ACA Litigation Round-Up (11/9/21): What’s Resolved, What’s On Hold, And What’s Still Moving?

Much litigation over the Affordable Care Act (ACA) and ACA-related issues remains on hold pending review by the Biden administration. But there has been movement in some ACA cases. This post summarizes the latest developments in pending litigation. The lawsuits discussed here include:

• Cases currently pending before the Supreme Court (on Section 1557, the health insurance tax, and hospital reimbursement policies);
• Lawsuits that are resolved or nearly resolved (on an immigration proclamation, the double billing rule, the SUNSET rule, and unpaid risk corridors payments);
• Challenges that are currently on hold (on association health plans, the provider conscience rule, Georgia’s Section 1332 waiver, unpaid cost-sharing reductions, and the contraceptive mandate); and
• Lawsuits that are proceeding or have been newly filed (on the preventive service mandate, Section 1557, the insurer transparency rule, and the Data Marketing Partnership arrangement).

Supreme Court Happenings

The most high-profile ACA-related litigation, California v. Texas, ended in June 2021 when the Supreme Court upheld the law. While there are no similar existential threats to the ACA at this time, the Supreme Court will continue to hear ACA-related litigation.

Section 1557

The Supreme Court will soon hear two challenges related to Section 1557 of the ACA, which is the law’s chief nondiscrimination provision and prohibits health programs or facilities that receive federal funds from discriminating based on race, color, national origin, age, disability, or sex. Section 1557 incorporates existing federal civil rights statutes, including Title VI of the Civil Rights Act of 1964 (which bars discrimination based on race, color, and national origin) and Section 504 of the Rehabilitation Act of 1973 (which bars discrimination based on disability). Section 1557 and several of these existing statutes also incorporate Title VI’s remedies for victims of discrimination; this includes the right to recover “compensatory damages.”

The Supreme Court will hear two separate challenges—Cummings v. Premier Rehab Keller and CVS Pharmacy v. Doe—that address the scope of protections under existing civil rights statutes and, by extension, Section 1557. In Cummings v. Premier Rehab Keller (which will be heard on November 30), a physical therapy provider, Premier Rehab Keller, refused to provide Jane Cummings (who is deaf and legally blind) with an ASL interpreter to help treat her chronic back pain. Cummings sued, alleging that the refusal discriminated based on her disability and violated the Rehabilitation Act and Section 1557. She asked for damages for the emotional distress caused by her experience.

But the district court dismissed her suit after concluding that “compensatory damages” do not include damages for emotional distress. The Fifth Circuit Court of Appeals agreed, and the Supreme Court agreed to hear Cummings’ appeal. The Court is being asked to resolve a circuit split since the Eleventh Circuit Court of Appeals has allowed damages for emotional distress. The Justices will consider whether compensatory damages under Title VI (and, by extension, the Rehabilitation Act and Section 1557) include compensation for emotional distress.

The issue is important because, as Cummings argues, those who face discrimination should be able to seek and recover damages related to the humiliation, anguish, and other noneconomic injuries that they might face. Briefs in support of Cummings were filed by the Department of Justice, disability advocates, and civil rights organizations led by the NAACP, among others. Briefs in support of Premier Rehab Keller were filed by a coalition of Republican attorneys general led by Texas, state and local officials led by the National Conference of State Legislatures, and business/insurance entities led by the U.S. Chamber of Commerce, among others.

In CVS Pharmacy v. Doe (which will be heard on December 7), the Supreme Court could resolve a circuit split on a separate question related to Section 504 of the Rehabilitation Act and Section 1557. This lawsuit was filed by patients living with HIV who argue that CVS improperly restricted access to certain HIV medications by requiring patients to use a mail or local CVS retail pharmacy to obtain in-network rates (as opposed to a community pharmacy). These restrictions, they argue, prevent the patients from consulting with their local pharmacist, invade patient privacy by sending HIV medications through the mail, and could result in delayed or lost shipments.

This policy, the plaintiffs argue, adversely and disproportionately affects enrollees with HIV and discriminates on the basis of disability. The Court agreed to hear the appeal but will limit its review to whether Section 504, and by extension Section 1557, provide a disparate impact cause of action for those that allege disability discrimination.

