unitedhealthcare of new york, inc. v. vullo · of up to 30% of that amount on the later of the date...

Form T-1080 (rev.12-13)

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500

MOTION INFORMATION STATEMENT

Docket Number(s): ________________________________________ _______________Caption [use short title]_____________________

Motion for: ______________________________________________

________________________________________________________

________________________________________________________

Set forth below precise, complete statement of relief sought:

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

MOVING PARTY:_______________________________________ OPPOSING PARTY:____________________________________________

___Plaintiff ___Defendant

___Appellant/Petitioner ___Appellee/Respondent

MOVING ATTORNEY:___________________________________ OPPOSING ATTORNEY:________________________________________

________________________________________________________ _______________________________________________________________

________________________________________________________ _______________________________________________________________

________________________________________________________ _______________________________________________________________

Court- Judge/ Agency appealed from: _________________________________________________________________________________________

Please check appropriate boxes: FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND INJUCTIONS PENDING APPEAL:

Is oral argument on motion requested? ___Yes ___No (requests for oral argument will not necessarily be granted)

Has argument date of appeal been set? ___ Yes ___No If yes, enter date:_______________________________________________________

Signature of Moving Attorney:

_________________________________ Date:__________________ Service by: ___CM/ECF ___Other [Attach proof of service]

[name of attorney, with firm, address, phone number and e-mail]

Has this request for relief been made below? ___Yes ___No Has this relief been previously sought in this court? ___Yes ___No Requested return date and explanation of emergency: ________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________

Has movant notified opposing counsel (required by Local Rule 27.1): ___Yes ___No (explain):__________________________ _______________________________________________

Opposing counsel’s position on motion: ___Unopposed ___Opposed ___Don’t Know

Does opposing counsel intend to file a response: ___Yes ___No ___Don’t Know

18-2583

UnitedHealthcare of New York, Inc. v. Vullo

Emergency injunction pending appeal.

Plaintiffs-appellants seek an injunction barring the defendant,

Superintendent Maria T. Vullo, from demanding payment from plaintiffs

of risk-adjustment contributions due under 11 N.Y.C.R.R. § 361.9,

for the 2017 plan year, which plaintiffs contend is preempted by federal law.

Oxford Health Insurance, Inc; UnitedHealthcare of New York, Inc. Maria T. Vullo

Neal Kumar Katyal Matthew W. Grieco

Hogan Lovells US LLP

555 13th St. NW Washington, D.C. 20015

(202) 637 5600; [email protected]

New York State Office of the Attorney General

28 Liberty Street, 23rd Floor, New York, NY 10005-1400

(212) 416-8014; [email protected]

SDNY (Koeltl, J.)

Plaintiff Oxford Health Insurance expects to receive over $216 million from federal authorities

on or about October 22, 2018. The challenged regulation authorizes the defendant to demand payment

of up to 30% of that amount on the later of the date Oxford receives it or within 10 days of

the receipt of an invoice from the Superintendent. Any amounts paid will not be recoverable in federal court.

09/25/2018

✔

✔

✔

✔

✔

✔

✔

/s/ Neal Kumar Katyal

✔

✔

✔

Case 18-2583, Document 30-1, 09/25/2018, 2396243, Page1 of 31

IN THE

United States Court of Appeals

for the Second Circuit ___________________

UNITEDHEALTHCARE OF NEW YORK, INC., OXFORD HEALTH INSURANCE, INC., Plaintiffs-Appellants,

V. MARIA T. VULLO, IN HER OFFICIAL CAPACITY AS SUPERINTENDENT OF FINANCIAL

SERVICES OF THE STATE OF NEW YORK Defendant-Appellee.

____________________

Appeal from the United States District Court for the Southern District of New York

____________________

PLAINTIFFS-APPELLANTS’ EMERGENCY MOTION FOR AN INJUNCTION PENDING APPEAL

(Relief Requested by October 22, 2018) ____________________

Steven Rosenbaum COVINGTON & BURLING LLP 1 CityCenter 850 10th Street, NW Washington, D.C 20001

Neal Kumar Katyal Eugene A. Sokoloff HOGAN LOVELLS US LLP 555 13th Street, NW Washington, D.C. 20004

Attorneys for Plaintiffs-Appellants


TABLE OF CONTENTS

Page

i

TABLE OF AUTHORITIES .................................................................................... ii

INTRODUCTION .................................................................................................... 1

BACKGROUND ...................................................................................................... 5

A. Overview ................................................................................................... 5

B. Plaintiffs’ Challenge to New York’s Regulations ..................................... 7

C. The Circumstances Necessitating Emergency Relief ................................ 8

REASONS FOR GRANTING THE REQUESTED RELIEF .................................. 9

A. Plaintiffs Will Suffer Irreparable Harm Absent An Injunction. ............................................................................................... 10

B. An Injunction Would Not Entail Substantial Injury To Any Party. ....................................................................................................... 11

C. This Appeal Presents Substantial Questions Of First Impression. .............................................................................................. 12

1. The challenged regulation is expressly preempted. ...................... 13

2. The challenged regulation is impliedly preempted. ...................... 14

3. The novelty of the questions cuts in favor of a brief injunction. ..................................................................................... 20

D. The Equities Tip Decisively In Favor Of Enjoining Enforcement Of The Challenged Regulation. ......................................... 21

E. Any Risk Of Harm To The State’s Interests Can Be Mitigated By Expedited Briefing And Consideration. ............................ 22

CONCLUSION ...................................................................................................... 23

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE


TABLE OF AUTHORITIES—Continued

Page

ii

Cases

Allco Fin. Ltd. v. Klee, No. 16-2946(L) (2d Cir. Nov. 2, 2016) ............................................................... 3

Cayuga Indian Nation of New York v. Pataki, 188 F. Supp. 2d 223 (N.D.N.Y. 2002) .............................................................. 20

Citigroup Glob. Markets, Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30 (2d Cir. 2010) .................................................................................. 9

Entergy Nuclear Vermont Yankee, LLC v. Shumlin, 733 F.3d 393 (2d Cir. 2013) .......................................................................... 3, 10

Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (1982) .......................................................................................... 16

Flagg v. Yonkers Sav. & Loan Ass’n, FA, 396 F.3d 178 (2d Cir. 2005) .............................................................................. 14

Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88 (1992) ............................................................................................ 13

Hillman v. Maretta, 569 U.S. 483 (2013) .......................................................................................... 19

Hirschfeld v. Bd. of Elections, 984 F.2d 35 (2d Cir.1993) ................................................................................... 9

Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir. 1979) ................................................................................ 10

Jock v. Sterling Jewelers, Inc., 738 F. Supp. 2d 445 (S.D.N.Y. 2010) ............................................................... 20

K.A. ex rel. Ayers v. Pocono Mountain Sch. Dist., 710 F.3d 99 (3d Cir. 2013) ................................................................................ 21

LaRouche v. Kezer, 20 F.3d 68 (2d Cir. 1994) .................................................................... 3, 9, 12, 21

Nat’l Immigration Project of the Nat’l Lawyers Guild v. U.S. Dep’t of Homeland Sec., 842 F. Supp. 2d 720 (S.D.N.Y. 2012) ............................................................... 20

N.Y.C. Health & Hosps. Corp. v. Perales, 50 F.3d 129 (2d Cir. 1995) ................................................................................ 10



Page

iii

New York SMSA Ltd. P’ship v. Town of Clarkstown, 612 F.3d 97 (2d Cir. 2010) ................................................................................ 15

Pursuing Am.’s Greatness v. Fed. Election Comm’n, 831 F.3d 500 (D.C. Cir. 2016) .......................................................................... 21

Resolution Tr. Corp. v. Diamond, 45 F.3d 665 (2d Cir. 1995) ................................................................................ 15

Sprietsma v. Mercury Marine, 537 U.S. 51 (2002) ............................................................................................ 15

Stern v. Gen. Elec. Co., 924 F.2d 472 (2d Cir. 1991) .............................................................................. 15

Thapa v. Gonzales, 460 F.3d 323 (2d Cir. 2006) ................................................................................ 9

United States v. New York, 708 F.2d 92 (2d Cir. 1983) ............................................................................ 3, 11

Virgin Enterps. Ltd. v. Nawab, 335 F.3d 141 (2d Cir. 2003) .............................................................................. 10

