UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

ASSOCIATION FOR COMMUNITY ) .
AFFILIATED PLANS, et al., ) FILED
)
Plaintiffs, ) JUL 19 2019
) Clerk, U.S. District & Bankruptcy
Vv. ) Courts for the District of Columbia
)
UNITED STATES DEPARTMENT OF ) Civil Case No. 18-2133 (RJL)
TREASURY, et al, )
)
Defendants. )
)
MEMORANDUM OPINION

 

(July Wi% 2019) [Dkt. ## 39, 40]

This is an Administrative Procedure Act (“APA”) challenge to an August 3, 2018
final rule (“2018 Rule”), 83 Fed. Reg. 38,212, promulgated by the Departments of Labor,
Treasury, and Health and Human Services (“the Departments”). The 2018 Rule redefined
“short-term, limited duration insurance” (or “STLDI”), a category of individual health
insurance that Congress expressly exempted from individual market regulations in the
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and did not
address further in the 2010 Affordable Care Act (“ACA”). Plaintiffs are a collection of
associations and organizations that directly or through their members offer individual
health insurance coverage through ACA-created marketplaces (“insurer plaintiffs’),
provide various medical services (“provider plaintiffs”), or purchase ACA-compliant
individual health insurance (“consumer plaintiffs”). See Compl. [Dkt # 1] at § 15.

Plaintiffs claim that the 2018 Rule violates the APA, 5 U.S.C. § 706, by interpreting STLDI

1
in a manner that is contrary to the ACA and/or HIPAA and is otherwise arbitrary and
capricious. /d. at §§ 97-123.

Pending before me are plaintiffs’ and the Departments’ cross-motions for summary
judgment. See Pls.” Mot. for Summ. J. [Dkt. # 39]; Defs.” Mot. for Summ. J. [Dkt. # 40].
Upon consideration of the briefing, the relevant law, and the entire record herein, the
Departments’ motion for summary judgment 1s GRANTED and plaintiffs’ motion for
summary judgment is DENIED.

BACKGROUND

The story of STLDI begins in 1996. That was the year that Congress enacted
HIPAA, a law designed in part to improve the availability and continuity of health
insurance coverage in the individual and group markets. See Pub. L. No. 104-191, 110
Stat. 1936. HIPAA amended the Public Health Service Act (“PHS Act’) to create federal
standards for “individual health insurance coverage.” See PHS Act § 2741, codified at 42
U.S.C. § 300gg-41, et seg. In doing so, the law defined “individual health insurance
coverage” to mean “health insurance coverage offered to individuals in the individual
market, but [that] does not include short-term limited duration insurance.” /d. § 300gg-
91(b)(5). That is, Congress in HIPAA exempted STLDI from individual market
regulations. Congress did not, however, define what coverage constitutes STLDI.

HIPAA also imposed several reforms on the individual health insurance market.
For those seeking individual policies, the law guaranteed coverage availability and
preexisting condition protections to “eligible individual[s],” i.e., persons with “18 or more

months” of “creditable coverage,” id. §§ 300gg-41(a)(1), (b)(1)(A), without any

2
“significant breaks in coverage” lasting 63 or more days, id. § 300gg-3(c)(2)(A). HIPAA
defined “creditable coverage” to include most forms of health coverage, including STLDI
(notwithstanding STLDI’s exemption from individual health insurance regulations). See
id. § 300gg-3(c)(1)(B); H.R. Rep. No. 104-736, at 180 (1996) (“The conferees intend that
creditable coverage includes short-term, limited coverage.”’); 45 C.F.R. § 146.113(a)(1)(ii)
(STLDI is a type of “health insurance coverage”). In addition, HIPAA capped the period
during which a group health insurer could exclude benefits for preexisting conditions to 12
months from enrollment (or 18 months for late enrollees) and required that the period be
“reduced by the aggregate of the periods of creditable coverage” for the individual seeking
to participate in the plan. HIPAA, Pub. L. No. 104-191, § 2701(a)(2)-(3). In sum,
individuals who changed plans under certain circumstances were afforded day-for-day
credit for their previous coverage, which served to protect them in full or in part from
benefit denials for preexisting conditions under their new coverage.

With Congress having created and exempted an undefined category of health
insurance, the Departments, predictably, stepped in to give STLDI meaning. In April 1997,
during the Clinton Administration, the Departments published an interim final rule (“1997
Rule”) defining STLDI as “health insurance coverage provided pursuant to a contract with
an issuer that has an expiration date specified in the contract (taking into account any
extensions that may be elected by the policyholder without the issuer’s consent) that is

within 12 months of the date such contract becomes effective.” 62 Fed. Reg. 16,894,
16,928 (Apr. 8, 1997).! The Departments during the Bush Administration followed up in
2004 with a final rule (“2004 Rule”), which adopted effectively the same definition as the
1997 Rule without opposition or comment. See 69 Fed. Reg. 78,720, 78,748 (Dec. 30,
2004).

In 2010, fourteen years after STLDI’s debut in HIPAA, Congress passed the ACA,
which overhauled the operation of individual health insurance markets in order “to increase
the number of Americans covered by health insurance and decrease the cost of health care.”
Nat’l Fed. of Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012). Among the ACA’s reforms
were: (1) “guaranteed issue,” requiring insurers to offer coverage to all individuals
regardless of health status and to accept every individual who applies for such coverage,
see 42 U.S.C. § 300gg-1; (2) “community rating,” which generally prohibits insurers from
charging higher premiums based on a person’s medical history or gender, see id. § 300gg;
(3) a collection of “essential health benefits” that insurers must provide in their plans, id.
§ 300gg-6; (4) the creation of “single risk pools” for individual and small group enrollees,
from which insurers must set their premiums, id. § 18032(c); (5) the establishment of
“Health Benefit Exchanges,” which are state-specific online marketplaces where
consumers can purchase ACA-compliant “qualified health plans” or “QHPs” (that is. plans
that comply with the foregoing requirements), see id. §§ 18021, 18031. 18032; and (6) the

provision of subsidies for low-income individuals in the form of premium tax credits,

 

' The “extension” language in the original STLDI interpretation is complicated, but
the parties now agree that the definition permitted unlimited policy renewals with the
issuer’s consent. Hr’g Tr. (May 21, 2019) [Dkt. # 56] at 9, 17, 19. Cf Pls.’ Mot. for Summ.
J. at 33 (“the pre-ACA STLDI definition did not permit any renewal of STLDI plans”).

4
which are designed to help eligible persons purchase QHPs through an ACA Exchange and
are tied to the premium charged by a benchmark plan available on the Exchange, as well
as to a consumer’s household income, see 26 U.S.C. § 36B; id. § 36B(b)(2). Not among
the ACA’s reforms was any change to HIPAA’s definition of “individual health insurance
coverage,” which expressly excluded STLDI. See 42 U.S.C. § 300gg-91(b)(5).
Accordingly, STLDI remained exempt under the ACA from individual health insurance
market regulations, including those imposed by the ACA. STLDI also remained statutorily
undefined.

The ACA’s most well-known feature, of course, is the so-called “individual
mandate,” which requires individuals to maintain “minimum essential coverage’”—e.g..
purchasing a QHP on an Exchange, see 26 U.S.C. § SOO0OA(f)(1)(C)—or pay a tax penalty.
See id. § 5000A(a)(b). There are statutory exemptions from the penalty, including for
those who cannot afford ACA-compliant plans or will suffer hardship in securing them.
See id. § 5000A(e)(1), (5). But, as of January 1, 2019, those exemptions are effectively
moot, as Congress’s Tax Cuts and Jobs Act of 2017 (“TJCA”) reduced the tax penalty
amount to $0 for all individuals, effective at the beginning of this year. See Budget Fiscal
Year, 2018, Pub. L. No. 115-97 § 11081, 131 Stat. 2054 (2017).

It is not in dispute that after the ACA’s reforms took effect in 2014, health insurance
premiums began to rise. See, e.g., 83 Fed. Reg. at 38,232 (“[i]ndividual market premiums
increased 105 percent from 2013 to 2017, in the 39 states using Healthcare.gov in 2017”).
Two years later, in 2016, the Departments during the Obama Administration became

“concerned” that individuals were “purchasing [STLDI] coverage as their primary form of

5
health coverage” and that STLDI issuers might “target[]” “healthier individuals, . . . thus
adversely impacting the risk pool for Affordable Care Act-compliant coverage.” 81 Fed.
Reg. 75,316, 75,317-18 (Oct. 31, 2016). In other words, the Departments were worried
that as the cost for ACA-compliant plans rose, more and more healthy individuals would
be incented to exit the ACA Exchanges and purchase cheaper health coverage options like
STLDI. Accordingly, the Departments adopted a final rule (“2016 Rule”) that redefined
STLDI “so that the coverage must be less than three months in duration, including any
period for which the policy may be renewed.” /d. at 75,318. The 2016 Rule thus reduced
the maximum term and duration of STLDI from less than twelve to less than three months,
and it effectively prohibited renewals.

