A federal appeals court says it has no jurisdiction over a public health insurance exchange funding charge in the District of Columbia because, for most of the insurers that pay the charge, it is pretty much useless.
A three-judge panel at the D.C. U.S. Circuit Court of Appeals came to that conclusion in a ruling on American Council of Life Insurers v. the District of Columbia Health Benefit Exchange Authority et al. (Case Number 14-7206).
Originally, a D.C. district court judge rejected the arguments the American Council of Life Insurers (ACLI) made against the exchange funding charge and blocked the ACLI’s suit.
The appellate court panel has told the district court to cancel that ruling and dismiss the ACLI suit for lack of jurisdiction.
The ruling means that, for now, issuers of disability insurance, long-term care insurance (LTCI) and other health insurance products other than major medical coverage still have to help pay for DC Health Link, the district’s Patient Protection and Affordable Care Act (PPACA) exchange program.
Congress gave the D.C. Superior Court exclusive jurisdiction over challenges to taxes imposed by the district, Senior Circuit Judge Stephen Williams writes in an opinion for the three-judge panel that issued the ruling.
The district does not call the exchange funding charge a tax, but Williams says the D.C. Circuit panel believes the key question is whether a charge raises revenue to cover the cost of providing a service for the payers of the charge, or if it raises revenue for purposes that are not especially useful for the entities that pay the charge.
“When payers receive a benefit in exchange for a charge, they will have less incentive to raise meritless or marginal challenges,” Williams writes.
An offensive fee that does little or nothing to help the payer “breeds the likely readiness of an assessed party to start litigation,” Williams says.
The District of Columbia now requires insurers to sell all new individual major medical coverage through DC Health Link, and it requires issuers of many kinds of health products to pay an exchange support charge, even though the only products insurers can sell through the exchange are major medical coverage and dental plans purchased along with major medical coverage.
In this case, the fact that the plaintiffs get no benefit from the exchange supports that the charge “militates in favor of classifying it as a tax and therefore places their federal-law challenges outside the jurisdiction of an ordinary federal court,” Williams writes.
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