Whitman v. Am. Trucking Associations, 531 U.S. 457 (2001) .......................................................................................... 17

Statutes

42 U.S.C. § 18041(a)(1)(C) ................................................................................ 5, 15

42 U.S.C. § 18041(b) .......................................................................................... 5, 15

42 U.S.C. § 18041(c) ........................................................................................ 13, 15

42 U.S.C. § 18041(c)(1) ......................................................................................... 17

42 U.C.C. § 18041(d) ............................................................................................. 13

42 U.S.C. § 18063(a) .................................................................................... 5, 13, 14

42 U.S.C. § 18063(b) .................................................................................... 5, 13, 14

Regulations

45 C.F.R. § 153.310(a)(2) ...................................................................................... 14

45 C.F.R. § 153.320(a) ................................................................................. 6, 14, 16

45 C.F.R. § 153.320(a)(1) ........................................................................................ 6

45 C.F.R. § 153.320(a)(2) .................................................................................. 6, 16



Page

iv

45 C.F.R. § 153.320(d) ........................................................................................... 18

45 C.F.R. § 153.320(d)(4) ...................................................................................... 18

45 C.F.R. § 153.330 ................................................................................................ 16

11 N.Y.C.R.R. § 361.9(a) ....................................................................................... 16

11 N.Y.C.R.R. § 361.9(e) ....................................................................................... 14

11 N.Y.C.R.R. § 361.9(e)(1) .................................................................................... 6

11 N.Y.C.R.R. § 361.9(e)(2)(i) ................................................................................ 7

Rules

Fed. R. Civ. P. 62(c) ................................................................................................. 8

Second Circuit Rule 27.1(b) ..................................................................................... 1

Second Circuit Rule 32.1(b)(3) .............................................................................. 22

Other Authorities

Adoption of the Methodology for the HHS-Operated Permanent Risk Adjustment Program Under the Patient Protection and Affordable Care Act for the 2017 Benefit Year, 83 Fed. Reg. 36457 (July 30, 2018) ................................................................ 1, 8

New York State Dep’t of Fin. Servs., Instructions for the Filing of 2017 Premium Rates Individual and Small Group –“On” and “Off” Exchange Plans (Mar. 11, 2016) ....................................................................... 11

New York State Dep’t of Fin. Servs., Instructions for the Filing of 2018 Premium Rates Individual and Small Group – “On” and “Off” Exchange Plans, (Apr. 19, 2017) ................................................................ 12, 18

Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019, 83 Fed. Reg. 16,930 (Apr. 17, 2018) ................................................................. 18

Press Release, New York State Dep’t of Fin. Servs., Department of Financial Services Announces 2017 Health Insurance Rates (Aug. 5, 2016) ................................................................................................... 12


1

INTRODUCTION

This appeal arises from a challenge to a New York regulation that interferes

directly with a crucial element of a complex federal program designed to stabilize

the nation’s health insurance markets. Unless this Court intervenes, Defendant

Maria T. Vullo (the “Superintendent”) will confiscate tens of millions of federal

dollars from Plaintiff Oxford Health Insurance, Inc. (“Oxford”) in violation of the

Supremacy Clause and the Fifth and Fourteenth Amendments, leaving Oxford with

no federal remedy. This Court should grant this emergency motion and enjoin the

Superintendent from enforcing the regulation until this Court can address the

important questions of first impression raised by this appeal.1

In just a few short weeks, the federal Centers for Medicare and Medicaid

Services (CMS), acting on behalf of the Department of Health and Human Services

(HHS), will remit over $216 million in federal “risk adjustment” transfers to

Oxford. See Adoption of the Methodology for the HHS-Operated Permanent Risk

Adjustment Program Under the Patient Protection and Affordable Care Act for the

2017 Benefit Year, 83 Fed. Reg. 36457, 36459 (July 30, 3018). These payments

vindicate a core purpose of the Affordable Care Act (ACA): By transferring funds

from plans with relatively healthier subscribers to those—like Plaintiffs’ plans—

1 In accordance with Circuit Rule 27.1(b), Plaintiffs notified opposing counsel of their intention to file this emergency motion. Opposing counsel has indicated that it opposes this motion and intends to file a response.


2

with higher-risk subscribers, the Act’s risk-adjustment program ensures that

coverage remains available to individuals regardless of their medical history or

pre-existing conditions. The precise amount of every transfer is determined by a

complex formula set forth in an intricate regulatory scheme that was promulgated

through a series of rulemaking proceedings in which HHS fielded extensive

comments from state regulators, industry participants, and others.

Instead of taking one of the many opportunities that the statute and these

regulations provide for State input and participation in the federal program, New

York chose to override unilaterally the careful balance struck by federal authorities.

In 2017, the Superintendent adopted a regulation that purports to confiscate up to

30% of the risk-adjustment funds the federal government determines must be paid

to insurers like Plaintiffs and to return those funds to the insurers the federal

government decided must pay into the risk-adjustment program.

Under this Court’s precedent, that imminent collision with federal law calls

for emergency injunctive relief. First, Oxford faces a near-certain threat of

irreparable harm. Absent an injunction, the Superintendent will seize $65 million

in Oxford’s federal risk-adjustment receipts before this Court has even had a

chance to hear or decide this appeal. See Separate Stmt. of Undisputed Material

Facts ¶ 52 (Jan. 9, 2018), Dist. Ct. Dkt. 29-3 (hereinafter “SUMF”). That seizure is

irreparable because New York enjoys sovereign immunity from federal-court


3

claims for damages for past violations of federal law. See Entergy Nuclear

Vermont Yankee, LLC v. Shumlin, 733 F.3d 393, 422-423 (2d Cir. 2013); United

States v. New York, 708 F.2d 92, 93-94 (2d Cir. 1983). Only an injunction can

maintain the status quo. See, e.g., Motion Order, Allco Fin. Ltd. v. Klee, No. 16-

2946(L) (2d Cir. Nov. 2, 2016) (granting emergency motion for injunction in

preemption challenge to threat of compelled contracts), Doc. 87.

Second, an injunction would entail no risk of “substantial injury” to any

party. LaRouche v. Kezer, 20 F.3d 68, 72 (2d Cir. 1994). The portion of the

regulation sought to be enjoined applies only to the 2017 plan year. Insurers who

expected to owe money under the federal risk-adjustment program were required

by New York’s Department of Financial Services—like all of New York’s

insurers—to account fully for the impact of the program in their 2017 rates.

Because those rates permitted these insurers to recover their expected liabilities

from subscribers, any refunds they might receive under the challenged regulation

would be a windfall. A brief delay of that boon is no injury at all.

Third, Plaintiffs have, at the very least, a “substantial possibility” of success

on appeal. LaRouche, 20 F.3d at 72 (internal quotation marks omitted). The ACA

vests the Secretary of Health and Human Services with exclusive responsibility for

implementing risk-adjustment programs in States that, like New York, choose not

to operate an ACA program on their own. Whether the program is federally


4

administered or not, the Act and its implementing regulations require a federally

approved methodology. That methodology determines precisely the amount that

each plan must contribute or receive to vindicate federal policy. The challenged

regulation unilaterally vetoes that determination.

The district court’s contrary holding, which is due no deference on appeal,

fundamentally misunderstands the federal scheme. The risk-adjustment

regulations make perfectly clear that state initiatives, while welcome in some areas,

cannot displace the carefully calibrated methodology adopted by HHS and CMS.

At the very least, the presence in this case of important and unsettled questions

makes it exceptionally inappropriate to impose irreparable harm on Oxford before

this Court has had an opportunity to decide the appeal.

Fourth, the balance of equities tips decisively in favor of injunctive relief.

The minimal administrative inconvenience New York might face as a result of a

short injunction pales in comparison to the irreparable harm Oxford faces. And

this Court can mitigate any inconvenience by placing this case on the Expedited

Appeals Calendar. This Court should grant the motion for an injunction.


policies

preexisting conditions or medical history, the Affordable Care Act’s risk

adjustment program spreads the cost of insuring sicker enrollees across all insurers

in the individual or small gr

transferring money from health plans with relatively lower risk enrollees to those

with higher risk enrollees, the risk

the phenomenon of adverse selection

enrollees to the detriment of sicker ones.

and Human Services to develop, “in consultation with States,” “criteria and

methods” for determining whic

must receive risk

equilibrium. 42 U.S.C. §

their own risk

adopt regulations the

standards.

policies










must receive risk


their own risk


standards.