Just days after the 2016 Rule was finalized, American voters elected a new
Administration with, to say the least, different views from the previous Administration
regarding competition and choice in health insurance markets. On January 20, 2017,
President Trump issued an Executive Order stating his Administration’s policy “to seek
the prompt repeal of the [ACA]” and ordering agencies with authority and responsibilities
under the ACA to take all possible legal steps “‘to minimize the unwarranted economic and
regulatory burdens of the Act,” provide relief from “regulatory burdenjs] on individuals,
families, health care providers, health insurers, patients,” and maximize “options for
patients and consumers.” Exec. Order No. 13,765, Minimizing the Economic Burden of
the [ACA] Pending Repeal, 82 Fed. Reg. 8351, 8351, Secs. 1, 2, 4 (Jan. 20, 2017).
Congress also tried its hand several times at repealing the ACA outright. See American

Health Care Act of 2017, H.R. 1628, 115th Cong. (2017); Better Care Reconciliation Act

6
of 2017, S. Amend. 270 (July 25, 2017); Obamacare Repeal Reconciliation Act of 2017,
S. Amend. 271, 115th Cong. (July 25, 2017); Healthcare Freedom Act of 2017, S. Amend.
667, 115th Cong. (July 26, 2017). Those efforts failed. All the while, the ACA Exchanges
continued to struggle. See, e.g., 83 Fed. Reg. at 38,232 (citing HHS reports showing that
“{iJndividual market premiums increased 105 percent from 2013 to 2017, in the 39 states
using Healthcare.gov in 2017, while the average monthly premium for the second-lowest
cost silver plan for a 27-year-old increased by 37 percent from 2017 to 2018”).

On October 12, 2017, President Trump issued another Executive Order, this time
directing the Departments to prioritize efforts to “to expand the availability of and access
to... STLDI” in order to “promot[e] competition in healthcare markets” and increase
consumer choice. See Exec. Order No. 13813, Promoting Healthcare Choice and
Competition Across the United States, Sec. 1, 82 Fed. Reg. 48,385, 48,385—86 (Oct. 12,
2017). Not surprisingly, the Departments under the Trump Administration responded a
few months later with a proposed rule that would return the definition of STLDI to the
original twelve-month maximum term that was in place when Congress enacted the ACA
in 2010. Short-Term, Limited-Duration Insurance, Proposed Rule, 83 Fed. Reg. 7437
(proposed Feb. 21, 2018).

After receiving comments, the Departments finalized the proposed rule on August
3, 2018. The final rule (“2018 Rule”), effective October 2, 2018, defined STLDI as “health
insurance coverage provided pursuant to a contract with an issuer that has an expiration
date specified in the contract that is less than 12 months after the original effective date of

the contract and, taking into account renewals or extensions, has a duration of no longer

7
than 36 months in total.” 83 Fed. Reg. at 38,212, 38,214-15. In plain English, the 2018
Rule caps the maximum initial term of an STLDI plan at twelve months—.e., the original
definition—and it caps the maximum total duration of an STLDI plan at 36 months—i.e.,
the maximum initial term plus two renewals.

Plaintiffs? filed suit on September 14, 2018—about two weeks before the 2018 Rule
took effect—claiming that the new definition of STLDI is contrary to HIPAA and the ACA
and/or is arbitrary and capricious, in violation of the APA, 5 U.S.C. § 706(2)(A). See
Compl. at {§ 97-123.2 They followed with a motion for preliminary injunction on
September 28, 2018, see [Dkt. # 10], which was argued before the Court on October 26,

2018, see Hr’g Tr. (Oct. 26, 2018) [Dkt. # 29], but subsequently withdrawn by plaintiffs

 

* There are seven named plaintiffs: (1) the Association for Community Affiliated
Plans (“ACAP”), an association of nonprofit and community-based insurers that provide
qualified health coverage to individuals through the ACA marketplaces and thus compete
with STLDI issuers for individual enrollees; (2) the National Alliance on Mental Illness,
an organization that represents individuals affected by mental illness who typically are
unable to purchase STLDI; (3) Mental Health America, a community-based nonprofit that
assists individuals living with mental illness; (4) the American Psychiatric Association,
whose member psychiatrists provide medical services that are not covered by STLDI; (5)
AIDS United, which represents individuals with HIV and healthcare providers who treat
them and whose services are not covered by STLDI; (6) the National Partnership for
Women & Families, which promotes policies that benefit women and claims that STLDI
plans disproportionately harm women in pricing, coverage, and access to care; and (7) the
Little Lobbyists, a group of families with children with serious health conditions who rely
on ACA-compliant plans and could face higher premiums due to the 2018 Rule. See
Compl. at § 15.

> The Complaint also included claims that the Departments failed to consider
regulatory alternatives and the effects of the 2018 Rule’s renewability provision, Compl.
at {| 120-21, and failed to comply with their procedural notice-and-comment obligations
under the APA, id. at 49 85-89. Those claims are absent from plaintiffs’ motion for
summary judgment and are therefore abandoned. See Aliotta v. Bair, 614 F.3d 556, 562—
63 (D.C. Cir. 2010) (claims raised in complaint may be abandoned at summary judgment).

8
on November 7, 2018, see [Dkt. # 28]. On November 12, 2018, I set an expedited briefing
schedule for the parties’ cross-motions for summary judgment, but that schedule was soon
stalled by the government shutdown. Following the restoration of funding on January 25,
2019, the parties filed their summary judgment motions on February 22, 2019, see [Dkt.
## 39, 40], their oppositions on March 15, 2019, see [Dkt. ## 44, 45], and their replies on
March 22, 2019, see [Dkt. #4 46, 47].4 Plaintiffs filed a revised joint administrative
appendix on April 2, 2019. See [Dkt. #51]. Oral argument on the motions was held on
May 21, 2019.

LEGAL STANDARD

Summary judgment is the appropriate mechanism for deciding whether, as a matter
of law, an “agency action is supported by the administrative record and is otherwise
consistent with the APA standard of review.” Hill Dermaceuticals, Inc. v. FDA, No. 11-
1950, 2012 WL 5914516, at *7 (D.D.C. May 18, 2012). At this stage, courts ordinarily
apply the familiar standard in Federal Rule of Civil Procedure 56(a), granting judgment “if
the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” But courts assessing agency actions “‘sit[ ] as
an appellate tribunal,” and “[t]he entire case on review is a question of law.” Am.
Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (internal quotation

marks omitted).

 

+ Several amici curiae—among them, the American Medical Association, American
Cancer Society, and AARP—filed briefs in support of plaintiffs at the preliminary
injunction and summary judgment stages. See [Dkt. ## 53, 54, 55].

9
Under the APA’s “default standard” of review, “[a] court must set aside agency
action it finds to be ‘arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.’” Tourus Records, Inc. v. DEA, 259 F.3d 731, 736 (D.C. Cir. 2001)
(quoting 5 U.S.C. § 706(2)(A)). “The ‘arbitrary and capricious’ standard of review as set
forth in the APA is highly deferential,” and the Court must therefore “presume the validity
of agency action.” Am. Horse Prot. Ass'n v. Yeutter, 917 F.2d 594, 596 (D.C. Cir. 1990).

>

The Court “is not empowered to substitute its judgment for that of the agency.” Cape
Hatteras Access Pres. All. v. U.S. Dep’t of Interior, 731 F.Supp.2d 15, 21 (D.D.C.
2010) (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971)).
However, “[t]his deferential standard cannot permit courts to merely to rubber stamp
agency actions, nor be used to shield the agency’s decision from undergoing a thorough,
probing, in-depth review.” Guindon vy. Pritzker, 31 F.Supp.3d 169, 186 (D.D.C.
2014) (internal quotation marks and citation omitted). In the final analysis, the Court must
be satisfied that the agency has “examine[d] the relevant data and articulate[d] a
satisfactory explanation for its action including a rational connection between the facts
found and the choice made.” Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C. Cir. 2006)

(internal quotation marks omitted).
ANALYSIS
A. Standing
An analysis of plaintiffs’ case begins, as it must, with standing—the “essential and
unchanging” predicate to the exercise of judicial power. Lujan v. Defs. of Wildlife, 504

U.S. 555, 560 (1992). To establish Article HI standing, plaintiffs must show a concrete

10
and particularized injury in fact that is fairly traceable to the 2018 Rule and likely to be
redressed by a favorable judicial decision. /d. at 560-61. Plaintiffs’ self-styled “primary
standing contention” is that the insurer plaintiffs—i.e., plaintiff ACAP’s member
insurers°——have standing to challenge the 2018 Rule under the competitor standing
doctrine. Pls.’ Opp’n to Defs.’ Mot. for Summ. J. [Dkt. # 45] at 2. I agree, and, therefore,
I need not consider standing as to the remaining members of the plaintiff group, all of
whom seek invalidation of the 2018 Rule. See Comcast Corp. v. FCC, 579 F.3d 1, 6 (D.C.
Cir. 2009) (“‘[I]f one party has standing in an action, a court need not reach the issue of
the standing of other parties when it makes no difference to the merits of the case.’”
(quoting Ry. Labor Execs.’ Ass'n v. United States, 987 F.2d 806, 810 (D.C. Cir. 1993)));
see also Pls.’ Reply in Supp. of Pls.’ Mot. for Summ. J. [Dkt. # 47] at 4n.4.

