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ACA in the District Survives Another Attack: Court Rules in Favor of DC State-based Marketplace; Funding Approach Is Legal and Fair

Friday, November 14, 2014

Today, the chair of the DC Health Benefit Exchange Authority Executive Board applauds the decision to dismiss a lawsuit filed by the American Council of Life Insurers (ACLI) on behalf of their health insurer members. The lawsuit challenged how the District’s Online Health Insurance Marketplace is funded.

“Today’s ruling is a victory for the District’s residents and small businesses,” said Diane C. Lewis, M.P.A., chair of the DC Health Benefit Exchange Authority Executive Board. “DC Health Link provides a critical service to District residents and small businesses by making quality health insurance available under a fair set of rules at affordable prices. Today’s ruling reaffirms the broad benefits of DC Health Link, which the District Council recognized when enacting our enabling legislation and passing our financial sustainability plan.”

In dismissing the lawsuit, U.S. District Court for the District of Columbia Judge Beryl A. Howell stated, “In this case, ACA’s text and purpose make plain that Congress did not intend to limit the exercise of State power in operating State Exchanges. On the contrary, Congress intended in the ACA to encourage States to operate their own Exchanges and to give the States broad authority to provide adequate funding for those Exchanges when federal funding ceased.”

Judge Howell further stated, “In sum, the Challenged Amendment reflects a considered, and not an arbitrary, choice by the District that is rationally related to, and intended to further the goals of, the ACA and the Establishment Act to facilitate access to affordable health insurance for underserved District residents and small businesses.”

Background

In 2012, the District voted to establish a local, District run insurance marketplace through the Health Benefit Exchange Authority (Authority). Both federal and District law require the Authority to develop a financial sustainability plan and be financially self-sustaining beginning January 1, 2015. After detailed analysis and extensive stakeholder input, the Authority’s Executive Board unanimously adopted a financial sustainability plan based on a broad-based assessment on all health carriers. This approach spreads the cost widely across all health carriers. The insurance industry benefits by having a larger customer base for their supplemental health products like disability insurance and long term care insurance. The broad-based assessment is similar to the funding approach for the DC Ombudsman Office.

In Spring 2014, after hearing testimony from proponents and opponents of the assessment at a budget hearing on HBX, the District Council unanimously voted to enact the broad-based assessment as proposed by the Executive Board. ACLI immediately challenged the new law by filing a lawsuit.