A.

In order to secure the gains Congress intended to achieve by prohibiting

policies








To implement this crucial program, the ACA directs the Secretary of Health



must receive risk


their own risk


standards.

OverviewA.


policies that denied coverage or increased premiums based on an individual’s











must receive risk


their own risk


standards.

Overview


that denied coverage or increased premiums based on an individual’s











must receive risk


their own risk


standards. See id.

Overview













must receive risk


their own risk-adjustment programs, they must eith


See id.

Overview













must receive risk


adjustment programs, they must eith


See id.

Overview













must receive risk-adjustment transfers in order to maintain the appropriate




See id. § 18041(a)(1)(C), (b).













adjustment transfers in order to maintain the appropriate




18041(a)(1)(C), (b).
















adopt regulations the HHS

18041(a)(1)(C), (b).














equilibrium. 42 U.S.C. § 18063(a)


HHS

18041(a)(1)(C), (b).














18063(a)


HHS

18041(a)(1)(C), (b).

BACKGROUND





in the individual or small group market within each State. SUMF ¶







methods” for determining which plans must contribute to the program and which


18063(a)


HHS Secretary determines are consistent with those

18041(a)(1)(C), (b).

BACKGROUND





oup market within each State. SUMF ¶







h plans must contribute to the program and which


18063(a)


Secretary determines are consistent with those

18041(a)(1)(C), (b).

BACKGROUND







with higher risk enrollees, the risk-adjustment program is intended to counteract

the phenomenon of adverse selection—






18063(a)-(b). Although States may elect to administer



18041(a)(1)(C), (b).

BACKGROUND







adjustment program is intended to counteract

—the econom






(b). Although States may elect to administer



18041(a)(1)(C), (b).

5

BACKGROUND








the econom








18041(a)(1)(C), (b).

BACKGROUND








the econom








BACKGROUND








the econom








BACKGROUND








the econom








BACKGROUND








the economic incentive to seek out healthy






adjustment programs, they must either adopt the federal standards or









ic incentive to seek out healthy






er adopt the federal standards or















































































































oup market within each State. SUMF ¶ 5. By















5. By















5. By













preexisting conditions or medical history, the Affordable Care Act’s risk-


5. By














5. By












6

The risk-adjustment regulations provide that “[a]ny risk adjustment

methodology used by a State, or HHS on behalf of the State, must be a Federally

certified risk adjustment methodology.” 45 C.F.R. § 153.320(a). That is, the

methodology must either be “[t]he risk adjustment methodology . . . developed by

HHS,” Id. § 153.320(a)(1), or it must be “[a]n alternate risk adjustment

methodology” that is “reviewed and certified by HHS,” 45 C.F.R. § 153.320(a)(2).

New York took a different path. New York has never sought, much less

obtained, HHS approval or certification to operate a risk adjustment program.

SUMF ¶ 42. The Superintendent once conceded that this means that New York is

“unable to change” the federally administered program’s “parameters or alter

issuers’ associated liabilities.” See SUMF ¶ 45. But, in 2017, the Superintendent

promulgated a regulation that did exactly that.2

The challenged regulation exacts a fixed percentage contribution from

“every carrier in the small group health insurance market that is designated as a

receiver of a payment transfer from the federal risk adjustment program.” 11

N.Y.C.R.R. § 361.9(e)(1) (emphasis added). For the 2017 plan year, that exaction

will amount to 30% of the federal funds transferred to the affected insurers in the

small group market, including Plaintiffs. SUMF ¶ 53. The regulation then directs

2 The Superintendent initially adopted the challenged regulation on an emergency basis in September 2017. SUMF ¶ 46. After reissuing the regulation six times, id. ¶ 47, the Superintendent adopted it on a permanent basis on July 31, 2018. See Dist. Ct. Dkt. 65.


the S

the small group health insurance market that is designated as a

transfer into the federal risk adjustment program.” 11 N.Y.C.R.R. §

(emphasis

the federal risk

Plaintiffs Oxford and

declare unlawful and enjoin enforcement of the challenged regulation. Compl.

(Oct. 6, 2017), Dist. Ct. Dkt. 1. Plaintiffs allege that the regulation is preempted,

both expressly and impliedly,

implementing regulations and that, by unlawfully confiscating Plaintiffs’ risk

adjustment transfers, the regulation effects an unconstitutional taking or exaction.

See id.

cross

(Koeltl, J.) denied Plaintiffs’ motion. The court found that the challenged

regulation was not expressly preempted because

that preserve the States’ role “as the primary regulators of the insurance business,”

Opinion and Order (“Op.”) at 17

the S



(emphasis

the federal risk







See id.

cross





the Superintendent to redistribute



(emphasis

the federal risk

B.

Threatened with the seizure of up to 30% of their federal entitlements,







See id. ¶¶ 8

The Superinten

cross-moved for summary judgment. On August 13, 2018, the district court





uperintendent to redistribute



(emphasis

the federal risk

Plaintiffs’ Challenge to New York’s RegulationsB.








¶¶ 8

The Superinten

moved for summary judgment. On August 13, 2018, the district court








(emphasis added). In other words, the challenged regulation unilaterally reverses

the federal risk

Plaintiffs’ Challenge to New York’s Regulations








¶¶ 8-11, 94

The Superinten









added). In other words, the challenged regulation unilaterally reverses

the federal risk-









11, 94

The Superinten










-adjustment distribution.









11, 94

The Superinten










adjustment distribution.









11, 94-122.

The Superinten













Plaintiffs Oxford and UnitedHealthcare of New York, Inc. (“United”) filed suit to






122.

The Superintendent moved to dismiss Plaintiffs’ complaint and Plaintiffs













UnitedHealthcare of New York, Inc. (“United”) filed suit to






122.

dent moved to dismiss Plaintiffs’ complaint and Plaintiffs






















































both expressly and impliedly, by the ACA’s risk









uperintendent to redistribute those










by the ACA’s risk








Opinion and Order (“Op.”) at 17-18 (Aug. 13, 2018), Dist. Ct. Dkt. 66. It found

those










by the ACA’s risk








18 (Aug. 13, 2018), Dist. Ct. Dkt. 66. It found

those










by the ACA’s risk









7

federal disbursements to “every carrier in









by the ACA’s risk


















by the ACA’s risk


















by the ACA’s risk


















by the ACA’s risk-






regulation was not expressly preempted because the ACA includes savings clauses












-adjustment provisions and their






the ACA includes savings clauses












adjustment provisions and their














































the small group health insurance market that is designated as a payor

















the small group health insurance market that is designated as a payor

















payor

















payor of a payment

transfer into the federal risk adjustment program.” 11 N.Y.C.R.R. § 361.9(e)(2)(i)
















of a payment

361.9(e)(2)(i)
















of a payment

361.9(e)(2)(i)
















of a payment

361.9(e)(2)(i)
















of a payment

361.9(e)(2)(i)
















of a payment

361.9(e)(2)(i)







implementing regulations and that, by unlawfully confiscating Plaintiffs’ risk-









of a payment

361.9(e)(2)(i)















that the regulation was not impliedly preempted because

New York’s independent regulatory authority and because the court viewed federal

authorities’ general receptivity to parallel state insurance regulation

several federal register notices

occupy the entire field of risk adjustment,”

conclusions, the court also denied Plaintiffs’ takings and exaction claims.

& n.7.

October 22, 2018, and New York’s confiscation anticipated soon thereafter,

Plaintiffs moved in the district court for expedited consideration of an injunction

pending appeal.

court declined to expedite, indicating that it would “decide the motion for a stay

promptly after being fully briefed.” Dist. Ct. Dkt. 78 (Aug. 27, 2018). In an effort

to

Superintendent demands into an escrow account.

¶ 2

2018, the district court entered an order

motion.

loss of some $65 million







& n.7.



pending appeal.



to avoid


2.


motion.








& n.7.

C.

With federal risk



pending appeal.



avoid


The Superintendent declined Plaintiffs’ offer.


motion.








The Circumstances Necessitating Emergency ReliefC.

With federal risk



pending appeal.



avoid the need for an injunction,




motion. Thus, absent








The Circumstances Necessitating Emergency Relief

With federal risk



pending appeal.



the need for an injunction,




Thus, absent









With federal risk



pending appeal.