The insurer plaintiffs have established an injury in fact under the competitor
standing doctrine, which recognizes the economic understanding that market “actors
‘suffer [an] injury in fact when agencies lift regulatory restrictions on their competitors or
otherwise allow increased competition’ against them.” Sherley v. Sebelius. 610 F.3d 69,
72 (D.C. Cir. 2010) (quoting La. Energy & Power Auth. v. FERC, 141 F.3d 364, 367 (D.C.
Cir. 1998)); see also Canadian Lumber Trade All. v. United States, 517 F.3d 1319, 1332
(Fed. Cir. 2008) (competitor standing doctrine “relies on economic logic to conclude that

a plaintiff will likely suffer an injury-in-fact when the government acts in a way that

 

> ACAP has established its associational standing to sue on behalf of “at least one
of its members,” Ctr. for Biological Diversity v. EPA, 861 F.3d 174, 182 (D.C. Cir. 2017),
namely Community Health Choice. See Compl. at §§ 24-30; Decl. of Heather J. Foster
(“Foster Decl.”) [Dkt. # 48-2] at § 3, Table 1.

1]
increases competition or aids the plaintiffs competitors”). The doctrine’s “basic
requirement” is that the challenger “show an actual or imminent increase in competition,
which... will almost certainly cause an injury in fact.” Sherley, 610 F.3d at 73. To do so,
the party “must demonstrate that it is a direct and current competitor whose bottom line
may be adversely affected by the challenged government action.” KERM, Inc. v. FCC, 353
F.3d 57, 60 (D.C. Cir. 2004) (internal quotation marks omitted).

The insurer plaintiffs directly, and currently, compete with STLDI plan providers
for enrollees in the individual health insurance market. Indeed, the “entire purpose” of the
2018 Rule “is to promote competition” for individual insurance, which will “inevitably
come at the expense of” market competitors, like the insurer plaintiffs, who sell ACA-
compliant plans. See Sorenson Comms., LLC v. FCC, 897 F.3d 214, 226 (D.C. Cir. 2018).
As the Rule recognizes, STLDI provides “an additional choice for many consumers that
exists side-by-side with individual market coverage.” 83 Fed. Reg. at 38,218. And as the
Departments foresaw, expanding the availability of this choice would likely impact the
market. Indeed, the agencies predicted that as the STLDI “market grows, . . . in the long
term more issuers will sell such coverage, increasing competition and limiting excessive
profits.” /d. at 38,231. Specifically, they anticipated that certain healthier demographics
would exit the individual market Exchanges in favor of STLDI, thereby pushing ACA-
compliant premiums—for plans offered by, for example, the insurer plaintiffs—upward
over time. /d. at 38,234-36. Thus, there is no serious question that the 2018 Rule increases
competition between ACA-compliant Exchange plans and cheaper STLDI plans over

individual enrollees. See La. Energy & Power, 141 F.3d at 367 (plaintiff “will be injured

12
by increased price competition,” which establishes an injury in fact); Sherley, 610 F.3d at
72 (injury in fact exists where “a seller facing increased competition may lose sales to
rivals, or be forced to lower its price or to expend more resources to achieve the same sales,
all to the detriment of its bottom line”).

The Departments counter that the insurer plaintiffs sell plans in a different market
than STLDI. Defs.’ Reply in Supp. of Mot. for Summ. J. at 2-10. Putting aside that the
2018 Rule expressly states that STLDI “exists side-by-side with individual market
coverage,” 83 Fed. Reg. at 38,218 (emphasis added), the Departments cite no authority for
the proposition that courts should conduct a “product market” analysis prior to applying
the competitor standing doctrine. Rather, our Circuit Court has held that plaintiffs face
increased competition and thus qualify as direct and current competitors when they
compete for a similar or the same economic goal. See Sorenson Comms., 897 F.3d at 222~
23, 226; Wash. All. of Tech. Workers v. U.S. Dep’t of Homeland Sec., 892 F.3d 332, 341
(D.C. Cir. 2018). That is clearly the case here. The Departments take “too narrow a view
of what qualifies as participating in the ... market” at issue in this case. See Mendoza v.
Perez, 754 F.3d 1002, 1013 (D.C. Cir. 2014).

That the 2018 Rule’s “intended effect” is to promote individual market competition
itself is likely “sufficient evidence of an ‘actual or imminent’ increase in competition.”
Sorenson Comms., 897 F.3d at 226; see also La. Energy & Power, 141 F.3d at 367 (“[t]he
lifting of [regulatory] restrictions [on competitors] alone is generally sufficient” to establish
competitor standing). But here, the insurer plaintiffs have gone beyond allegations and

developed a factual record that, for standing purposes, provides adequate confirmation of

13
increased competition to support competitor standing. Specifically, ACAP has submitted
enrollment data for 2018 and 2019 indicating varying degrees of decline in ACA-compliant
enrollment in states that have adopted the “less than 12 months” definition of STLDI in the
2018 Rule. See generally Foster Decl.® At this stage, plaintiffs’ submission is sufficient
to satisfy the Article III injury requirement. See Fed. Forest Res. Coal. v. Vilsack, 100
F.Supp.3d 21, 34 (D.D.C. 2015) (party “at the summary judgment stage . . . must set forth
by affidavit or other evidence specific facts” supporting its standing claim).

Second, the increase in competition is “fairly traceable” to the 2018 Rule because
the Rule authorizes longer term STLDI plans, and economic actors can be expected to act
rationally by offering such plans and, for enrollees, potentially switching to them. See
Honeywell Int'l Inc. v. EPA, 374 F.3d 1363, 1369 (D.C. Cir. 2004) (per curiam) (agency
regulation that “legalizes the entry of a product into a market in which [plaintiff] competes”
causes plaintiff injury), withdrawn in part on other grounds, 393 F.3d 1315 (D.C. Cir.
2005) (per curiam); Bldg. Indus. Ass’n of Superior California v. Babbitt, 979 F.Supp. 893,
899 (D.D.C. 1997). The Departments’ argument that traceability to the 2018 Rule is
inherently speculative due to the “variable nature of health insurance coverage and cost,”
Defs.’ Mot. for Summ. J. at 17-18, is unavailing in this context, see Wash. All. of Tech.

Workers, 892 F.3d at 341 (where standing “injury claimed [was] exposure to increased

 

° Plaintiffs submitted this enrollment data along with their reply in support of their
motion for summary judgment. The Departments moved to strike the submission but
alternatively filed a merits response regarding the data’s relevance on the issue of standing.
See {Dkt. # 50]. I deny the Departments’ motion to strike and consider the evidence
properly before me.

14
competition in the .. . labor market.” rejecting defendant agency’s ‘“‘argument that its
regulation leaves the hiring decision to the employer”); Honeywell Int’l, 374 F.3d at 1369
(rejecting argument that plaintiff's injury was not caused by regulation allowing competing
products into market because plaintiff could only “speculat[e] about the purchasing
decisions of third parties not before the court’). The insurer plaintiffs have therefore
“demonstrate[d] a causal relationship between the final agency action and the alleged
injur[y].” Ctr. for Law & Educ. v. Dep't of Educ., 396 F.3d 1152, 1160 (D.C. Cir. 2005).

Finally, a favorable outcome in this Court for the insurer plaintiffs would redress
the harm caused by the 2018 Rule. All plaintiffs seek invalidation of the Rule, and a Court
order doing so would remedy the specific injury alleged—i.e., the increased competition
that has resulted from the Rule. See Wash. All. of Tech. Workers, 892 F.3d at 341;
Honeywell Int’l, 374 F.3d at 1369 (“As a favorable opinion of the court could remove the
competing [products] from the market, redressability is satisfied ....”). Accordingly. the
insurer plaintiffs have standing to challenge the 2018 Rule.

