J.D.

Calling a claim for money a claim for declaratory relief is not enough to overcome HHS’ sovereign immunity. A district court in Minnesota did not have jurisdiction to hear a self-insured/self-administered group health plan’s (SI/SA plan) request for relief from the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) 2014 transitional reinsurance fee. Although trustees of the Twin City Pipe Trades Welfare Fund (the Fund) claimed their request for more than $760,000 in reimbursement was secondary to their request for a declaration that the rule governing the fee was arbitrary and capricious, the court found that the claim for money damages was the primary focus of the lawsuit and was therefore not subject to a waiver of HHS’ sovereign immunity under the Administrative Procedure Act (APA) (5 U.S.C. § 702) (Batsche v. Burwell, September 26, 2016, Schiltz, P.).

Section 1341(b)(1)(A) of the ACA. required insurance issuers and third party administrators on behalf of group health plans to pay a transitional reinsurance fee to the federal government each year from 2014 to 2016. HHS issued a Final rule (78 FR 15410, March 11, 2013) in 2013 stating that SI/SA plans (with no third party administrators) would also have to pay the fee. However, it issued a 2014 Final rule (79 FR 13744, March 11, 2014), stating that SI/SA plans would not be required to pay the fee in 2015 and 2016. Trustees of the Fund filed suit to enjoin HHS from collecting the 2014 fee. However, they then learned that the Fund had already paid the $762,663.90 fee, and amended their complaint to ask the court to declare that the Fund was not subject to the fee and was entitled to reimbursement and to seek judgment in the amount of the fee already paid. HHS moved to dismiss the case based on its sovereign immunity to suit.

The Trustees agreed that section 702 of the APA waives sovereign immunity in actions challenging final agency actions, provided the suits seek "relief other than money damages." They maintained that they sought a declaration that the rule requiring 2014 payments was arbitrary and capricious and that such a declaration was prerequisite to other relief. The court determined, however, that the Trustees were seeking a simple "determination" rather than a declaration. It noted that courts regularly made determinations—e.g., of duty, harm, and proximate cause—before issuing money judgments. However, they only infrequently issue declaratory judgments, typically in cases where plaintiffs are threatened with future harm and where monetary judgments will not make them whole. In this case, the 2014 fee was a one-time occurrence, so the Trustees were not threatened with future harm, and a money judgment would make them whole. Declaratory relief would thus be "utterly superfluous." Even assuming that sovereign immunity could be waived, the U.S. Court of Federal Claims, and not the district court, would have jurisdiction over the suit as a monetary claim in excess of $10,000 pursuant to the Tucker Act (28 U.S.C. § 1491(a)(1)). As a result, the court dismissed the action for lack of subject matter jurisdiction.

The case is No. 15-CV-0053 (PJS/BRT).

Attorneys: Jacob T. Schutz (Nichols Kaster PLLP) for Paul Batsche, Trustee, Twin City Pipe Trades Welfare Fund. Megan A. Crowley, U.S. Department of Justice, for Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services.

Companies: Twin City Pipe Trades Welfare Fund; U.S. Department of Health and Human Services

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