Thus, absent









With federal risk



pending appeal.







Thus, absent









With federal risk



pending appeal. See







Thus, absent









With federal risk



See 83 Fed. Reg. at 36459; Fed. R. C







Thus, absent









With federal risk-



83 Fed. Reg. at 36459; Fed. R. C







this Court’s intervention, Oxford will suffer an irreparable

loss of some $65 million in








-adjust











in a matter of weeks.








adjust











a matter of weeks.




several federal register notices—




adjustment payments expected to begin on or about











a matter of weeks.




—to suggest “that the ACA was no




ment payments expected to begin on or about











a matter of weeks.




to suggest “that the ACA was no















a matter of weeks.














the need for an injunction, Plaintiffs offered to





a matter of weeks.

8














Plaintiffs offered to



2018, the district court entered an order (dated September 21)


a matter of weeks.

















(dated September 21)


a matter of weeks.



















a matter of weeks.





occupy the entire field of risk adjustment,” id


















id. at 20










Superintendent demands into an escrow account. Ex

The Superintendent declined Plaintiffs’ offer. Id.







. at 20










x. A,

The Superintendent declined Plaintiffs’ offer. Id.



that the regulation was not impliedly preempted because it was promulgated under




. at 20






83 Fed. Reg. at 36459; Fed. R. Civ. P. 62(c). The district




A,

Id. at ¶



it was promulgated under




. at 20-21. Based on those






iv. P. 62(c). The district




A, Decl. of S. Rosenbaum,

at ¶ 3.







21. Based on those









pay any amounts the

Decl. of S. Rosenbaum,

3.







21. Based on those









pay any amounts the


On September 2

(dated September 21) denying Plaintiffs’




authorities’ general receptivity to parallel state insurance regulation—


21. Based on those








pay any amounts the


On September 2

denying Plaintiffs’




—expressed in

to suggest “that the ACA was not intended to

21. Based on those








pay any amounts the


On September 2





expressed in

t intended to

21. Based on those








pay any amounts the


On September 2





expressed in

t intended to

21. Based on those

conclusions, the court also denied Plaintiffs’ takings and exaction claims. Id.







pay any amounts the


On September 2





expressed in

t intended to

21. Based on those

Id. at 33







pay any amounts the


On September 2





expressed in

t intended to

21. Based on those

at 33







pay any amounts the


On September 2





expressed in

t intended to

21. Based on those

at 33







pay any amounts the


On September 24,





expressed in

t intended to

21. Based on those

at 33







pay any amounts the


,




9

REASONS FOR GRANTING THE REQUESTED RELIEF

In assessing a motion for a stay or injunction pending appeal, this Court

weighs four considerations: “(1) whether the movant will suffer irreparable injury

absent a stay, (2) whether a party will suffer substantial injury if a stay is issued,

(3) whether the movant has demonstrated ‘a substantial possibility, although less

than a likelihood, of success’ on appeal, and (4) the public interests that may be

affected.” LaRouche, 20 F.3d at 72 (quoting Hirschfeld v. Bd. of Elections, 984

F.2d 35, 39 (2d Cir.1993)).

Consistent with familiar principles of equity, this Court has “treated these

criteria somewhat like a sliding scale.” Thapa v. Gonzales, 460 F.3d 323, 334 (2d

Cir. 2006). Thus, for example, it has “explain[ed] that the probability of success

that must be demonstrated is inversely proportional to the amount of irreparable

injury plaintiff will suffer absent the stay.” Id. (internal quotation marks and

brackets omitted). And, in cases where the “balance of hardships tip[s] decidedly

toward the party requesting” an injunction, a movant need only show irreparable

harm and “sufficiently serious questions going to the merits to make them a fair

ground for litigation.” Citigroup Glob. Markets, Inc. v. VCG Special

Opportunities Master Fund Ltd., 598 F.3d 30, 35 (2d Cir. 2010) (internal quotation

marks and citation omitted).


the way for the Superintendent’s plan to seize $64,993,988.67 from Oxford in the

coming weeks.

“demonstrate [the]

relief.”

2017

challenged regulation provides that New York’s 30% exaction is due on the later of

the date an insurer receives its federal funds or within 10

invoice from the Superintendent.

done long before this Court is likely to resolve Plaintiffs’ appeal. Oxford’s injury

is thus both “actual and imminent.”

Inc.

past violations of federal law, the harm Oxford faces is also irreparable.

Entergy Nuclear

Perales

forecloses is an award of money required to be paid from state funds that

compensates a claimant for the state’s past violations of federal law.”).


coming weeks.


relief.”

2017






Inc., 596 F.2d 70, 72 (2d Cir. 1979).


Entergy Nuclear

Perales



The district court’s denial of Plaintiffs’ motion for summary judgment clears


coming weeks.


relief.”

Plaintiffs expect to receive their federa

2017 plan year on or about October 22






, 596 F.2d 70, 72 (2d Cir. 1979).

Because States generally are immune from federal suits seeking relief for


Entergy Nuclear

Perales



A.



coming weeks.


relief.” Virgin Enterps. Ltd


plan year on or about October 22






, 596 F.2d 70, 72 (2d Cir. 1979).



Entergy Nuclear

Perales, 50 F.3d 129, 135 (2d Cir. 1995) (“What the [Eleventh] Amendment



A.



coming weeks.


Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



Entergy Nuclear

, 50 F.3d 129, 135 (2d Cir. 1995) (“What the [Eleventh] Amendment



Plaintiffs Will Suffer Irreparable Harm Absent An Injunction.



coming weeks.


Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



Entergy Nuclear







coming weeks.


Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



Entergy Nuclear, 733 F.3d







That looming threat amply satisfies Plaintiffs’ burden to


Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



, 733 F.3d








“demonstrate [the] probability

Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



, 733 F.3d








probability

Virgin Enterps. Ltd








, 596 F.2d 70, 72 (2d Cir. 1979).



, 733 F.3d








probability

Virgin Enterps. Ltd. v. Nawab








, 596 F.2d 70, 72 (2d Cir. 1979).



, 733 F.3d








probability

. v. Nawab








, 596 F.2d 70, 72 (2d Cir. 1979).



, 733 F.3d at








probability of irreparable harm in the absence of injunctive

. v. Nawab








, 596 F.2d 70, 72 (2d Cir. 1979).



422








of irreparable harm in the absence of injunctive

. v. Nawab





invoice from the Superintendent. See



, 596 F.2d 70, 72 (2d Cir. 1979).



422-423;









. v. Nawab





See


is thus both “actual and imminent.” See Jackson Dairy

, 596 F.2d 70, 72 (2d Cir. 1979).



423;




10






. v. Nawab, 335 F.3d 141, 145 (2d Cir. 2003).


plan year on or about October 22, 2018.



See SUMF ¶


See Jackson Dairy



423; see also




10






, 335 F.3d 141, 145 (2d Cir. 2003).


, 2018.



SUMF ¶


See Jackson Dairy



see also









, 335 F.3d 141, 145 (2d Cir. 2003).


, 2018.



SUMF ¶


See Jackson Dairy



see also









, 335 F.3d 141, 145 (2d Cir. 2003).

Plaintiffs expect to receive their federal risk adjustment payments for the

, 2018.



SUMF ¶ 49. Either way, the damage will be


See Jackson Dairy



see also









, 335 F.3d 141, 145 (2d Cir. 2003).

l risk adjustment payments for the

, 2018. See



49. Either way, the damage will be


See Jackson Dairy



see also N.Y.C. Health & Hosps. Corp. v.









, 335 F.3d 141, 145 (2d Cir. 2003).


See





See Jackson Dairy



N.Y.C. Health & Hosps. Corp. v.









, 335 F.3d 141, 145 (2d Cir. 2003).


See 83 Fed. Reg. at 36459.





See Jackson Dairy,












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.





Inc. v. H












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.


the date an insurer receives its federal funds or within 10 days of the receipt of an



Inc. v. H












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.


days of the receipt of an



Inc. v. H












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.





Inc. v. H. P. Hood & Sons,












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.





. P. Hood & Sons,












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.





. P. Hood & Sons,












, 335 F.3d 141, 145 (2d Cir. 2003).