B. Scope of Congressional Delegation

At its core, plaintiffs’ merits challenge is based on their view that in promulgating
the 2018 Rule, the Departments exceeded the limits that Congress imposed on the agencies
when it enacted the ACA. Plaintiffs claim that the ACA’s structure and purpose forbid the
Departments’ interpretation of STLDI, which, they say, was intended to (and
allegedly does) create an alternative individual health insurance market beyond the reach
of the ACA’s reforms. See, e.g., Pls.” Mot. for Summ. J. at 18 (Departments “sought to

circumvent” ACA to “creat[e] an alternative health insurance regime”); Pls.’ Reply in

15
Supp. of Mot. for Summ. J. at 4 (“we do not mean to ‘insinuate’ that the Rule is designed
to create a new form of primary coverage: we say that outright”).

To say the least, the current landscape of judicial review of agency statutory
interpretations—that is, the range of analytical approaches available, both within and
outside the traditional Chevron framework—is varied. Plaintiffs’ basic criticism, however,
is antecedent to Chevron, which applies only when “Congress has delegated interpretive
authority to the agency in question.” Prime Time Intern. Co. v. Vilsack, 930 F.Supp.2d
240, 248 (D.D.C. 2013) (citing United States v. Mead Corp., 533 U.S. 218, 226-27 (2001)
and Cass Sunstein, Chevron Step Zero, 92 Va. L. Rev. 187, 190-92 (2006)). If, as plaintiffs
argue here, the Departments overstepped their congressionally circumscribed bounds in
promulgating the 2018 Rule, they cannot benefit from application of Chevron’s deferential
framework.

There is, of course, no serious question that Congress delegated to the Departments
the authority to define STLDI when it enacted HIPAA in 1996. Congress defined
“individual health insurance coverage” to exclude STLDI but made no attempt to dictate
the characteristics that mark such plans. See PHS Act § 2791(b)(5), codified at 42 U.S.C.
§ 300gg-91(b)(5). The Departments stepped in the following year to define STLDI as plans
lasting less than 12 months with unlimited issuer-consented renewals, and they finalized
that definition in 2004. Thirteen years passed between the 1997 interim rule and the ACA’s
enactment in 2010. Over that period, the Departments exercised the authority to define
STLDI without challenge or resistance. The ACA’s passage did not alter this status quo !

In fact, the ACA—which in so many ways constituted a sea change to the provision of

16
individual health insurance in the United States—retained untouched HIPAA’s exception
of STLDI from individual market insurance regulations. See 42 U.S.C. § 300gg-91(b)(5).
And it was not for another six years after the ACA’s enactment that the Departments
revisited STLDI, in an effort to protect the single risk pools and relieve pressure on the
struggling individual Exchange markets. See 81] Fed. Reg. 75,316, 75,317-18.

Plaintiffs thus do not, and could not, contend that the Departments exceeded their
congressionally delegated power when they defined STLDI in 1997 and 2004 or, more to
their liking, in 2016 (although plaintiffs do maintain that the original definition was likely
arbitrary and capricious, see Pls.” Mot. for Summ. J. at 3-4; Hr’g Tr. (May 21. 2019) [Dkt.
# 56] at 9). Plaintiffs therefore appear to agree that Congress “left a gap for [the
Departments] to fill,” thereby delegating “authority to the agenc[ies] to give meaning to a
specific provision of the statute by regulation.” Atl. City Elec. Co. v. FERC, 295 F.3d 1. 8
(D.C. Cir. 2002).’

Accordingly, for plaintiffs to succeed on their claim that the Departments have
overstepped the bounds of their delegated authority, there must be something so
“extraordinary” about the particular regulatory power exercised in the 2018 Rule—e.g., it
implicates “a question of deep ‘economic and political significance’ that is central to the
statutory scheme’”—that Congress would not have conferred such power without so stating.

See King v. Burwell, —- U.S. —, 135 S.Ct. 2480, 2489 (2015) (quoting Util. Air

 

’ See also 42 U.S.C. § 300gg-92 (“The Secretary, consistent with section 104 of
[HIPAA], may promulgate such regulations as may be necessary or appropriate to carry
out the provisions of this subchapter.”).

17
Regulatory Grp. v. EPA, 573 U.S. 302, 324 (2014); see also City of Arlington v. FCC, 569
U.S. 290, 321-22 (2013) (Roberts, C.J., dissenting) (“An agency interpretation warrants
[Chevron] deference only if Congress has delegated authority to definitively interpret a
particular ambiguity in a particular manner.”). After all, as Justice Scalia colorfully put it,
“Congress... does not alter the fundamental details of a regulatory scheme in vague terms
or ancillary provisions—it does not, one might say, hide elephants in mouseholes.”
Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001).

Plaintiffs have strived mightily to frame the 2018 Rule as such an “extraordinary”
administrative action, striking a blow to the heart of the ACA in a manner that is both
unprecedented and unworthy of judicial deference. Unfortunately for plaintiffs, neither the
law nor the facts supports that conclusion.

As previously noted, the 1996 Congress left it to the Departments to interpret the
meaning of STLDI, which is hardly surprising given the agencies’ relative expertise in
implementing health insurance legislation, cf King, 135 S.Ct. at 2489 (finding it
“especially unlikely that Congress would have delegated this decision to the /RS, which
has no expertise in crafting health insurance policy of this sort’). The Departments quickly
did so, and their original definition of STLDI was in place for over a decade before the
ACA’s enactment. That “interpretation of the law through its implementation color/ed]
the background against which Congress . . . legislat[ed],”" and “Congress is presumed to
preserve, not abrogate,” those “established practices and authoritative interpretations of the

coordinate branches.” United States v. Wilson, 290 F.3d 347, 356-57 (D.C. Cir. 2002).

Accordingly, the 2010 Congress was presumptively aware of the Departments’

18
longstanding interpretation when it passed the ACA. See Feng Wang v. Pompeo, 354
F.Supp.3d 13, 21-22 (D.D.C. 2018) (Congress adopting “virtually identical language”
from prior legislation “was aware that for twenty-five years [the State Department] had
interpreted” the prior legislation a specific way). Because Congress chose not to amend
HIPAA’s exemption of STLDI from individual market reforms or otherwise define (or
even reference) the term in the ACA, there is no “evidence of any intent to repudiate” the
Departments’ original interpretation and no basis to conclude other than that the ACA
adopted the Departments’ “longstanding administrative construction.” Haig v. Agee, 453
U.S. 280, 297 (1981); Feng Wang, 354 F.Supp.3d at 22. Now, after the Departments
briefly narrowed STLDI in 2016—an exercise of regulatory power that plaintiffs do not
challenge—the 2018 Rule has largely restored the longstanding construction against which
Congress enacted the ACA.

To say the least, this legal background poses a serious hurdle for plaintiffs. While
the Supreme Court has, in a select few instances, deemed an agency action “extraordinary”
(and thus effectively beyond Chevron’s reach), each case involved an expansive and
qualitatively unprecedented assertion of authority—a regulatory power grab, so to speak.
In some, the Supreme Court rejected the claimed power in part because the agency had
historically declined to assert it. The Court, for example, rejected the EPA’s assertion of
national permitting authority over millions of greenhouse gas-emitting stationary sources
because the agency had “discover[ed]” this “unheralded power to regulate a significant
portion of the American economy” “in a long-extant statute.” Util. Air Regulatory Grp.,

573 U.S. at 324 (internal quotation marks omitted). Similarly, the FDA could not claim

19
broad regulatory power over tobacco products after decades of disavowing such
jurisdiction, as Congress would not have delegated implicitly such a “decision of . . .
economic and political significance” to an agency that had for years disclaimed that very
authority. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 160 (2000). In
other cases, the agency’s claim to considerable regulatory power failed because it was
rooted in an otherwise prosaic statutory source. See MCI Telecomm. Corp. v. Am.
Telephone & Telegraph Co., 512 U.S. 218, 225-31 (1994) (rejecting FCC position that
statutory power to “modify” tariff filing requirements in 1934 Communications Act—what
the Court called ‘ta subtle device”—conferred authority to render voluntary the otherwise
mandatory requirement to file tariffs); Whitman, 531 U.S. at 468 (finding “it implausible
that Congress would give to the EPA through these modest words the power to determine
whether implementation costs should moderate national air quality standards”).

This case, by comparison, presents neither an “unheralded” assertion of regulatory
authority, nor a “subtle” or “modest” legislative fount. Congress excepted (but left for the
Departments to define) an entire category of individual health insurance from the strictures
it placed on the general individual market. The Departments, not surprisingly, moved
quickly to give STLDI a definition that governed for nearly the entirety of its statutory
existence. Congress reenacted the STLDI exemption without amending that longstanding
definition, and, after a brief hiatus, the Departments have now returned to a substantially
similar definition. Cf King, 135 S.Ct. at 2487 (interpreting IRS rule for first time). In this
respect, this case resembles Verizon v. FCC, wherein our Circuit Court considered a

challenge to an FCC regulation “impos[ing] disclosure, anti-blocking, and anti-

20
discrimination requirements on broadband providers.” 740 F.3d 623, 628 (D.C. Cir. 2014).
The FCC relied on § 706 of the 1996 Telecommunications Act, directing it “to encourage
the deployment . . . of advanced telecommunications capability’—including “broadband
telecommunications capability’—by taking measures “that promote competition in the
local telecommunications market” and “remove barriers to infrastructure development.”
Id. at 635~36 (quoting 47 U.S.C. §§ 1302(a), (d)(1)). According to the FCC, the challenged
regulation furthered this mandate by preserving unimpeded innovation in the provision of
internet services. /d. at 634. Verizon countered that even if § 706 conferred substantive
regulatory authority, “the scope of that grant is not so expansive as to permit the [FCC] to
regulate broadband providers in the manner” that the regulation had. /d. at 635.

