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ACA Preemption and How a Missouri Order Will Impact Health Litigation

By John W. Polonis – June 19, 2014

Score one for the Affordable Care Act (ACA). On January 23, 2014, the U.S. District Court for the Western District of Missouri found that federal law likely preempts Missouri’s Health Insurance Marketplace Innovation Act (HIMIA). The court ruled that state law cannot apply to federally certified entities or individuals counseling those seeking to purchase insurance on Missouri’s federally facilitated exchange (FFE). See St. Louis Effort for Aids v. Huff, No. 13-4246 (W.D. Mo. 2014).

The Huff court issued a preliminary injunction against the Missouri Department of Insurance, Financial Institutions and Professional Registration, preventing it from enforcing state laws on certified applicant counselors (CACs) that exceed the ACA and its accompanying regulatory requirements. The court found the licensing requirements of HIMIA to conflict with and run counter to the ACA. U.S. District Court Judge Ortrie D. Smith held that federal law preempted HIMIA because the state law otherwise would impede the efforts of health-insurance navigators and CACs to educate people about Missouri’s FFEs, as required by the ACA.

Under the ACA, states may establish exchanges pursuant to 42 U.S.C. § 18031(b). Should a state choose to opt out of the program, however, the Department of Health and Human Services (HHS) will establish and operate an exchange in that state in accordance with 42 U.S.C. § 18041(c)(1). All exchanges, regardless of state or federal operation, are required to use a certified application-assistance program where CACs are present to assist buyers. The ACA sets forth the regulatory obligations and duties of the CACs while the exchange in each state is responsible for oversight and certification. Thus, all CACs on FFEs are subject to HHS oversight and control.

In Huff, the plaintiffs are CACs: Planned Parenthood of the St. Louis Region and Southwest Missouri, and St. Louis Effort for AIDS. Given the absence of a state exchange in Missouri, these CACs employ individuals who are certified by HHS, which operates the FFE in Missouri. They are mandated by the federal government to help buyers enroll in the Missouri FFE. Although it did not create a state exchange, Missouri passed HIMIA in 2013 to regulate the conduct of entities and individuals who perform duties for the FFE. Under section 376.2002.1 of the Missouri Revised Statutes, HIMIA requires CACs and navigators to obtain a state license and adhere to state-specific licensing requirements, including continuing-education requirements.

The Missouri law also mandates 30 hours of training and imposes fees for the organizations operating the FFE in Missouri. HIMIA also places a number of limitations on what the CACs and navigators may do, including registering as a licensed insurance agent. By not registering, CACs and navigators are prevented from providing “advice concerning the benefits, terms and features of a particular health plan or [from] offer[ing] advice about which exchange health plan is better or worse for a particular individual or employer.” See Mo. Rev. Stat. § 376.2002.3(3).

The Huff court found that HIMIA interfered with the primary purposes of the ACA—to increase access to health insurance and decrease the cost of health care. The court concluded that the additional burdens placed on CACs by the state law likely compromise these purposes. The court noted that Missouri had the option of creating its own exchange but opted instead for the federal-government program. Thus, the court found that Missouri did not have the liberty of choosing to impose additional requirements or limitations on the federal exchange because they frustrate Congress’s purpose of delegating that responsibility to HHS.

The plaintiffs argued that the additional state requirements are preempted by federal law, and they requested a preliminary injunction to prevent Missouri from enforcing HIMIA pending a decision on the merits of the case. At the crux of their argument is the Constitution’s Supremacy Clause, which explicitly states that “the Laws of the United States . . . shall be the supreme law of the land.” See U.S. Const. art. VI. The Huff court described the different categories of conflict preemption under the Supremacy Clause, including express preemption and preemption by implication. Congress can expressly preempt state law by inserting explicit language in a statute, or it can preempt it by implication by preventing its application through logical deduction based on the text of the statute. These categories are not “rigidly distinct,” and both preemption categories may be implicated as the court noted in this case. See Huff, slip op. at 4.

Under the ACA, federal law does not “preempt any State law that does not prevent the application of the provisions of” the ACA, 42 U.S.C. § 18041(d). The Huff court found this to imply that the ACA “does preempt any State law that prevents the ACA’s operation, and in that sense the statute does little more than invoke conflict preemption.” Because the court considered the issue of whether HIMIA provisions preempted the Missouri FFE on a motion for preliminary injunction, its analysis turned on whether the plaintiffs were likely to succeed on the merits of their claim. The Huff court concluded that the plaintiffs met this requirement and found that the additional state licensing requirement unreasonably obstructed implementation of the ACA.

Missouri countered the plaintiffs’ claims by arguing that HIMIA did not apply to them and they therefore were unlikely to succeed on the merits of their claims. The state argued that its law applied only to individuals or entities that were compensated for their services.

The Huff court rejected Missouri’s argument because it appeared that the plaintiffs were compensated for performing their federal duties through HHS grants. Although Missouri used the term “state navigator” in HIMIA, the court found that term to encompass federal navigators because the Missouri law defined a state navigator as anyone who receives funds from HHS, which the CACs did. Compensation in exchange for services performed in connection with a health-benefit exchange was found to be sufficient to subject the plaintiff to the additional requirements set forth by HIMIA. The court found these additional requirements to obstruct the operation of the FFE. The state mandate to obtain state licenses for federal CACs was determined to “constitute an impermissible obstacle.” In particular, the state law’s licensed insurance agent requirements improperly prevent CACs from providing advice on benefits and features of individual health-care plans, thus conflicting with federal provisions that expressly require CACs to provide detailed information about various plans.

The Huff court concluded that Missouri’s attempts to regulate the conduct of those working on behalf of the FFE are preempted. Missouri had the option to create an exchange, but because it declined to do so, the court found that it cannot impose additional requirements or limitations on the FFE. The court found no state hardship as a result of the issuance of a preliminary injunction to the plaintiffs and instead determined that the public interest favored “removing the state-created specter of punishment and regulation that likely violates the Constitution, and permitting the FFE to operate as intended by the ACA.” Huff, slip op. at 16.

Impact on Future Litigation
According to the National Health Law Program, Missouri and at least 12 other states have enacted laws to impose additional licensing standards and requirements on federally certified individuals and entities charged with helping consumers enroll in FFEs. The Huff decision should serve as persuasive authority throughout the country that entities and individuals must be able to exercise the duties they are funded to perform under the ACA and could call into question the constitutionality of similar laws in other states. As the Huff court states: “State laws that make operation of the FFE more difficult or onerous run afoul of the ACA’s purpose and are subject to preemption.” See Huff, slip op. at 5. The ruling likely will bolster challenges similar to laws in other states and may cause state legislators to act cautiously before considering laws designed to obstruct implementation of the ACA.

Keywords: litigation, health law, Affordable Care Act, certified applicant counselors, Department of Health and Human Services, health care

John W. Polonis is a 2013 graduate of the Villanova University School of Law, where he was the editor-in-chief of the Jeffrey S. Moorad Sports Law Journal.

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