83 Fed. Reg. at 36459.





. P. Hood & Sons,













83 Fed. Reg. at 36459.





. P. Hood & Sons,












83 Fed. Reg. at 36459.





. P. Hood & Sons,












The





. P. Hood & Sons,


past violations of federal law, the harm Oxford faces is also irreparable. See









The





. P. Hood & Sons,


See









The





. P. Hood & Sons,


See





loss must be deemed irreparable when it cannot be recovered in federal court

because of sovereign immunity.

available remedy at law

explained, “federal courts may consider only the available

New York

against New York are constitutionally foreclosed” by the Eleventh Amendment, a

monetary loss caused by the State is “irreparable” for purposes of establishing a

party’s entitlement to equitable relief.

injunction while this Court considers Plaintiffs’ appeal would cause no meaningful

harm to anyone. That is because insurers

program for the 2017 plan year already recovered those liabilities from their

subscribers in the form of higher premiums.

account for any expect

plan year in their 2017 premium rates.

Instructions for the Filing of 2017 Premium Rates Individual and Small Group

“On” and “Off” Exchange Plans





New York












In





New York




B.

In contrast to the imminent and irreparable harm Plaintiffs face, a temporary





New York





n United States v. New York





New York




An InjunctionB.






New York





United States v. New York





New York, 708 F.2d




An Injunction






New York










708 F.2d




An Injunction






New York










708 F.2d




An Injunction






New York










708 F.2d




An Injunction






New York’s Department of Financial Services










708 F.2d




An Injunction






’s Department of Financial Services








available remedy at law that would make injunctive relief unavailable,” this Court


708 F.2d at 93 (emphasis




An Injunction Would Not Entail Substantial Injury To Any Party.







account for any expected federal risk







that would make injunctive relief unavailable,” this Court


at 93 (emphasis




Would Not Entail Substantial Injury To Any Party.







ed federal risk









at 93 (emphasis











ed federal risk









at 93 (emphasis











ed federal risk






because of sovereign immunity. “[I]n deciding whether a federal plaintiff has an



at 93 (emphasis











ed federal risk



“On” and “Off” Exchange Plans 6

United States v. New York, this Court held that even a purely monetary


“[I]n deciding whether a federal plaintiff has an



at 93 (emphasis











ed federal risk-



6-7 (Mar. 11, 2016),

11

, this Court held that even a purely monetary





at 93 (emphasis



party’s entitlement to equitable relief. Id.








-adjustment receipts or liabilities for the 2017



7 (Mar. 11, 2016),

11






at 93 (emphasis in original



Id. at 94.




harm to anyone. That is because insurers th




adjustment receipts or liabilities for the 2017

plan year in their 2017 premium rates. See


7 (Mar. 11, 2016),






in original



at 94.




that paid into the federal risk adjustment





See New York State Dep’t of Fin. Servs.,


7 (Mar. 11, 2016),






in original



at 94.




at paid into the federal risk adjustment




New York State Dep’t of Fin. Servs.,


7 (Mar. 11, 2016),






in original












7 (Mar. 11, 2016),






in original). Because “federal damages












7 (Mar. 11, 2016),






). Because “federal damages












7 (Mar. 11, 2016), see














’s Department of Financial Services required all insurers




see





explained, “federal courts may consider only the available federal









required all insurers




see Dist. Ct.





federal













Dist. Ct.





federal













Dist. Ct.





federal legal remedies.”













Dist. Ct. Dkt. 81





legal remedies.”













Dkt. 81





legal remedies.”













Dkt. 81





legal remedies.”













Dkt. 81-





legal remedies.”













-1, Exh.





legal remedies.”













1, Exh.





legal remedies.”








required all insurers to



Instructions for the Filing of 2017 Premium Rates Individual and Small Group –

1, Exh.





legal remedies.”








to



1, Exh.


A to Declaration of Jon

finalized and fixed those

the Superintendent announced the challenged regu

See

of Financial Services Announces 2017 Health Insurance Rates

available at

not able or allowed to recalculate their

would receive a rebate of their federal contributions from the Superintendent.

Because insurers were able to charge rates designed to compensate for their federal

liabilities (without accounting for the countervailing benefit of the challenged

regulation), any further payments now would be a windfall. T

risk

in the c

merits” of their preemption claims.

3 changed its policyexpected marincluding adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and SmallPlans Dougherty Decl.




See SUMF ¶ 46; Press Release, New York State Dep’t of Fin. Servs.,


available at






risk of

in the c


changed its policyexpected marincluding adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and SmallPlans Dougherty Decl.




SUMF ¶ 46; Press Release, New York State Dep’t of Fin. Servs.,


available at






of harm to weigh against the very real and irreparable injury facing Plaintiffs

in the coming weeks.

C.

With respect to the third factor, Plaintiffs have “a substantial case on the


To avoid such a windfall in the 2018 plan year

changed its policyexpected marincluding adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and SmallPlans 7, (Apr. 19, 2017) (emphasis added), Dougherty Decl.






available at






harm to weigh against the very real and irreparable injury facing Plaintiffs

oming weeks.

This Appeal Presents Substantial Questions Of First Impression.C.




changed its policyexpected marincluding adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and Small

7, (Apr. 19, 2017) (emphasis added), Dougherty Decl.






available at







oming weeks.

This Appeal Presents Substantial Questions Of First Impression.




changed its policyexpected marincluding the expected impact of New York’s adjustment to federal risk adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and Small







available at https://www.dfs.ny.gov/







oming weeks.





changed its policyexpected market

the expected impact of New York’s adjustment to federal risk adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and Small







https://www.dfs.ny.gov/







oming weeks.





changed its policyket-















oming weeks.





changed its policy and required insurers to-wide payments and charges under the federal risk adjustment,















oming weeks.3





and required insurers towide payments and charges under the federal risk adjustment,


7, (Apr. 19, 2017) (emphasis added),

A to Declaration of Jon-Michael Dougherty (“Dougherty Decl.”). The Department



















Michael Dougherty (“Dougherty Decl.”). The Department

finalized and fixed those 2017



















2017














To avoid such a windfall in the 2018 plan yearand required insurers to

wide payments and charges under the federal risk adjustment, the expected impact of New York’s adjustment to federal risk

adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and Small



2017 rates on August 5, 2016



















rates on August 5, 2016























https://www.dfs.ny.gov/about/









merits” of their preemption claims. LaRouche





12






about/









LaRouche





12






about/

not able or allowed to recalculate their 2017








LaRouche










about/press/

2017








LaRouche

To avoid such a windfall in the 2018 plan yearand required insurers to address


adjustment.” New York State Dep’t of Fin. Servs., 2018 Premium Rates Individual and Small Group







press/

2017








LaRouche, 20 F.3d at 72 (internal quotation

To avoid such a windfall in the 2018 plan yearaddress


adjustment.” New York State Dep’t of Fin. Servs., Group

7, (Apr. 19, 2017) (emphasis added), see






press/pr1608051.htm.

rates once they learned that they








, 20 F.3d at 72 (internal quotation

To avoid such a windfall in the 2018 plan yearaddress


adjustment.” New York State Dep’t of Fin. Servs., Group

see



the Superintendent announced the challenged regulation on September 9, 2016.



pr1608051.htm.










To avoid such a windfall in the 2018 plan year, the Departmentaddress in their 2018 rates


adjustment.” New York State Dep’t of Fin. Servs., Group –

see Dist. Ct.


rates on August 5, 2016—

lation on September 9, 2016.



pr1608051.htm.










, the Departmentin their 2018 rates


adjustment.” New York State Dep’t of Fin. Servs., Instructions for the Filing of – “On” and “Off” Exchange

Dist. Ct.


—more than a month before




pr1608051.htm.












Instructions for the Filing of “On” and “Off” Exchange

Dist. Ct.


more than a month before




pr1608051.htm.













Dist. Ct.






pr1608051.htm.













Dist. Ct. Dkt. 81






pr1608051.htm.





regulation), any further payments now would be a windfall. There is therefore no








Dkt. 81





of Financial Services Announces 2017 Health Insurance Rates (Aug. 5, 2016),

pr1608051.htm. So in





here is therefore no








Dkt. 81





(Aug. 5, 2016),

So in










, the Department subsequentlyin their 2018 rates



Dkt. 81-2, Exh. B to




SUMF ¶ 46; Press Release, New York State Dep’t of Fin. Servs., Department

(Aug. 5, 2016),

So insurers were










subsequentlyin their 2018 rates the “[t]otal



2, Exh. B to




Department

(Aug. 5, 2016),

surers were










subsequentlythe “[t]otal



2, Exh. B to




Department

(Aug. 5, 2016),

surers were













2, Exh. B to




Department

(Aug. 5, 2016),

surers were












2, Exh. B to




Department

(Aug. 5, 2016),

surers were









subsequently the “[t]otal



2, Exh. B to




Department

(Aug. 5, 2016),

surers were








the “[t]otal



2, Exh. B to


13

marks omitted). “[U]nder the Supremacy Clause, from which [the] pre-emption

doctrine is derived, any state law, however clearly within a State’s acknowledged

power, which interferes with or is contrary to federal law, must yield.” Gade v.

Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 108 (1992) (internal quotation marks

and citation omitted). Plaintiffs have a substantial case that the challenged

regulation is both contrary to and interferes with the ACA and its implementing

regulations.4

1. The challenged regulation is expressly preempted.

New York’s unilateral adjustments to the federal risk-adjustment program

are expressly foreclosed by the ACA. Although the Act does not generally

displace state laws, it makes an exception for laws that “prevent[] the application

of [the ACA’s] provisions.” 42 U.S.C. § 18041(d). The challenged regulation is

just such a law: it effectively prevents HHS from carrying out its statutory

obligation to implement a risk-adjustment program consistent with the “criteria and

methods” it develops. 42 U.S.C. § 18063(a)-(b).

Where, as here, a State chooses not to administer its own risk-adjustment

program, the Act provides that “the Secretary shall . . . take such actions as are

necessary to implement [the Act’s] requirements.” 42 U.S.C. § 18041(c). For its

4 The district court rejected Plaintiffs’ non-preemption claims based solely on its preemption holding. Accordingly, Plaintiffs’ substantial case on the preemption question likewise establishes a substantial case on their non-preemption claims.


14

part, the State must “forgo implementation of all State functions” related to the

ACA’s risk-adjustment provisions and let federal authorities “carry out all of the[se]

provisions . . . on behalf of the State.” 45 C.F.R. § 153.310(a)(2). The statute and

its implementing regulations thus vest the Secretary of Health and Human Services

with exclusive authority to administer the risk-adjustment program, including

determining the amount of any risk-adjustment liability or credit. See 42 U.S.C.

§ 18063(a)-(b); 45 C.F.R. § 153.320(a); see also Flagg v. Yonkers Sav. & Loan

Ass’n, FA, 396 F.3d 178, 182 (2d Cir. 2005) (“Federal regulations have no less pre-

emptive effect than federal statutes.” (internal quotation marks omitted)). The

challenged regulation prevents the Secretary from exercising that authority.

By taking funds away from those insurers the Secretary has determined need

them, and returning those funds to those insurers the Secretary has determined

must relinquish them, the challenged regulation reverses a determination that

Congress delegated to the HHS Secretary alone. Compare 11 N.Y.C.R.R.

§ 361.9(e), with 42 U.S.C. § 18063(a) (describing the obligation to make transfers

from low- to high-risk plans). At the very least, the district court’s contrary

interpretation of the Act’s plain text presents a substantial question on appeal.

2. The challenged regulation is impliedly preempted.

The challenged regulation is also preempted for the independent reason that

it conflicts both with the ACA’s aims and the means Congress chose to achieve


15

them. See Sprietsma v. Mercury Marine, 537 U.S. 51, 56 (2002) (holding that an

express preemption provision “does not bar the ordinary working of conflict

preemption principles” (internal quotation marks omitted)). For one thing, the

regulation “frustrat[es] the attainment of specific objectives that” the Act and its

implementing regulations are “designed to promote.” Stern v. Gen. Elec. Co., 924

F.2d 472, 476 (2d Cir. 1991). As detailed above, the “scope, structure, and

purpose” of the Act’s risk-adjustment provisions manifest Congress’s intent to

establish an effective risk-adjustment program under federal supervision in every

State. New York SMSA Ltd. P’ship v. Town of Clarkstown, 612 F.3d 97, 104 (2d

Cir. 2010).

The challenged regulation also “interferes with the methods by which the

[ACA] was designed to reach” its objectives. Resolution Tr. Corp. v. Diamond, 45

F.3d 665, 674 (2d Cir. 1995) (internal quotations marks and citation omitted;

emphasis added). The Act directs the Secretary of Health and Human Services to

establish uniform risk-management standards and oversee their implementation.

See 42 U.S.C. § 18041(a)(1)(C), (b), (c). In accordance with that mandate, the

Secretary has promulgated regulations that require that “[a]ny risk adjustment

methodology used by a State, or HHS on behalf of the State, must be a Federally


16

certified risk adjustment methodology.” 45 C.F.R. § 153.320(a). 5 The regulations

contain detailed and mandatory procedures both for developing a risk-adjustment

methodology and for obtaining federal approval to implement alternative

methodologies. See id. §§ 153.320(a)(2), 153.330.

The challenged regulation’s purpose and effect is to override the federal

standards and the procedures that govern their development, approval, and

implementation. New York’s Department of Financial Services expressly refers to

the challenged regulations as “New York’s adjustment to federal risk adjustment.”

New York State Dep’t of Fin. Servs., Instructions for the Filing of 2018 Premium

Rates Individual and Small Group – “On” and “Off” Exchange Plans 7, (Apr. 19,

2017). And the Superintendent has justified the regulation in light of perceived

shortcomings in the federal methodology. See 11 N.Y.C.R.R. § 361.9(a). Yet New

York has made no effort to comply with the mandatory procedures for seeking

adjustments to the Secretary’s chosen risk-adjustment methodology. Instead, the

challenged regulation achieves the same result through unilateral means by

effectively overriding the Secretary’s distribution. That is a textbook example of

conflict preemption.

5 Notably, “[a] pre-emptive regulation’s force does not depend on express congressional authorization to displace state law.” Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 154 (1982). So even if the ACA had been drafted to avoid collision with state insurance regulation, the risk-adjustment regulations would retain their full preemptive force.


17

The district court dismissed the incompatibility between the challenged

regulation and the text and purpose of the ACA and its implementing regulations.

It looked instead to the federal Government’s informal endorsement of state efforts

to address unintended effects of the federal program by making appropriate

adjustments to their own, state regulations. But the court’s interpretation of those

comments to permit “any state [risk-adjustment] programs operated under state

authority” sweeps far beyond what HHS intended. Opinion & Order 26, Dist. Ct.

Dkt. 66.

To be sure, some language in the preambles to various risk-adjustment rules

encourage States to develop ways to improve the risk-adjustment programs. But

even if those preambles carried any legal force, they do not contemplate New

York’s unilateral veto of the Secretary’s painstakingly developed risk-adjustment

methodology. For one thing, the Secretary cannot delegate his statutory duty to

“take such actions as are necessary to implement” a risk-adjustment program either

“directly or through an agreement with a not-for-profit entity” on New York’s

behalf back to the State. 42 U.S.C. § 18041(c)(1); see Whitman v. Am. Trucking

Associations, 531 U.S. 457, 475 (2001) (“[T]he degree of agency discretion that is

acceptable varies according to the scope of the power congressionally conferred.”).

So even if the Secretary had suggested that New York’s program was compatible

with federal law, that view would be entitled to no deference.


18

For another, it would make no sense for the Secretary to promulgate detailed

procedures for obtaining federal approval for alternative risk-adjustment

methodologies while simultaneously encouraging States to flout those procedures

by making the very same kinds of modifications unilaterally. All the more so now

that the Secretary has promulgated rules respond directly to New York’s concerns

regarding the amount of the risk-adjustment transfers. Under regulations that will

take effect in 2020, States “can request to reduce risk adjustment transfers in the

State’s individual, small group or merged markets by up to 50 percent in States

where HHS operates the risk adjustment program” only “if HHS determines” a

reduction is appropriate after notice and comment. Patient Protection and

Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019,

83 Fed. Reg. 16,930, 17,059 (Apr. 17, 2018); see 45 C.F.R. § 153.320(d).

Although the preamble accompanying this new rule acknowledged that States “do

not generally need HHS approval” where they act seek to mitigate the unintended

consequences of the federal program “under State legal authority,” CMS made

clear that “the flexibility finalized in this rule involves a reduction to the risk

adjustment transfers calculated by HHS and will require HHS review” and

approval. 83 Fed. Reg. at 16,960; see 45 C.F.R. § 153.320(d)(4). In other words,

the Secretary has chosen to establish a detailed and mandatory federal procedure


19

for altering risk-adjustment distributions in circumstances that federal authorities

determine warrant a reduction.