Our Circuit Court rejected Verizon’s lack-of-authority argument, noting that “when
Congress passed section 706(a) in 1996, it did so against the backdrop of the Commission’s
long history of subjecting” broadband providers “to common carrier regulation.” /d. at
638. The Court continued, “although regulation of broadband Internet providers certainly
involves decisions of great ‘economic and political significance,’ Brown & Williamson.
529 U.S. at 160,” there was “little reason given this history to think that Congress could
not have delegated some of these decisions to the Commission.” /d. at 639. In other words,
“section 706(a) [wa]s no mousehole.” J/d.; see also Ass’n of Private Colls. & Univs. v.
Duncan, 870 F.Supp.2d 133, 147 (D.D.C. 2012) (rejecting argument that Department of
Education measures of program compliance with statutory “gainful employment”
requirement constituted “a policy change so large that Congress could not have meant to

authorize it in the statutory language”). The same is true of the STLDI exemption here.

2]
In a similar way, the factual record also confirms that the 2018 Rule “is no elephant”
either ! See Verizon, 740 F.3d at 639. There is no indication in the evidence submitted
that the Rule is having or will have the type of impact—substantial exodus from the
individual market Exchanges—that would threaten the ACA’s structural core.’ Indeed, it
is unclear exactly what impact the 2018 Rule will have on ACA-compliant plan premiums.
The evidence of record indicates that since the 2018 Rule went into effect, premiums have
remained stable—in fact, 2019 rates are down 1.5 percent overall. See Declaration of Jeff
Wu (“Wu Decl.”) [Dkt. # 40-2] at § 18. Moreover, a large majority (87 percent) of
individuals enrolled in Exchange plans receive subsidies that effectively insulate them from
premium increases for ACA-complaint coverage. See id. at [ 5-6. Because the subsidies
cannot be applied to STLDI premiums, there is little incentive for individual Exchange
enrollees to exit the Exchanges and purchase STLDI plans. See 83 Fed. Reg. at 38,235—
36. For unsubsidized enrollees, however, the Departments projected premium increases of
approximately one percent in 2019 and five percent by 2028. Jd. at 38,236. These
projections are hardly de minimis to the average person, and some proportion of the small
minority of unsubsidized enrollees may in fact exit the Exchanges as aresult. But for many
unsubsidized enrollees, a five-percent premium increase over a decade will not be enough
to accept the relative risks inherent in purchasing STLDI, which are well documented in
the 2018 Rule, see id. at 38,231-34. In any event, the Departments made a “judgment...

that individuals are in the best position to evaluate the tradeoffs between lower premiums

 

®t bears mentioning that the individual markets account for less than five percent
of the overall insurance market. See Wu Decl. at § 8.

22
and limitations of’ STLDI coverage, id. at 38,232, and there is no basis in the record to
conclude that this judgment will destabilize the Exchange markets.

Plaintiffs’ last-minute submission of enrollment data’ does not alter this conclusion.
Plaintiffs submitted figures indicating that, as of February 2019, eight of ACAP’s insurer
members have seen enrollment declines—ranging from 2.27 to 49.10 percent—for
Exchange policies offered in states that permit STDLI plans to last up to 364 days (as in
the 2018 Rule). Foster Decl. at {| 3-4. By contrast, four of the members’ enrollment
numbers are up—ranging from 0.30 to 25.64 percent—in states that meaningfully restrict
STLDI plan terms. /d. at 4 3, 5.

These data are clearly not enough to show that the 2018 Rule is, in fact, causing any
meaningful number of individuals to leave the Exchange markets and purchase STLDI
plans. As an initial matter, it is unclear what inference is to be drawn from recent increases
in enrollment in states that substantially restrict STLDI terms. The status quo ante (the
2016 Rule) limited STLDI plans to less than three months. Thus, evidence of increasing
enrollment in states that have effectively maintained the 2016 Rule is at best immaterial;
at worst, it undermines any direct correlation between the definition of STLDI and

enrollment levels. More importantly, evidence of enrollment declines in states that have

 

” As noted above in Section A, plaintiffs’ enrollment data is relevant to the standing
analysis. The data is also particularly useful under the circumstances in assessing whether
the Departments have exceeded the scope of the relevant Congressional! delegation. See,
e.g.,Am. Wildlands v. Kempthorne, 530 F.3d 991, 1002 (D.C. Cir. 2008) (court is permitted
to consider evidence outside of the administrative record in “unusual circumstances”
(quoting Tex. Rural Legal Aid, Inc. v. Legal Servs. Corp., 940 F.2d 685, 698 (D.C. Cir.
1991)).

23
adopted the 2018 Rule’s longer term is of minimal probative value absent some established
nexus between the two variables. “Correlation,” as our Circuit Court has reminded, “is not
causation.” In re Navy Chaplaincy, 738 F.3d 425, 429 (D.C. Cir. 2013) (internal quotation
marks omitted); cf Friends of Mayanot Inst., Inc. v. Iran, 313 F.Supp.3d 50, 60 (D.D.C.
2018) (declaration insufficient to show financial loss because evidence established only a
correlation between variables, “but not necessarily causation”). In addition to a limited
sample size of just eight plans, plaintiffs “have made no attempt to control for potential
confounding factors, such as,” inter alia, Congress’s zeroing out of the individual mandate
tax penalty. See In re Navy Chaplaincy, 738 F.3d at 429.'° That alone negates the data’s
evidentiary value, as the individual mandate was “[k]ey to the [ACA’s] ‘interlocking
reforms,’” Cutler v. U.S. Dep’t of Health and Human Services, 797 F.3d 1173, 1175 (D.C.
Cir. 2015) (quoting King, 135 S.Ct. at 2485), and the disabling of its enforcement
mechanism has undoubtedly impacted individuals’ enrollment decisions, see 42 U.S.C.
§ 18091(2)(A) (recognizing that without the mandate “some individuals would make an

economic and financial decision to forego health insurance coverage’’); King, 135 S.Ct. at

 

'° Plaintiffs do cite a projection from the Wakely Consulting Group, which plaintiff
ACAP hired to assess the 2018 Rule’s effects. Pls.” Opp’n to Defs.’ Mot. for Summ. J. at
8; see Decl. of Margaret Murray, Ex. B [Dkt. # 10-10] at 16-33. Wakely estimated that,
taking into account the zeroing out of the tax penalty, the 2018 Rule could be expected to
cause premiums on ACA plans to “increase by 0.7 percent to 1.7 percent and enrollment
[to] decrease by 2.7 percent to 6.4 percent in the individual market in 2019.” 83 Fed. Reg.
at 38,238. The Departments expressly considered Wakely’s report in the 2018 Rule and
concluded that it indicated that the Rule would “likely only result in a small average
increase to premiums in the individual and group markets.” /d. at 38,239.

24
2486 (“Congress found that the guaranteed issue and community rating requirements
would not work without the [individual responsibility] requirement.”).

Without persuasive evidence from the challengers regarding effect or causation,
there is no basis to conclude that the 2018 Rule is within the category of regulatory actions
that should cause courts “to hesitate” before applying the Chevron framework. See King,
135 S.Ct. at 2489 (quoting Brown & Williamson, 529 U.S. at 159). And even if plaintiffs
could show causation, any impact from the 2018 Rule is simply of a lesser order of
magnitude than what was at stake in King. There, the statutory question implicated one of
the ACA’s “key reforms, involving billions of dollars in spending each year and affecting

°

the price of health insurance for millions of people,” and, moreover, involved a regulation
promulgated by an agency (the IRS) that lacked any “expertise in crafting health insurance
policy.” /d. at 2488-89. Worse yet, the challengers’ interpretation of the provision at issue
“would destabilize the individual insurance market in any State with a Federal Exchange,
and likely create the very ‘death spirals’ that Congress designed the Act to avoid.” J/d. at
2493 (citing studies predicting that premiums would increase by as much as 47 percent and
enrollment would decrease by as much as 70 percent).

