5th Circuit Update: Health Care Reform--Cajun Style
Well, the Civil Procedure wonks are all a-twitter today over the Supreme Court's Shady Grove opinion (pdf). And who wouldn't be? Combine the Erie Doctrine with prompt pay penalties and Federal Rule 23 and you've got a party. Add a keg and the law nerds will be off the hook, or chain or whatever mot juste is currently de rigueur.
But I'm still counting votes, reading the opinion and trying to decide who won.
For me the big news is United Healthcare Ins. Co. v. Davis, released today by the Fifth Circuit.
The State of Louisiana decided to self-insure its employee health benefits to save money. But this shut out a Louisiana HMO that handled insured products.
So the HMO "petitioned the government" for a law creating an insured option in which only Louisiana HMOs (i.e., that HMO) could participate. And it "petitioned the government for a new, open enrollment period during the middle of the plan year for which the foreigners handling self-insurance were already being paid on a per-member basis.
The carriers handling self-insured plans called foul, arguing the act violated the dormant Commerce Clause and the Contracts Clause.
The Fifth Circuit held:
Because the State, by choosing with whom it did business, was acting as a participant in—and not a regulator of—the insurance market, the Act fell within the market participant exception, and the dormant Commerce Clause was therefore not a bar to its actions. However, the Act was invalid, as applied, because it interfered with the plaintiffs’ current contracts in violation of the Contract Clause.
Among the reasons the act violated the Contract Clause:
In this case, the record indisputably demonstrates that the Act is narrowly focused on benefiting in-state HMOs (indeed, a specific one) and is not a broad exercise of the State’s police power. The representative who drafted the bill met only with the President and CEO of [that specific Louisiana HMO] for input.
Lagniappe in Louisiana? Health Care? Political? Who knew?
Judge Jolly wrote for the majority and Judge Dennis concurred, stating that he would have invalidated the law on both grounds.
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