The district court thought that these restrictions on the means by which

States may seek changes to the federal program have no bearing on a State’s

authority to run its own risk-adjustment program. See Order Denying Mot. 7-8,

Dist. Ct. Dkt. 83. By that reasoning, the decisions in countless preemption cases

would have come out the other way. To take just one example, in Hillman v.

Maretta, 569 U.S. 483 (2013), the Supreme Court considered a state statute that—

just like the challenged regulation—purported to divest the beneficiaries of

transfers made under federal law. The Virginia statute in Hillman provided that,

where there had been an intervening change in the marital relationship between the

named beneficiary of any insurance contract with a death benefit and the insured,

the decedent’s state-law heir could sue the named beneficiary for the proceeds of

that benefit. Id. 485-486. The Court recognized that there was a presumption

against preemption in matters of domestic relations and family property. Id. at

490-491. But it had no trouble concluding that Virginia’s statute was preempted to

the extent that it purported to give someone other than the named beneficiary rights

in the proceeds of a policy issued under the Federal Employees’ Group Life


20

Insurance Act of 1954 without abiding by the specific and exclusive federal

procedures for changing a named beneficiary. Id. at 493-494.6

If the district court’s reasoning was correct, Virginia’s undisputed authority

to enact laws respecting family property would have withstood the clash with

federal procedures in Hillman. It did not. Whatever independent state initiatives

the Secretary intended to encourage with respect to ACA insurance plans, New

York cannot commandeer federal transfers in defiance of existing procedures. At

the very least, the district court’s contrary interpretation presents a substantial

question on appeal.

3. The novelty of the questions cuts in favor of a brief injunction.

The questions raised by this appeal are not only substantial; they are also

novel. Plaintiffs are aware of no other decision that addresses whether a State’s

unilateral effort to redistribute ACA risk adjustment transfers is preempted, and the

Superintendent has pointed to none. That novelty makes a brief injunction

especially appropriate. See Jock v. Sterling Jewelers, Inc., 738 F. Supp. 2d 445,

447 (S.D.N.Y. 2010) (Rakoff, J.). After all, “where the district court has had to

address issues as to which the appellate courts have provided little direct guidance,

the likelihood that an appellate court will take a different approach increases.”

6 Although the statute in question also contained an express preemption provision, the Supreme Court’s holding was confined to implied, conflict-preemption principles. Hillman, 569 U.S. at 490.


Am.’s Greatness v. Fed. Election Comm’n

Nat’l Immigration Project of the Nat’l Lawyers Guild v. U.S. Dep’t of Homeland

Sec.

Nation of New York v. Pataki

“no need to engage in a detailed analysis of the relative merits of any appeal”

where “the difficulties of the issues presented” ma

there is no likelihood of success on appeal” (internal quotation marks and ellipses

omitted)).

merits,

UHC’s risk adjustment entitlement,

favor of” an injunction pending this Court’s resolutio

LaRouche

generally can claim an interest in the enforcement of an unconstitutional law.”

ex rel. Ayers v. Pocono Mountain Sch. Dist

(citation and internal quotation marks omitted in original).


(“[E]nforcement of an unconstitutional law is always contrary to the public

interest.”

the inconvenience to third


Sec., 842 F. Supp. 2d 720, 733 (S.





omitted)).

merits,



LaRouche






interest.”



, 842 F. Supp. 2d 720, 733 (S.





omitted)).

D.

With $65 million in imminent and irr

merits,



LaRouche






interest.”



, 842 F. Supp. 2d 720, 733 (S.





omitted)).

The Equities Tip Decisively In Favor Of Enjoining Enforcement Of D.The Challenged Regulation.


and a potential windfall for the insurers who would receive the 30% of



LaRouche






interest.” (quotation omitted)). And the potential harm to the Superintendent and



, 842 F. Supp. 2d 720, 733 (S.





The Equities Tip Decisively In Favor Of Enjoining Enforcement Of

The Challenged Regulation.





LaRouche, 20 F.3d at 72.






(quotation omitted)). And the potential harm to the Superintendent and



, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.









, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.









, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.









, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.









, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.









, 842 F. Supp. 2d 720, 733 (S.











, 20 F.3d at 72.







the inconvenience to third-


, 842 F. Supp. 2d 720, 733 (S.

Nation of New York v. Pataki, 188 F. Supp. 2d 223, 253 (N.D.N.Y. 2002) (finding










, 20 F.3d at 72. After all, “neither the Government nor the public







-party insurers is negligible when


, 842 F. Supp. 2d 720, 733 (S.

, 188 F. Supp. 2d 223, 253 (N.D.N.Y. 2002) (finding










After all, “neither the Government nor the public







party insurers is negligible when


, 842 F. Supp. 2d 720, 733 (S.




















, 842 F. Supp. 2d 720, 733 (S.D.N.Y. 2012) (Rakoff, J.);









UHC’s risk adjustment entitlement, “the balance of the equities weighs heavily in










21


D.N.Y. 2012) (Rakoff, J.);









“the balance of the equities weighs heavily in










21


D.N.Y. 2012) (Rakoff, J.);



















D.N.Y. 2012) (Rakoff, J.);






With $65 million in imminent and irreparable harm








Am.’s Greatness v. Fed. Election Comm’n, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);






eparable harm






ex rel. Ayers v. Pocono Mountain Sch. Dist., 710 F.3d 99, 114 (3d Cir


, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);






eparable harm






., 710 F.3d 99, 114 (3d Cir


, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);



where “the difficulties of the issues presented” make it “foolhardy to predict that



eparable harm






., 710 F.3d 99, 114 (3d Cir


, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);



ke it “foolhardy to predict that



eparable harm






., 710 F.3d 99, 114 (3d Cir


, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);






eparable harm,






., 710 F.3d 99, 114 (3d Cir


, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);






, a substantial case on the



favor of” an injunction pending this Court’s resolution of Plaintiffs’ appeal.



., 710 F.3d 99, 114 (3d Cir

(citation and internal quotation marks omitted in original). See also

, 831 F.3d 500, 511 (D.C. Cir. 2016)





D.N.Y. 2012) (Rakoff, J.);






a substantial case on the



n of Plaintiffs’ appeal.



., 710 F.3d 99, 114 (3d Cir

See also

, 831 F.3d 500, 511 (D.C. Cir. 2016)



party insurers is negligible when weighed against the


D.N.Y. 2012) (Rakoff, J.); see Cayuga Indian












., 710 F.3d 99, 114 (3d Cir

See also

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian












., 710 F.3d 99, 114 (3d Cir

See also,

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian












., 710 F.3d 99, 114 (3d Cir

, e.g.

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian












., 710 F.3d 99, 114 (3d Cir

e.g.,

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian












., 710 F.3d 99, 114 (3d Cir. 2013)

, Pursuing

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian












. 2013)

Pursuing

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian











generally can claim an interest in the enforcement of an unconstitutional law.” K.A.

. 2013)

Pursuing

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian











K.A.

. 2013)

Pursuing

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


see Cayuga Indian











K.A.

. 2013)

Pursuing

, 831 F.3d 500, 511 (D.C. Cir. 2016)



weighed against the


monetary losses Oxford will suffer (and cannot recover in federal court) from the

enforcement of the c

imposed a modest delay in the enforcement of the challenged regulation, which can

easily be compensated by the payment of interest. If, conversely, Plaint

on appeal, then the Superintendent has lost nothing to which she was legally

entitled. The public interest

favor of an inju

Superintendent’s ability to distribute a windfall to third

some cognizable injury, th

Court’s Expedited Appeals Calendar.

ready to brief this appeal on an expedited basis and to make themselves available

for argument at the earliest possible date for bot







favor of an inju








At worst, if the Superintendent prevails on appeal, an injunction would have





favor of an inju

E.

To the extent this Court is concerned that a brief delay in the













favor of an inju

Any Risk Of Harm To E.Expedited Briefing And Consideration.














favor of an inju

Any Risk Of Harm To

Expedited Briefing And Consideration.














favor of an inju

Any Risk Of Harm To















favor of an injunction pending resolution of Plaintiffs’ appeal

Any Risk Of Harm To















nction pending resolution of Plaintiffs’ appeal

Any Risk Of Harm To









enforcement of the challenged regulation,.