Here, not only is any potential negative impact from the 2018 Rule minimal, but its
benefits are undeniable. Because Congress effectively eliminated the individual mandate,
relatively healthy Exchange enrollees are no longer choosing between paying
ACA-compliant plan premiums or a fine. Their choice now is between paying ACA plan

premiums and going uninsured altogether. By modestly (re)expanding the utility of less

expensive STLDI plans, the Rule aims to minimize the harm and expense that would result

25
from these individuals opting to forego health insurance in the face of rising premiums.
After all, “the Affordable Care Act’s primary aim [was] to induce participation in health
insurance plans,” Sissel v. HHS, 760 F.3d 1, 8 (D.C. Cir. 2014), not use whatever means
necessary to press individuals exclusively into ACA-compliant coverage. See King, 135
S.Ct. at 2485 (ACA “designed to expand coverage in the individual health insurance
market”): NFIB v. Sebelius, 567 U.S. 519, 538 (2012) (ACA enacted “to increase the
number of Americans covered by health insurance and decrease the cost of health care”).

For these reasons, the 2018 Rule does not exceed the regulatory authority that
Congress delegated to the Departments to define STLDI as a category of insurance that is
exempt from individual insurance regulations. The Chevron framework therefore applies.

C. Chevron Step One: Whether the Statutory Construction is Precluded

The first step in the Chevron analysis is to determine whether the statute(s) that the
Departments interpreted are “ambiguous” or speak “directly . . . to the precise question at
issue.” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).
In other words, I must decide whether Congress has “unambiguously foreclose[d] the
agency’s interpretation.” Good Fortune Shipping SA v. Comm. of IRS, 897 F.3d 256, 261
(D.C. Cir. 2018) (quoting Nat'l Cable & Telecomms. Ass'n v. FCC, 567 F.3d 659, 663
(D.C. Cir. 2009)). This requires resort to the “traditional tools of statutory interpretation—
text, structure, purpose, and legislative history.” Pharm. Research & Mfrs. of Am. v.
Thompson, 251 F.3d 219, 224 (D.C. Cir. 2001); see also Chevron, 467 U.S. at 843 n.9. If
Congress has spoken directly on the issue, “then the unambiguous intent of Congress must

control and the Chevron inquiry is over.” Prime Time Intern. Co., 930 F.Supp.2d at 248.

26
Here, there is no serious question that HIPAA and the ACA are “silent or ambiguous
with respect to the specific issue” of the meaning of “short-term limited duration
insurance,” namely the maximum term and duration of STLDI policies. See Citizens Coal
Council v. Norton, 330 F.3d 478, 481 (D.C. Cir. 2003) (quoting Chevron, 467 U.S. at 843).
Neither law makes any attempt to give the phrase specific meaning; indeed, the ACA fails
to even mention it. Of course, “the absence of a statutory definition does not” in itself
“render a [phrase] ambiguous.” Nat. Res. Def’ Council v. EPA, 489 F.3d 1364, 1373 (D.C.
Cir. 2007). In this case, however, “nothing about the specific context in which [STLDI] is
used or the broader context as a whole . . . compel[s] the conclusion that the phrase has a
definite meaning.” ViroPharma, Inc. v. Hamburg, 898 F.Supp.2d 1, 18 (D.D.C. 2012)
(internal quotation marks omitted). And given that multiple other HIPAA and ACA
provisions expressly establish time limitations,'' the Congresses that enacted those laws
clearly “knew how to impose” temporal limits “when [they] chose to do so.” Cent. Bank
of Denver v. First Interstate Bank of Denver, 51) U.S. 164, 176-77, 184 (1994). The
absence of any such limits on the term or duration of STLDI here “indicates a deliberate

congressional choice with which the courts should not interfere,” at least not at this stage

of the analysis. /d.; see also Daiichi Sankyo Co. v. Rea, 12 F.Supp.3d 8, 16 (D.D.C. 2013)

 

'l See, e.g., HIPAA, Pub. L. No. 104-191, § 701(a) (permitting group plans to
exclude preexisting condition coverage within a “6-month period ending on the enrollment
date” and “for a period of not more than 12 months”); ACA, Pub. L. No. 111-148,
§ 1101(d)(2) (defining “eligible individual” as someone who “has not been covered under’
creditable coverage . . . during the 6-month period prior to the date on which such
individual is applying for coverage through the high risk pool”).

27
(reference to subparagraph in one provision indicated that Congress intentionally did not
so limit different provision referring to general paragraph).

Plaintiffs nevertheless contend that STLDI’s constituent phrases—“short-term” and
“limited duration”—unambiguously preclude the 2018 Rule’s interpretation. Pls.’ Mot.
for Summ. J. at 29, 36. I disagree. As to the first phrase, plaintiffs acknowledge, as they

39 66

must, that “short-term” is “relative,” in that a “term” can be “short” “only as it relates to
the length of something else.” Jd. at 29 & n.53. The “something else” in this case, plaintiffs
assert, “is the length of a standard health insurance plan: one year.” Jd. at 29.
Unfortunately for plaintiffs, this is just wishful thinking ! There is scant indication in
HIPAA’s text, structure, or purpose that Congress specifically intended for the
Departments to define “short-term” by reference to a one-year baseline. Even the resource
materials cited by plaintiffs show only that health insurance benefit periods are “usually”
or “often” one year in length. /d. (citing Bureau of Labor Statistics Definition of Health
Insurance Terms and Medical Mutual Glossary of Health Insurance Terms); see
ViroPharma, Inc., 898 F.Supp.2d at 19 (rejecting argument that statutory phrase’s
“common usage in industry transforms it into a clear term”). Again, Congress, had it been
so inclined, knew how to impose a 3-, 6-, or 12-month limitation. It did not, and I cannot
simply ignore the legislature’s choice to use indefinite, flexible phraseology.

That is not to say that plaintiffs’ view is an unreasonable one. The “standard” length
of a benefit period would be a perfectly sensible benchmark for interpreting “short-term”

insurance. However, to resolve this case at Chevron step one, I would have to find that

plaintiffs’ view “is not just ‘plausible,’ but rather that it is the ‘only possible

28
interpretation.’” Bennett v. Donovan, 4 F.Supp.3d 5, 9 (D.D.C. 2013) (quoting Regions
Hosp. v. Shalala, 522 U.S. 448, 460 (1998)); see also PDK Labs., 362 F.3d at 796 (fact
“(tlhat a statute is susceptible of one construction does not render its meaning plain if it is
also susceptible of another, plausible construction”); United States v. Nofziger, 878 F.2d
442, 446-47 (D.C. Cir. 1989) (statute is ambiguous if it can be read in more than one way).
That I cannot do. The “short-term” modifier, without more, fails to communicate
unambiguously a specific temporal limitation.

Plaintiffs also proclaim unequivocally that, as a matter of statutory plain meaning,
STLDI must refer to a “one-time, nonrenewable coverage option.” Pls.” Mot. for Summ.
J. at 36. But if that were the phrase’s plain meaning, the “limited duration” qualifier would
be mere window dressing ! Consistent with my “duty to give meaning to each [phrase]
used by Congress,” Nat. Res. Def Council, 489 F.3d at 1373, I must read “short-term” and
“limited duration” in a manner that “gives each phrase independent meaning,” Am. Fed.
Gov't Emps., AFL-CIO vy. Gates, 486 F.3d 1316, 1323 (D.C. Cir. 2007) (rejecting reading
of statutory phrase that would “render[] redundant the second, independent qualification
in” provision and “essentially read both qualifications . . . the same way, a highly
disfavored interpretive result”). When an insurance policy’s “term” and “duration” are
viewed as independent features, they are not necessarily coterminous periods of time.
Rather, the natural reading of “duration” in this context is the total lifespan of the insurance,
consisting either of a single term or multiple terms in the case of renewals or other
extensions. See 83 Fed. Reg. at 38,220 (‘“‘limited-duration’ refers to a longer time period

than ‘short-term,’ because . . . a policy’s term can be shorter than its duration (if the policy

29
is renewed or extended)’”). Thus, plaintiffs are incorrect in asserting that Congress
precluded an interpretation of “limited duration” that encompasses one or more renewals.
Finally, plaintiffs contend that HIPAA’s and the ACA’s structure and purpose
preclude the Departments’ chosen definition of STLDI. See, e.g., Pls.” Mot. for Summ. J.
at 30 (arguing that 2018 Rule is contradicted by “Congress’s purpose” in excepting STLDI
from individual market regulations and by the “term’s place within the overall HIPAA and
ACA schemes”). Taking HIPAA first—it is, after all, the statute in which STLDI
appears—plaintiffs argue that the law was intended to protect individuals at risk of
coverage loss who might be unable to obtain replacement insurance, and that the STLDI
exemption was meant to allow for “brief, gap-filling coverage for people between annual
plans who are awaiting commencement of full coverage pursuant to HIPAA’s access and
portability guarantees.” Pls.’ Mot. for Summ. J. at 31.!2 Those purposes, however, do not
foreclose the Departments’ interpretation. HIPAA guaranteed coverage availability and
preexisting condition protections to “eligible individual|[s],” i.e., those with at least 18
months of “creditable coverage” without any “significant breaks.” 42 U.S.C. §§ 300gg-
41(a)(1), (b)(1)(A); id. § 300gg-3(c)(2)(A). Under the law, “creditable coverage” included
STLDI. /d. § 300gg-3(c)(1)(B); see supra at p.3. HIPAA also afforded individuals
day-for-day credit for their prior creditable coverage, which served to reduce the time

period over which a group health insurer could exclude benefits for preexisting conditions

 

'? It is notable that the “gap-filling’” understanding of STLDI does not appear to be
reflected in HIPAA, the 1997 and 2004 Rules, or the ACA; the 2016 Rule marks its first
appearance in the administrative record. See 81 Fed. Reg. at 75,317 (STLDI “is designed
to fill temporary gaps in coverage”).

