Could the future of the District’s health exchange now be up to a judge?

Aug 15, 2014, 5:54pm EDT

Could the future of the District’s health exchange now be up to a judge?

Friday was the deadline for the city to explain why U.S. District Judge Beryl A. Howell should dismiss a legal challenge from a life insurance group against D.C.’s planned 1 percent tax on all “health-related’ insurers to fund D.C. Health Link.

Tina Reed

Staff Reporter- Washington Business Journal

The future of a state-run health exchange in the District is now up to a judge.

Well, at least in part. Friday was the deadline for the city to explain why U.S. District Judge Beryl A. Howell should dismiss a legal challenge from a life insurance group against D.C.’s planned 1 percent tax on all “health-related’ insurers to fund D.C. Health Link.

That group, the American Council of Life Insurers, already filed documents calling the tax unconstitutional, saying the judge should ultimately consider their challenge to the tax, but also stop the tax from going into effect in the meantime.

Now Howell, a federal District Court judge, will consider both issues together.

In July, the American Council of Life Insurers filed suit saying the planned tax is unconstitutional and violates the Affordable Care Act. The council passed a law earlier this year requiring all health-related insurers to pay the tax, regardless of whether they can sell products on the exchange, which breaks the law, ACLI said in a filing against the District.

“At its core, this case is about the Exchange Authority’s attempt to foist the costs of its Health Benefit Exchange … on a select group of insurance companies who are unable to sell their products on the D.C. Exchange and derive no benefit from it,” ACLI wrote. “While the Authority claims that it had no other choice, the reality is that any short-term funding gap is a problem of the District’s own making.”

While this is just the next step in the case, the implications couldn’t be higher for the future of D.C.’s health insurance exchange, District officials said in documents filed with the court Friday evening.

"To deny the ability to fund adequately the Exchange will force the Authority to abandon the establishment of an Exchange in the District and to rely instead on the Federal Exchange for the sale of affordable health insurance."

The District said Congress purposely gave “broad flexibility” in how states can fund their exchanges under the Affordable Care Act. The Attorney General’s office also took issue with ACLI’s characterization that the tax violates the constitution because life insurers don’t directly benefit those responsible for paying them.

“The Exchange creates direct and clear benefits for carriers of supplemental insurance, which include some of the companies in ACLI’s membership, by increasing access to affordable quality health insurance for individuals and those that work for small businesses,” the District’s filing said. “Insurers of supplemental products will reap the greater benefits of loss prevention and mitigation of claims in direct way as a result of coverage of a healthier risk pool created by the exchange.”

It is not clear when Judge Howell will ultimately rule on these issues, but I’ll give updates as soon as that happens.

Tina Reed covers health care.

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