The U.S. District Court for the Southern District of Ohio recently issued a decision which impacts Ohio’s public employers. In Ohio v. United States (2016), the Court held in part that Congress intended the Transitional Reinsurance Program to apply to both state and local government employers which offer qualifying group health plans in the same manner that the program applies to private-sector employers.
The Transitional Reinsurance Program (TRP), under 42 U.S.C. 18061, establishes a temporary 3-year program for the benefit years of 2014, 2015 and 2016. The purposes are to keep individual premiums low as well as ensuring market stability for insurers. Under the TRP, both health insurance issuers and group health plans are required to make monetary contributions, which are collected to help fund reinsurance payments to individual market issuers which insure high-risk, high-cost enrollees.
In its action, the State of Ohio and several of its political subdivisions argued that the TRP should not be applied against state and local government employers. It also sought to be refunded for its contributions made to the TRP, under protest, in the year 2014. In support of its position, the State first argued that its issued health plans are not considered “group health plans.” However, the District Court held that the State’s employer-sponsored healthcare plans do qualify as group health plans as defined by the Public Health Service Act (PHSA), and therefore are subject to the TRP’s requirements.
The State of Ohio also raised constitutional arguments, including violations of the Tenth Amendment and the Intergovernmental Tax Immunity Doctrine. However, the Court held that the Transitional Reinsurance Program does not violate the Constitution in these respects. The federal government is permitted to subject state and local government employers to the same standards that apply to employers in the private sector. The State is being required to comply with, not implement, a federal regulatory program. The District Court also determined that the TRP is not a discriminatory tax on the State; instead, the TRP “imposes reinsurance contributions on public and private group health plans in an even-handed, non-discriminatory manner.” All qualifying group health plans, offered by both government and private employers alike, pay the exact same amount per covered enrollee in each benefit year.
The Court determined that public employers who disagree with the TRP’s requirements may still resort to the political process to seek change. In the meantime, it remains to be seen if the District Court’s decision will be appealed, as well as the impact it may have on public employers in the interim.