30
under the new coverage plan. See HIPAA § 2701(a)(2)-(3). Accordingly, HIPAA’s
protections were contingent largely on the amount of unbroken “creditable coverage” -—
including STLDI—that a policyholder could claim. This statutory framework makes it is
difficult to construe HIPAA, as plaintiffs would, to permit unrenewable STLDI plans of
less than 3 months but preclude STLDI plans of less than 12 months that are renewable for
up to 36 months, given that the latter plans would better enable individuals to maintain
unbroken “creditable coverage” and access the law’s protections. See infra at p.37. To say
the very least, plaintiffs’ view is not the “only possible interpretation” of Congress’s intent
as expressed through HIPAA’s structure and purpose. See Bennett, 4 F.Supp.3d at 9
(quoting Regions Hosp., 522 U.S. at 460).

Even if HIPAA is ambiguous, plaintiffs contend, Congress in the ACA
“unquestionably foreclosed” the Departments’ interpretation by defining “short coverage
gap[s]"’—which are exempt from the ACA’s now-defunct tax penalty—as a “period of less
than 3 months.” Pls.’ Mot. for Summ. J. at 32 (quoting 26 U.S.C. § 5000(e)(4)).!° Of

course, Congress’s use of specific temporal language with “short coverage gaps” but not

 

'3 It is questionable whether the ACA is relevant to the Chevron analysis at all, given
that the statute does not reference STLDI but simply reenacts HIPAA’s exemption of
STLDI plans from individual market regulations. Courts generally “will not understand
Congress to have amended an act by implication unless there is a ‘positive repugnancy’
between the provisions of the preexisting and newly enacted statutes, as well as language
manifesting Congress’s ‘considered determination’ of the ostensible change.” U.S. Ass'n
of Reptile Keepers, Inc. v. Zinke, 852 F.3d 1131, 1141 (D.C. Cir. 2017) (quoting Blanchette
v. Conn. Gen. Ins. Corps., 419 U.S. 102, 134 (1974)). There is no indication that the ACA
is structurally incompatible with the STLDI exemption or the Departments’ original
understanding of the term and duration of STLDI plans. Nevertheless, to provide a
complete analysis I will consider plaintiffs’ ACA-related arguments.

31
STLDI is further indication that it intended for the Departments to define the latter. See
supra at p.27 & n.11. In any case, plaintiffs offer no persuasive reason why STLDI and
“short coverage gaps” must be given identical meaning. They claim that the ACA’s
exemption of these short breaks in coverage from the tax penalty demonstrates Congress’s
view that individuals should go no longer than 3 months without ACA-compliant coverage.
See Pls.’ Mot. for Summ. J. at 32-33. But that position ts belied by the same statutory
provision on which plaintiffs rely. Although 26 U.S.C. § 5000A does exempt “short
coverage gaps” of up to 3 months, it also creates income- and hardship-based exemptions,
neither of which are time limited. See 26 U.S.C. § SO00A(e). As such, I cannot possibly
infer that Congress viewed 3 months of non-compliance with the ACA as some inviolable
threshold.

More importantly, the 2010 Congress’s use of a tax penalty to incentivize
individuals to purchase coverage within 3 months of a coverage lapse does not dictate the
characteristics of the short-term coverage options that the 1996 Congress intended to be
available to individuals who face such a lapse. The ACA’s language “should be read in
context, the statute’s place in the overall statutory scheme should be considered, and the
problem Congress sought to solve should be taken into account” to determine whether
Congress has foreclosed the 2018 Rule. PDK Labs., Inc., 362 F.3d at 796 (internal
quotation marks omitted). If “courts addressing the meaning of a term in one context”
should “refrain from any declaration as to its meaning elsewhere in the same statute,”
Verizon Cal., Inc. v. FCC, 555 F.3d 270, 276 (D.C. Cir. 2009), then surely I should be

reluctant to interpret a word in accordance with the meaning given to the same word used

32
fourteen years later by a different Congress in a different statute contained in a different
title of the U.S. Code.

For these reasons, I conclude that Congress has not unambiguously precluded the
Departments’ interpretation in the 2018 Rule.

D. Chevron Step Two: Whether the Statutory Construction is Permitted

Under Chevron step two, I must determine whether the Departments’ definition of
STLDI is “based on a permissible construction of the statute.” Chevron. 467 U.S. at 843.
Put another way, I must decide whether the 2018 Rule is “arbitrary or capricious in
substance, or manifestly contrary to the statute.” Good Fortune Shipping SA, 897 F.3d at
261 (quoting Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44, 53
(2011)). As in step one, this requires application of “the traditional tools of statutory
interpretation, including reviewing the text, structure, and purpose of the statute.” Grace
v. Whitaker, 344 F Supp.3d 96, 121 (D.D.C. 2018). The difference at this stage, however,
is the “criteria”—1.e., whereas step one asked whether Congress “require/d] a certain
interpretation,” step two asks whether the same statutory text, history, and purpose “permit
the interpretation chosen by the agency.” Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1049
(D.C. Cir. 1997) (emphases in original). “At bottom,” my role is limited to deciding
whether the Departments acted “within the scope of [their] lawful authority” and whether
their actions are supported by “reasoned decisionmaking.” Tripoli Rocketry Ass'n v. ATF,
437 F.3d 75, 77 (D.C. Cir. 2006) (internal quotation marks omitted). Because Chevron

step two in this case is largely coextensive with arbitrary and capricious review, | will

33
address plaintiffs’ claims under the two standards together unless otherwise noted. See
Agape Church, Inc. v. FCC, 738 F.3d 397, 410 (D.C. Cir. 2013).

Although STLDI is ambiguous as a matter of law, to qualify as STLDI a policy
must, of course, be both “short-term” and of a “limited duration.” As Congress chose not

bP]

to define these phrases, I must look to “their ordinary meaning.” Asgrow Seed Co. v.
Winterboer, 513 U.S. 179, 187 (1995); ef Schindler Elevator Corp. v. United States ex rel.
Kirk, 563 U.S. 401, 407 (2011) (“Because the statute does not define ‘report,’ we look first
to the word’s ordinary meaning.”’). As noted above, see supra at p.29, the two modifiers
also should be given independent meaning to avoid redundancy or surplusage, which are
“inconsistent with a court’s duty to give meaning to each word used by Congress.” Nat.
Res. Def. Council, 489 F.3d at 1373; see also Bailey v. United States, 516 U.S. 137, 146
(1995) (“We assume that Congress used two terms because it intended each term to have a
particular, nonsuperfluous meaning.”); Sprietsma v. Mercury Marine, 537 U.S. 51, 63
(2003) (interpreting word “law” broadly could render word “regulation” superfluous in
preemption clause applicable to a state “law or regulation”). I will address the ordinary
meaning of the two phrases in turn.

According to Merriam-Webster, the modifier “short-term” means “occurring over
or involving a relatively short period of time.” Short-term, Merriam-Webster Online
Dictionary, https://www.merriam-webster.com/dictionary/short-term (last visited July 18,
2019). The word “relatively” denotes a comparison. Applied here to STLDI, the insurance

(the object being modified) must last for a “term” (a “period of time”) that is “short” by

comparison to another term. Assuming plaintiffs are correct that a standard health

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insurance benefit period—typically one year—is the most appropriate reference point. see
Pls.” Mot. for Summ. J. at 29, a plan with an initial term of less than one year constitutes
“a relatively short period of time.” Plaintiffs reject this reading as a hyper-literalist
“tortur[ing of] the language,” Pls.’ Opp’n to Defs.’ Mot. for Summ. J. at 22—23, but the
Departments’ construction is far from an outlier. Multiple states, the primary regulators of
insurance, have adopted the same “less than 12 months” definition of “short-term,”!4
which, again, was the definition in place (and unchallenged) from 1997 to 2016. The
Departments’ effort in 2016 to amend STLDI to shore up the struggling Exchanges did not
render its previous interpretation impermissible. Moreover, as the administrative record
shows, the Departments expressly considered adopting an “initial contract term [that] was
somewhat longer than less than 3 months,” such as, “for example, less than 9 months.” 83
Fed. Reg. at 38,218. The Departments decided against a 6- or 9-month limitation out of
concern that a shorter term would be less effective in helping individuals maintain
continuous coverage. /d. While plaintiffs may disagree with this policy objective. see Pls.’
Mot for Summ. J. at 30-33, as explained supra at pages 30-31, it is not inconsistent with
HIPAA. As such, I cannot conclude on this record that the 2018 Rule’s definition of “‘short-
term” is an impermissible statutory construction under Chevron’s second step.