Briefs in support of the patients were filed by the Department of Justice, disability advocates such as the AIDS Healthcare Foundation and The Arc, the NAACP, the Center for Health Law and Policy, and the National Health Law Program, among others. Briefs in support of CVS were filed by America’s Health Insurance Plans, state and local officials led by the National Conference of State Legislatures, the U.S. Chamber of Commerce, the Pharmaceutical Care Management Association (PCMA), and a coalition of Republican attorneys general led by Louisiana, among others. A separate brief filed by Democratic attorneys general led by DC supported neither side and urged the Court to resolve the case on other grounds.

Health Insurance Tax

We are waiting to see whether the Court will hear an appeal filed by a coalition of Republican attorneys general, led by Texas, on whether states are entitled to recoup the ACA’s health insurance tax as it applies to Medicaid managed care entities. Judge Reed O’Connor, a federal district court judge in Texas, held that six plaintiff states were owed nearly $500 million for the health insurance tax from 2014 to 2016. He concluded that parts of a federal regulation issued in 2002 violated federal nondelegation doctrine by authorizing private entities—the American Academy of Actuaries and the Actuarial Standards Board—to “effectively rewrite the ACA.” 

A three-judge panel of the Fifth Circuit Court of Appeals disagreed, reversing Judge O’Connor’s decision in 2020. Following a request from Texas for en banc review, the Fifth Circuit upheld the panel’s conclusion but issued a revised ruling. The request for en banc review was denied over the dissent of four judges who argued that the regulation unconstitutionally subdelegates lawmaking power from an administrative agency (rather than Congress) to a private entity.

Texas filed its cert petition on September 3 and asked the Court to consider whether the regulation violates the nondelegation doctrine. The government’s response would have been due on October 8, but federal officials requested, and received, an extension to file their response on November 8. It is unclear if the Court will agree to hear the appeal or not.

Other Health Policy Cases

While not discussed in detail here, the Supreme Court will hear several important health policy-related cases this term. The Court heard oral argument in two cases involving an unprecedented Texas law that has virtually halted abortion access in Texas. Those challenges focus primarily on procedural issues related to Texas’ unique law. But the Court will hear a separate challenge, Dobbs v. Jackson Women’s Health Organization, on December 1. Dobbs is a challenge to a Mississippi law that would ban nearly all abortion after 15 weeks and could upend long-standing Court precedent on the constitutional right to an abortion in Roe v. Wade and Planned Parenthood v. Casey.

On November 29 and 30, the Court will hear oral argument in Becerra v. Empire Health Foundation and American Hospital Association v Becerra, respectively. Both cases are complicated but involve judicial review of interpretations made by the Department of Health and Human Services (HHS) and thus could be relevant to ACA and other health policy cases.

In Empire Health Foundation, the Court will consider HHS’s methodology for calculating the disproportionate share hospital adjustment and whether part of this calculation improperly includes individuals who are “entitled” to benefits under Medicare Part A but for whom the Medicare program does not pay for (such as those who exhausted their inpatient benefits). American Hospital Association focuses on whether HHS can adjust hospital outpatient drug reimbursement rates for Section 340B hospitals without first collecting cost surveys and other data.

In the meantime, the Court has still not resolved litigation over the Trump administration’s approval of Medicaid work requirement waivers in Arkansas and New Hampshire. The Biden administration has been revisiting approved waivers, and Arkansas’ work requirements waiver expires at the end of 2021.

Resolved (Or Near-Resolved) Cases

The Biden administration has resolved some litigation over Trump-era policies, including the “double billing” rule, an immigration proclamation, one lawsuit over the insurer transparency rule, and the SUNSET rule. Biden officials also previously resolved litigation over the public charge regulations and Title X regulations; however, new lawsuits on those issues have been filed.

The double billing rule required insurers to bill for abortion coverage separately from their billing for other coverage. The rule never went into effect after being set aside by two district courts whose decisions were appealed to the Fourth and Ninth Circuit Courts of Appeals. While the appeals were held in abeyance, the Biden administration repealed these requirements in a regulation finalized in September 2021. The courts voluntarily dismissed the appeals soon thereafter. Separately, litigation over a Trump-era immigration proclamation pending before the Ninth Circuit was vacated as moot after President Biden revoked the proclamation.

There have been two challenges, one by the U.S. Chamber of Commerce and one by PCMA, to the Trump-era transparency rule for health insurers, which is based on legal authority under the ACA. Following an announced delay in some of the rule’s requirements, the Chamber of Commerce voluntarily dismissed its challenge in August. But the PCMA challenge is proceeding.

