Federal Court Dismisses UnitedHealth Suit Over N.Y. Risk-Adjustment Process

UnitedHealthCare and Oxford asserted in their suit that the New York department did not have the authority to redistribute the federal risk-adjustment payments. The companies allege in their complaint that the state’s regulation is pre-empted by the federal program and is an unconstitutional taking of the companies’ property.

Koeltl disagreed in his decision, saying that the HHS rules give states the ability to adjust the federal program if they need to, and that the New York program is therefore neither an overstep by the New York department nor an unconstitutional taking.

“In sum, the fact that the agencies responsible for implementing the FRAP [(federal risk-adjustment program)] — HHS and CMS — have repeatedly stated that states may turn to their own authority to adjust for unintended consequences of the FRAP — and have acknowledged that there have been such unintended consequences — is strong evidence that the ACA does not preempt the 2017 [New York regulatory action],” Koeltl wrote.

The two claims were essentially rolled into one based on that argument, Koeltl said. Since the state has the authority to adjust the FRAP funds, according to him, it also has the authority to redistribute the funds, as allowed under the regulation.

Vullo said in a statement that the decision affirms the agency’s authority to regulate insurers in New York.

“DFS is pleased that the federal court has recognized the Superintendent’s authority to promulgate New York’s health insurance risk adjustment regulation, and to enforce state law through regulation to protect New York’s markets and consumers,” Vullo said. “This decision correctly upholds New York’s regulatory insurance authority, and clearly affirms that New York’s continued enforcement of New York insurance law and regulation is not preempted by federal law.”

Steven Rosenbaum, a partner at Covington & Burling, represented United and Oxford in the matter. He declined to comment when reached by phone Monday. Jon-Michael Dougherty, an associate at Covington, was also on the case.

— Read UnitedHealth Says N.Y. ACA Risk-Adjustment Program Could Be in Trouble, on ThinkAdvisor.

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