As for the word “duration,” that word obviously means “the time during which

something exists or lasts.” Duration, Merriam-Webster Online Dictionary,

 

4 See, e.g., S.D. Admin. R. 20:06:40:02 (defining STLDI as plans with “an
expiration date specified in the contract that is within 12 months of the date the contract
becomes effective”); 28 Tex. Admin. Code § 3.3002(18) (same).

35
https://www.merriam-webster.com/dictionary/duration (last visited July 18, 2019).
Merriam-Webster unhelpfully defines “limited” as “confined within limits.” Limited,
Merriam-Webster Online Dictionary, https://www.merriam-
webster.com/dictionary/limited (last visited July 18, 2019). However, the Oxford English
Dictionary defines “limited” as “circumscribed within definite limits, bounded, restricted.”
Limited, Oxford English Online Dictionary, https://www.oed.com/view/Entry/10849 1 (last
visited July 18, 2019). The 2018 Rule permits renewals up to 36 months of total coverage.
That construction is obviously consistent with the ordinary meaning of “limited duration,”
as “the time during which [the coverage] exists or lasts” is “circumscribed within definite
limits” and “restricted” to 36 months. And, of course, it must be remembered that from
1997 to 2016 the Departments permitted unlimited issuer-consented renewals. Thus, the
2018 Rule constitutes the most onerous interpretation of “limited duration” in the phrase’s
history, at least as applied to the “healthy individuals” who previously could secure
issuer-consented renewals and who plaintiffs now fear will exploit renewals to avoid the
ACA-compliant market, see Pls.” Mot. for Summ. J. at 37. Now that is hardly an
impermissible construction.

This leaves plaintiffs’ statutory structure and purpose arguments. “Whether an
agency’s construction is reasonable depends, in part, “on the construction’s ‘fit’ with the
statutory language, as well as its conformity to statutory purposes.’” Good Fortune
Shipping SA, 897 F.3d at 262 (quoting Goldstein v. SEC, 451 F.3d 873, 881 (D.C. Cir.
2006)). For the same reasons that HIPAA’s structure and purpose do not preclude the 2018

Rule, see supra at pp.30--31, the Rule permissibly construes HIPAA in a manner that fits

36
within the law’s statutory scheme and conforms to its purposes. Relevant here, HIPAA
was enacted “to improve portability and continuity of health insurance coverage in the
group and individual markets.” Pub. L. No. 104-191 pmbl. The law accomplished these
purposes in part through coverage and preexisting condition protections, the availability of
which was contingent on a person’s prior “creditable coverage.” As such, it was reasonable
for the Departments to extend STLDI’s initial term to twelve months, as under HIPAA’s
scheme that would have (1) helped individuals more easily maintain an uninterrupted
period of prior “creditable coverage” to become eligible for the law’s protections (and
avoid the “significant break in coverage” that could negate eligibility), and (2) in some
cases, reduced the period during which a new issuer could refuse benefits to a participant
relating to preexisting conditions. As STLDI plans typically lack preexisting condition
protections, it is not hard to imagine situations where an individual who developed a
medical condition while covered by STLDI—and thus was at risk of losing coverage—
would be better positioned to access HIPAA’s protections if their STLDI coverage lasted
up to a year rather than three months. The Departments’ interpretation therefore “is
reasonable in light of [HIPAA’s] language, legislative history, and policies.” Nat. Res.
Def. Council, Inc. v. EPA, 822 F.2d 104, 111 (D.C. Cir. 1987).

With respect to the ACA, plaintiffs contend that the 2018 Rule unreasonably
interprets STLDI considering the ACA’s interlocking reforms to the individual health
insurance market—namely, the guaranteed issue, community rating, and essential health
benefits provisions as well as the single risk pool. See Pls.’ Mot. for Summ. J. at 20. I

disagree. Plaintiffs’ view that the ACA’s scheme made sacrosanct a specific, narrow

37
definition of STLDI unfortunately “manifests an interpretive error of long standing”; “‘a
statute’s primary or precipitating object” is not necessarily “its sole object.” Albany Eng.
Corp. v. FERC, 548 F.3d 1071, 1076 (D.C. Cir. 2008). Indeed, as the Supreme Court itself
has recognized, “no legislation pursues its purposes at all costs,” and “it frustrates rather
than effectuates legislative intent simplistically to assume that whatever furthers the
statute’s primary objective must be the law.” Rodriguez v. United States, 480 U.S. 522,
525-26 (1987). Here, the ACA “manifest[s] a deliberate congressional decision to balance
the goal of” fostering robust ACA-compliant individual health insurance markets with the
reality that not all individual plans can or should be subjected to the ACA’s requirements.
Albany Eng. Corp., 548 F.3d at 1076; cf East Bay Mun. Util. Dist. v. U.S. Dep't of
Commerce, 142 F.3d 479, 484 (D.C. Cir. 1998) (recognizing statutory balance between
using federal government’s vast resources for clean-up costs and fact that “in some
situations the statute explicitly calls for reimbursement of the United States for clean-up
costs it incurs, making clear the presence of additional purposes” (citation omitted)).

it is not my role to interfere with or disrupt the balance struck by policymakers
where, as here, there is no indication that those charged with implementing the balance
have failed to observe it. To be sure, the ACA’s various reforms are interdependent and
were designed to work together as features of the individual Exchange markets. However,
Congress clearly did not intend for the law to apply to all species of individual health
insurance. In addition to maintaining the STLDI exemption, Congress exempted multiple

forms of individual health insurance from the ACA’s reforms and the State-specific risk

38
pools.!> In other words, lawmakers were not rigidly pursuing the ACA-compliant market
at all costs, e.g., at the risk of individuals going without insurance altogether. Moreover,
while Congress certainly sought to foster a robust ACA-compliant market, its chosen
methods for doing so were embodied by the individual mandate and tax penalty, nor the
definition of STLDI ! Congress has since functionally eliminated those mechanisms,
which, as the ACA itself predicted, would result in “some individuals . . . mak[ing] an
economic and financial decision to forego health insurance coverage.” 42 US.C.
§ 18091(2)(A); see also King, 135 S.Ct. at 2486 (“Congress found that the guaranteed issue
and community rating requirements would not work without the [individual responsibility |
requirement.”’). That is now the state of play, and nothing in the ACA persuades me that

the Departments were not free to adjust to that reality.

 

'5 See, e.g., 42 U.S.C. § 18011 (exempting pre-ACA “grandfathered plans”); id. §
18118 (exempting student health insurance plans). The ACA’s expansion of Medicaid
eligibility also illustrates Congress’s openness to individuals seeking coverage outside of
the ACA-compliant individual markets. See ACA, Pub. L. No. 111-148, §§ 1421, 1511-
1513, 2001. Indeed, the Departments have submitted evidence indicating that the
aggregate number of individuals insured outside of the ACA-compliant individual market
far surpasses the number of individuals within it. See Wu Decl. § 8.

'6 Plaintiffs also contend that the 2018 Rule is arbitrary and capricious because the
Departments failed (1) to provide a reasoned explanation for the change from the 2016
Rule, and (2) to consider that the 2018 Rule would cause coverage gaps for many
consumers. Pls.’ Mot. for Summ. J. at 37-44. As to the former, the Departments clearly
did provide a reasoned basis for departing from the 2016 Rule, including that the 2016 Rule
was not successful in stabilizing the Exchanges and that the 2018 Rule’s definition of
STLDI was consistent with prior rulemakings. See 83 Fed. Reg. at 38,214—-17, 38.220,
38,227-28; FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009) (agencies may
depart from prior interpretations so long as “the new policy is permissible under the statute,
... there are good reasons for it, and... the agency believes it to be better”). As to the
latter, the Departments expressly addressed coverage gaps and concluded that the 2018

39
CONCLUSION
Thus, for all of the foregoing reasons, the Departments’ motion for summary
judgment is GRANTED. and plaintiffs’ motion for summary judgment is DENTED. An
order consistent with this Memorandum Opinion is separately and contemporaneously

issued herewith.

RICHARD N
United States District Judge

 

Rule would provide greater gap protection to consumers than the 2016 Rule. 83 Fed. Reg.
at 38,218.

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