Lawsuits over how much insurers are owed in unpaid risk corridors have, to my knowledge, now been settled. But some insurers objected to the $185 million in contingency fees that one of the law firms is set to receive for its role in the risk corridors litigation. That issue is now being litigated (go figure).

Litigation over the SUNSET rule is not yet resolved but could be soon. The SUNSET rule would have added global expiration dates to most current HHS rules and could have caused nearly 20,000 rules to expire automatically unless HHS took further action. This rule was challenged in early March and stayed. The lawsuit was cited by HHS in a subsequent rule that delayed the original effective date by one year—to March 22, 2022. On October 28, HHS issued a new proposed rule to repeal the SUNSET rule in its entirety with comments due on December 28. The plaintiffs in the legal challenge praised the move and suggested they will continue to watch the rulemaking process play out

There is continued litigation over the Trump-era public charge rule and new litigation over the Biden administration’s new Title X rule. Challenges to the public charge rule were dismissed from the Supreme Court earlier this year, and the Biden administration swiftly issued a final rule rescinding the Trump-era provisions. Federal officials subsequently issued an advance notice of proposed rulemaking. But that has not stopped states from trying to keep the Trump-era litigation alive: on October 29, the Supreme Court agreed to consider whether states can intervene to defend a federal regulation—in this case, the prior public charge rule—when the federal government ceases to do so.

Challenges to the Trump-era Title X rule were similarly dismissed from the Supreme Court in 2021, and the Biden administration has since issued a new final rule and funding for the program. On October 25, a coalition of Republican attorneys general, led by Ohio, challenged the latest Title X rule and asked for a preliminary injunction to prevent the rule from going into effect or being enforced. Ohio had previously argued that parts of the Trump-era interpretation are compelled by the text of Title X. There is also a separate lawsuit in Texas that challenges parts of the Title X program for not complying with Texas state laws before providing contraception and family planning services.

Cases On Hold

Many pending ACA-related cases remain on hold. This includes litigation over the association health plan rule (before the Court of Appeals for the District of Columbia Circuit); the provider conscience rule (before the Second and Ninth Circuits); and the approval of part of Georgia’s Section 1332 waiver (before district court in DC). In these challenges, the Biden administration asked for the lawsuits to be held in abeyance, citing the need to consult with new agency leadership or follow other processes (such as evaluate Georgia’s waiver in light of updated data). These requests have generally been unopposed by the plaintiffs and granted by the courts. The parties are required to submit regular status reports. HHS has consistently indicated that it continues to reconsider or reassess the issues in the litigation.

In a separate slate of challenges, insurers and the federal government are working to resolve disputes over owed unpaid cost-sharing reductions. This activity kicked into high gear after the Supreme Court declined to review a decision from the Federal Circuit that held that insurers were owed unpaid cost-sharing reductions (but that this amount must be reduced by any additional premium tax credits that the insurer received because of premium loading). While the lawsuits are stayed, the parties have filed status reports noting that the insurers and government are “in initial talks regarding potential avenues” to resolve the lawsuits in a way that avoids further litigation.

Litigation over the scope of the ACA’s contraceptive mandate—including challenges to the statute itself, an Obama-era rule, and Trump-era rules—is pending before district courts in California, Indiana, Pennsylvania, and Texas as well as the First and Fifth Circuit Courts of Appeals. Most of these cases have been stayed.

Most recently, the Supreme Court issued a decision on the contraceptive mandate in 2020. In Little Sisters of the Poor v. Pennsylvania, the Court held that the federal government had the authority to allow religious and moral exemptions to the contraceptive mandate but did not rule on whether the two Trump-era rules at issue were arbitrary and capricious. A district court in Massachusetts concluded that the rules were neither arbitrary and capricious nor unconstitutional. This ruling was appealed to the First Circuit and then put on hold. Other litigation remains pending before district courts in California, Indiana, and Pennsylvania but those challenges have also been stayed. As discussed here, the Biden administration told the courts that it intends to initiate new rulemaking on the contraceptive mandate within six months.

There is also a pending challenge before the Fifth Circuit. DeOtte v. Becerra, another case decided by Judge O’Connor, was a successful class action challenge to the Obama-era rule on the contraceptive mandate. The Trump administration did not defend the mandate, agreeing with the plaintiffs on the substantive legal issues. The Fifth Circuit heard oral argument in late April, and we are waiting for a decision to be issued. (A prior contraceptive mandate case, Leal v. Becerra, was dismissed as moot by the Fifth Circuit.)

