United Healthcare Ins. Co. v. Davis
(5th Cir. (La.), March 31, 2010)
The Fifth Circuit held that “Act 479,” which mandates the Office of Governmental Benefits (OGB) obtain proposals and contract with Louisiana HMOs is a violation of the Contract Clause of the U.S. Constitution, because it interfered with the plaintiffs’ current contracts. And, contrary to the holding of the district court, held the Act did not violate the Commerce Clause.
The OGB arranges for health insurance for State employees and their dependents, contributing a majority of the premiums. In 2006, it determined that it would save costs by offering only self-insured plans, outside of fully-insured Medicare plans for retirees, and issued a Notice of Intent to Contract (NIC) to insurers for Administrative Services Only (ASO). One year contracts were awarded to the plaintiffs starting in July 2007. Defendant was an HMO that had previously contracted with the OGB. While it did not submit a bid for the self-insured ASO plan, it requested an NIC for fully insured plans. Thereafter, Act 479 was signed into law, to which plaintiffs sought a declaratory judgment challenging the law under the Commerce, Contract and Due Process clauses of the Constitution.
With respect to the Commerce Clause, the court noted that the clause prevents a state from imposing regulations discriminating against out-of-state entities or burdens interstate commence. The court held, however, that the market participator exception applied because the state was acting as a market participant, as opposed to a market regulator. In contract, the 2-1 court held that the Contract Clause, which prohibits states from passing laws that impair contracts, applied to the plaintiff’s contracts and the record did not explain or justify the States basis for doing so. As a result, the district court’s judgment permanently enjoining the Act was vacated and remanded for further proceedings.
For a complete copy of the Fifth Circuit’s decision, click here
Kim Whistler and Dan Gerber
https://www.goldbergsegalla.com/attorneys/Whistler.html
https://www.goldbergsegalla.com/attorneys/Gerber.html
Decision courtesy of Lexis.