Appeal from the United States District Court for the Eastern District of Pennsylvania.
Weis, Higginbotham, and Sloviter, Circuit Judges.
Congress amended the Medicare Act to provide that benefits would not be available when an individual's medical expenses could be paid under an automobile insurance policy. Because of unforeseen losses that would be caused by this change, the plaintiff insurance company sought an injunction and declaratory relief against application of regulations implementing the statute. The district court held that it did not have jurisdiction over the challenge to the regulations except for the constitutional claims by way of mandamus. We conclude that all claims were properly before the court, that plaintiff has standing, but, nevertheless, we agree that plaintiff is not entitled to relief. Accordingly, the dismissal by the district court will be affirmed.
Colonial Penn Insurance Company applied to the district court for injunctive and declaratory relief from regulations stating that Medicare benefits would be secondary to coverage provided by automobile insurance policies. Plaintiff objected to the regulations because they required the company to make unanticipated payments on claims arising under previously issued policies. The district court dismissed statutory challenges to the regulations for lack of subject matter jurisdiction and dismissed all others for failure to state a claim.
The plaintiff's complaint alleges that its yearly insurance policies cover medical and hospital expenses for injuries received in automobile accidents. The contracts either comply with state "no-fault" statutes or contain a medical payment clause as part of an automobile liability policy.
Colonial Penn writes policies for many persons over age 65, and concentrates on that segment of the population in its sales promotion. The policies, which are reviewed or approved by the various state insurance departments, provide that payments for medical expenses shall be made only to the extent that they are not covered by Medicare. Because medical expense coverage is secondary to Medicare, the company has been able to offer lower insurance premiums to senior citizens.
In December 1980, as part of the Omnibus Budget Reconciliation Act of 1980, Congress amended section 1862(b) of the Social Security Act, 42 U.S.C. § 1395y, to realign coverage under the Medicare program. Pub.L. 96-499, § 953, 94 Stat. 2599, 2647 (1980). As modified, the statute states that Medicare payments would not be available "with respect to any item or service to the extent that payment has been made, or can reasonably be expected to be made (as determined in accordance with regulations) . . . under an automobile or liability insurance policy . . . or under no fault insurance. Any [Medicare] payment . . . shall be conditioned on reimbursement. . . ." 42 U.S.C. § 1395y(b)(1). The amendment, which became effective on December 5, 1980, was designed to make "medicare payment liability secondary in automobile insurance cases." H.Rep.No. 1167, 96th Cong., 2d Sess. 352 (1980), reprinted in 1980 U.S. Code Cong. & Ad. News 5526, 5717.
On May 17, 1982, the Secretary published proposed regulations to carry out the provisions of the amendment, 47 Fed. Reg. 21103 (1982), and issued final regulations on April 5, 1983, 48 Fed. Reg. 14802 (1983). They provided that Medicare payments would not be made for services covered by an automobile insurance policy, even though the policy states that its benefits are secondary to Medicare. 48 Fed. Reg. at 14810 (to be codified at 42 C.F.R. § 405.323(b)). The regulations also authorized the Secretary to sue an insurance carrier for reimbursement if Medicare benefits were made to a person eligible for coverage under an auto insurance policy. Id. (to be codified at 42 C.F.R. § 405.323(c)(3)(iii)). The regulations apply to services required because of accidents occurring after December 5, 1980, id. at 14809 (to be codified at 42 C.F.R. § 405.322(a)), but furnished on or after June 6, 1983, id. at 14810 (to be codified at 42 C.F.R. 405.323(a)). See also 48 Fed. Reg. at 14807.
The regulations became effective on May 5, 1983, and on May 25, Colonial Penn filed suit in the district court. The insurer alleged that the rules operated retroactively because they increased the insurer's coverage responsibilities under policies issued before promulgation of the regulations. Premiums had been set on the assumption that Medicare would provide primary coverage and thus pay most of the medical expenses of senior citizens injured in automobile accidents. Colonial Penn asserted that, as a result of the shift in coverage, it would be required to make substantial additional expenditures. Moreover, the company pointed out that its policies were written in conformance with state law. Without the approval of the state insurance departments, the contracts could not be changed to recognize the insurer's increased exposure.
Colonial Penn alleged the regulations effected a rewriting of its policies that deprived the company of its property without due process and constituted a taking in violation of the fifth amendment. The company also asserted that the regulations contravened the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-12, and misinterpreted the amendment to the Medicare provision. The carrier sought, inter alia, an order enjoining application of the regulations to any policy issued before June 6, 1983, and a declaration that the amendment and regulations were not applicable to policies in force before June 6, 1983.
The district court concluded that the insurance company might "very well" have standing because of the threat of actual injury. Finding jurisdiction in the mandamus statute to consider the constitutional challenges, the court determined however that no valid claims were presented. The district judge also held that as to the statutory attack, the regulation was "probably shielded from judicial review under the provisions of the statute itself."
On appeal, Colonial Penn argues that federal courts have jurisdiction over the statutory and constitutional claims and that on both bases a preliminary injunction should have issued.
We turn first to the question of standing. At issue are alleged property rights of the insurer in existing contracts.
According to the complaint, the regulations will impose a "severe economic detriment" on Colonial Penn and eliminate its "allowable profit margin in a number of states." The company also produced testimony at the hearing establishing that its assumption of primary liability for medical payments would result in losses in excess of three and one-half million dollars. Plaintiff alleges that this amount is unlikely to be recouped from added premium charges for policies issued at a later date because of the reluctance of state insurance commissions to allow a premium increase to compensate for past losses. There is present, therefore, the direct threatened injury traceable to the challenged action essential to confer standing. Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S. Ct. 752, 70 L. Ed. 2d 700 (1982). See also Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 152, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970) (loss of future profits and business establishes "injury in fact").
Having determined that Colonial Penn meets the constitutional requirement of standing, we look to see whether it has met the prudential consideration that the right asserted be within the zone of interests, arguably protected or regulated by the statute. See generally, Kirby v. United States Government, Department of Housing & Urban Development, 675 F.2d 60, 64-67 (3d Cir. 1982); Bowman v. Wilson, 672 F.2d 1145, 1150-1153 (3d Cir. 1982). Some doubt has been expressed on the continued vitality of the zone of interest analysis. See 4 K. Davis, ADMINISTRATIVE LAW TREATISE § 24:17 (2d ed. 1983). Nevertheless, the Supreme Court's reaffirmation of the test in Valley Forge Christian College, 454 U.S. at 475, suggests that reference to this consideration is still required. Kirby, supra.
The test is a generous one. Bank Stationers Association, Inc. v. Board of Governors of Federal Reserve System, 704 F.2d 1233, 1236 (11th Cir. 1983); Tax Analysts and Advocates v. Blumenthal, 184 U.S. App. D.C. 238, 566 F.2d 130, 140, 142 (D.C. Cir.), cert. denied, 434 U.S. 1086, 55 L. Ed. 2d 791, 98 S. Ct. 1280 (1977). The rights asserted need only be "arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Association of Data Processing Service Organizations, Inc., 397 U.S. at 153. Indeed, one commentary has stated that "there is substantial ground to believe that [the ...