Cases That Are Proceeding

In the meantime, some ACA-related litigation is continuing. These lawsuits focus on the ACA’s preventive services mandate, Section 1557, the insurer transparency rule, and the Data Marketing Partnership arrangement.

Preventive Services Mandate

There are continued (and separate) legal challenges to the ACA’s preventive service mandate under Section 2713 of the Public Health Service Act and the ACA’s contraceptive mandate (which is part of Section 2713). The entire preventive services mandate is being litigated in a case called Kelley v. Becerra, pending before Judge O’Connor.

The plaintiffs in Kelley argues that Section 2713 violates the Appointments Clause, the Vesting Clause, and the nondelegation doctrine. They ask the court to declare that Section 2713 is unconstitutional and unenforceable and that all preventive service mandates under Section 2713 are no longer required to be covered. They further argue that some of the recommendations—to cover contraceptives and pre-exposure prophylaxis (PrEP) to prevent HIV—also violate the Religious Freedom Restoration Act (RFRA).

Judge O’Connor has scheduled discovery to be completed by October 2021, and briefing will begin in mid-November and continue through early 2022. A decision is expected next year and could significantly impact the coverage of preventive services for millions of people.

Section 1557

In addition to the Section 1557-related challenges pending before the Supreme Court, there are pending and new lawsuits over how Section 1557 has been interpreted by the Trump and Biden administrations. Lawsuits over the Trump-era rule are pending before the DC Circuit, the Second Circuit, and district courts in DC, Massachusetts, and New York, but have been on hold. HHS intends to issue a new proposed rule on Section 1557 no later than April 2022. This has not, however, satisfied all the plaintiffs in these cases, leading some to ask that the stays be lifted (i.e., to allow the litigation to resume). The Biden administration opposed these requests, and the courts have granted the government’s request to keep the litigation on hold.

In the meantime, the Eighth Circuit Court of Appeals is considering a recent decision by a district court in North Dakota that held that parts of the Obama-era rule on Section 1557 and interpretation of Title VII violate RFRA. More specifically, the district court prohibited HHS and the EEOC from interpreting or enforcing Section 1557 or Title VII against the Catholic plaintiffs in a way that requires them to cover or perform medical procedures for gender transition. The Biden administration appealed this ruling to the Eight Circuit and proceedings are ongoing.

Other lawsuits are focused on new Biden-era interpretations. A case known as Franciscan Alliance was recently resolved after Judge O’Connor granted a group of religious providers’ request for a permanent injunction. This prevents HHS from interpreting or enforcing Section 1557 and implementing regulations in a way that would require those plaintiffs to perform, or provide insurance coverage for, services related to gender transition or abortion. In issuing a permanent injunction, Judge O’Connor cited the Supreme Court’s decision in Bostock v. Clayton County and an HHS announcement in May 2021 that it would interpret Section 1557’s ban on sex discrimination to include discrimination on the basis of sexual orientation and gender identity. He may soon clarify his order in response to a request from the Department of Justice to do so.

In August 2021, two new class action lawsuits were filed: one in Tennessee by a coalition of medical providers and one in Texas by physicians. Both argue that HHS’s interpretation of Bostock is inconsistent with the text of Section 1557 and ask the court to declare it invalid and permanently enjoin HHS from using or enforcing this interpretation. Setting aside the plaintiffs’ strained reading of Bostock, it remains unclear how plaintiffs have standing to challenge an interpretive statement where there is no indication that the new interpretation will be applied to or result in enforcement action against them.

Insurer Transparency Rule

As noted above, PCMA’s lawsuit over the Trump-era health insurer transparency rule is proceeding before the federal district court in DC. The government has been granted an extension until November 9 to file a response to PCMA’s complaint. Briefing will continue from there.

Data Marketing Partnership Arrangement

The Fifth Circuit may soon hear an appeal of a district court decision by Judge O’Connor that blessed another alternative to ACA coverage. Briefing was completed in mid-July. Amicus briefs were filed by the National Association of Insurance Commissioners, individual state insurance commissioners, insurers, state attorneys general, patient advocates, and consumer advocates in support of the federal government’s position. One amicus brief was filed in support of Data Marketing Partnership.