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Pennsylvania Life and Health Insurance Guaranty Association v. Pennsylvania Insurance Department

Commonwealth Court of Pennsylvania

September 9, 2019

Pennsylvania Life and Health Insurance Guaranty Association, Petitioner
v.
Pennsylvania Insurance Department, Respondent

          Argued: March 13, 2019

          BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE ANNE E. COVEY, Judge HONORABLE MICHAEL H. WOJCIK, Judge HONORABLE CHRISTINE FIZZANO CANNON, Judge HONORABLE ELLEN CEISLER, Judge

          OPINION

          MARY HANNAH LEAVITT, PRESIDENT JUDGE.

         The Pennsylvania Life and Health Insurance Guaranty Association (PLHIGA) petitions for review of an adjudication of the Insurance Commissioner sustaining the appeals of nine member health insurers (Health Insurers)[1] and reversing the assessments imposed by PLHIGA on Health Insurers' Medicare Parts C and D premium accounts. In doing so, the Commissioner concluded that the assessments, which PLHIGA imposed pursuant to the dictates of its enabling legislation (PLHIGA Act), [2] are preempted by federal law. Discerning no error by the Commissioner, we affirm.

         I. Background

         This appeal involves the interplay of federal Medicare law and Pennsylvania's life and health insurance guaranty association law. Accordingly, we begin with an overview of the law relevant to the issues raised by PLHIGA in its challenge to the Commissioner's holding on preemption.

         A. Relevant Law

         1997 Balanced Budget Act and Regulations

         As part of the Balanced Budget Act of 1997 (Balanced Budget Act), Pub. L. No. 105-33, 111 Stat. 251 (August 5, 1997), Congress created Medicare Part C, then known as Medicareਚ≱ or "M," and now commonly referred to as Medicare Advantage or "MA." Under Medicare Part C, eligible Medicare beneficiaries may elect to receive Medicare benefits through either the traditional Medicare fee-for-service program or an M plan. Part C provides Medicare beneficiaries with a wider range of health plan choices to complement their traditional Medicare option.

         The Balanced Budget Act also included measures to control costs and ensure uniformity across Part C plans. To that end, the Balanced Budget Act states:

No State may impose a premium tax or similar tax with respect to payments to Medicareਚ≱ organizations under section 1395w-23[3] of this title or premiums paid to such organizations under this part.

42 U.S.C. §1395w-24(g) (emphasis added). To implement this and other parts of the Act, Congress directed the United States Secretary of Health and Human Services to "establish by regulation other standards ... for Medicareਚ≱ organizations and plans consistent with, and to carry out, this part." 42 U.S.C. §1395w-26(b)(1).

         In 1998, the Department of Health and Human Services published a proposed preemption regulation to implement Medicare Part C. In 2000, following a public comment period, the Department issued its final regulation, which states, in pertinent part, as follows:

(a) Basic rule. No premium tax, fee, or other similar assessment may be imposed by any State … or any of [its] political subdivisions or other governmental authorities with respect to any payment CMS [(Center for Medicare and Medicaid Services)] makes on behalf of MA enrollees[.]

42 C.F.R. §422.404(a) (as amended) (emphasis added).

         2003 Medicare Modernization Act

         Enacted in 2003, the Medicare Modernization Act[4] created Medicare Part D, which provides Medicare beneficiaries with a prescription drug benefit. A Conference Committee report accompanying the House version of the bill stated that the Act sought to address "some confusion in recent court cases" by reiterating that Medicare Part C "is a federal program operated under Federal rules[, ]" and that "[s]tate laws, do not, and should not apply, with the exception of state licensing laws or state laws related to plan solvency." H.R. Report No. 108-391, at 557 (2003) (Conf. Rep.). The report reiterated that "no state may impose a premium, or similar, tax on premiums paid to MA organizations under this bill." Id.

         In furtherance of these objectives, Congress included a new, broader preemption provision stating as follows:

The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part.

42 U.S.C. §1395w-26(b)(3). Congress applied preemption equally to Part C and Part D plans. See 42 U.S.C. §1395w-112(g) ("The provisions of sections 1395w-24(g) and 1395w-26(b)(3) of this title shall apply with respect to [Medicare Part D] plans under this part in the same manner as such sections apply to … plans under [P]art C.").

         In 2005, the Department of Health and Human Services issued final regulations implementing the Medicare Modernization Act. The regulation pertaining to Part C plans states:

The standards established under this part supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to the MA plans that are offered by MA organizations.

42 C.F.R. §422.402. The regulation pertaining to Part D states, in pertinent part:

(a) Federal preemption of State law. The standards established under this part supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) for Part D plans offered by Part D plan sponsors.
(b) State premium taxes prohibited-
(1) Basic rule. No premium tax, fee, or other similar assessment may be imposed by any State … or any of [its] political subdivisions or other governmental authorities for any ...

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