Any Risk Of Harm To









hallenged regulation,.







Any Risk Of Harm To
















Any Risk Of Harm To




some cognizable injury, that injury can be mitigated by placing this case on the












Any Risk Of Harm To




at injury can be mitigated by placing this case on the










entitled. The public interest and the balance of harms


Any Risk Of Harm To














and the balance of harms


Any Risk Of Harm To
















Any Risk Of Harm To The








22









The





Court’s Expedited Appeals Calendar. See



22









The State





See










State





See Local Rule 32.1(b)(3).










State’s





Local Rule 32.1(b)(3).


for argument at the earliest possible date for both sets of counsel and the Court.








’s Interests Can Be Mitigated By







h sets of counsel and the Court.








Interests Can Be Mitigated By

















Superintendent’s ability to distribute a windfall to third-










and the balance of harms thus




-party insurers would cause










thus




party insurers would cause










thus weigh

nction pending resolution of Plaintiffs’ appeal.













weigh













weigh





Local Rule 32.1(b)(3). Plaintiffs stand








weigh decisively in





Plaintiffs stand






easily be compensated by the payment of interest. If, conversely, Plaintiffs prevail


decisively in





Plaintiffs stand






iffs prevail


decisively in





Plaintiffs stand






iffs prevail


decisively in





Plaintiffs stand






iffs prevail


decisively in





Plaintiffs stand






iffs prevail


decisively in





Plaintiffs stand





iffs prevail


decisively in





Plaintiffs stand



23

CONCLUSION

For the foregoing reasons, the motion should be granted, the Defendant-

Appellee should be enjoined from enforcing the challenged regulations, and if the

Court determines that an expedited schedule is appropriate, the case should be

assigned to the Court’s Expedited Appeals Calendar with a briefing schedule in

accordance with Local Rule 32.1(b)(3) to run from the entry of an order granting

this motion.

Respectfully submitted,

/s/ Neal Kumar Katyal Neal Kumar Katyal Eugene A. Sokoloff HOGAN LOVELLS US LLP 555 13th Street, N.W. Washington, D.C. 20004 (202) 637-5600 [email protected] Steven Rosenbaum COVINGTON & BURLING LLP 1 CityCenter 850 10th Street, NW Washington, D.C 20001

Attorneys for Plaintiffs-Appellants


CERTIFICATE OF COMPLIANCE

1. This motion complies with the length limitations of Federal Rule of

Appellate Procedure 27(d)(2)(A) because it contains 5,005 words.

2. This motion complies with the typeface and type style requirements of

Federal Rule of Appellate Procedure 27(d)(1)(E) because it has been prepared in a

proportionally spaced typeface using Microsoft Office Word in Times New Roman

14-point font.



CERTIFICATE OF SERVICE

I certify that the foregoing motion was filed with the Clerk using the

appellate CM/ECF system on September 25, 2018. All counsel of record are

registered CM/ECF users, and service will be accomplished by the CM/ECF

system. I further certify that I caused six paper copies of the motion to be

delivered to the Court.



Exhibit A


1

IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

UNITEDHEALTHCARE OF NEW YORK, INC., OXFORD HEALTH INSURANCE, INC.,

Plaintiffs-Appellants, v.

MARIA T. VULLO, IN HER OFFICIAL CAPACITY AS SUPERINTENDENT OF FINANCIAL SERVICES OF THE STATE OF NEW YORK

Defendant-Appellee.

NO. 18-2583-CV

DECLARATION OF STEVEN J. ROSENBAUM

I, STEVEN J. ROSENBAUM, declare as follows:

1. I am an attorney with the law firm Covington & Burling LLP, counsel

for the Plaintiffs-Appellants’ in the above-captioned appeal. I respectfully submit

this declaration in support of Plaintiffs-Appellants’ Emergency Motion for an

Injunction Pending Appeal. I make this declaration from my personal knowledge.

2. On August 30, 2018, Plaintiffs-Appellants proposed to Defendant-

Appellee that the parties agree to propose expedited briefing of the present appeal,

with the amounts the Defendant-Appellee demands be paid by Plaintiffs pursuant to

her authority under the challenged New York risk-adjustment regulation being paid

into an escrow account pending resolution of that appeal.

3. On September 11, 2018, counsel for Defendant-Appellee declined to

accept Plaintiffs-Appellants’ proposal.


2

4. Attached hereto as an Addendum is a true and correct copy of an email

chain between me as counsel for Plaintiffs-Appellants, and C. Harris Dague, trial

counsel for Defendant-Appellee, containing the communications on this topic that

occurred on the dates indicated in this email chain.

I declare under penalty of perjury that the foregoing is true and correct.

Executed in Washington, DC on September 24, 2018.

/s/ Steven J. Rosenbaum STEVEN J. ROSENBAUM


ADDENDUM


1

Dougherty, Jon-Michael

From: Dague, Harris <[email protected]>Sent: Tuesday, September 11, 2018 4:26 PMTo: Rosenbaum, StevenSubject: RE: United HealthCare of New York, Inc., et al. v. Vullo, No. 17-cv-7694

Steve, I am sorry I thought I responded to this earlier. I have been in trial prep so must have slipped my to do list. The State declines the proposal. -Harris Truly Yours,

C. Harris Dague C. Harris Dague Special Counsel Litigation Bureau N.Y.S. Office of the Attorney General The Capitol, Justice Building 4th Fl. Albany, NY 12224 Telephone: (518) 776-2621

This e-mail, including attachments, contains information that is confidential and may be protected by the attorney/client or other privileges. This e-mail, including attachments, constitutes non-public information intended to be conveyed only to the designated recipient(s). If you are not an intended recipient, please delete this e-mail, including attachments, and notify me as soon as possible. The unauthorized use, dissemination, distribution or reproduction of this e-mail, including attachments, is prohibited and may be unlawful.

From: Rosenbaum, Steven <[email protected]> Sent: Tuesday, September 11, 2018 3:22 PM To: Dague, Harris <[email protected]> Subject: RE: United HealthCare of New York, Inc., et al. v. Vullo, No. 17-cv-7694 Could you please let us know the State's position on the proposal set forth in my email below? It has been almost two weeks since we set forth this proposal. Steve


2

From: Dague, Harris <[email protected]> Sent: Thursday, August 30, 2018 4:02 PM To: Rosenbaum, Steven <[email protected]> Subject: RE: United HealthCare of New York, Inc., et al. v. Vullo, No. 17-cv-7694 Steve, I will speak with my client. I do not handle our appeals so once our district court proceeding is closed the matter will be transferred to one of our appellate attorneys. I mention this as regardless of my client’s position on your proposal, I would have to loop our appellate lawyer on matters affecting his/her briefing. I will try to get back to you as soon as possible.

Truly Yours,

C. Harris Dague C. Harris Dague Special Counsel Litigation Bureau N.Y.S. Office of the Attorney General The Capitol, Justice Building 4th Fl. Albany, NY 12224 Telephone: (518) 776-2621

This e-mail, including attachments, contains information that is confidential and may be protected by the attorney/client or other privileges. This e-mail, including attachments, constitutes non-public information intended to be conveyed only to the designated recipient(s). If you are not an intended recipient, please delete this e-mail, including attachments, and notify me as soon as possible. The unauthorized use, dissemination, distribution or reproduction of this e-mail, including attachments, is prohibited and may be unlawful. From: Rosenbaum, Steven <[email protected]> Sent: Thursday, August 30, 2018 3:58 PM To: Dague, Harris <[email protected]> Subject: United HealthCare of New York, Inc., et al. v. Vullo, No. 17-cv-7694 Harris, although we have filed a motion for injunction pending appeal with Judge Koeltl, and will do the same with the Second Circuit if Judge Koeltl rules against us, there is a simpler approach that both parties may find more appealing. We think both sides and other insurers in the NY market would benefit from the certainty created by a prompt resolution of the dispute on the merits, and the parties are free jointly to propose a briefing schedule to the Second Circuit that would accomplish that. For example, we could jointly propose that plaintiffs' opening brief be due 30 days after the parties file such a proposal; the State's response would be due 30 days thereafter; plaintiffs' reply would be due 14 days after the State's response; and oral argument would be scheduled on an expedited basis. As part of this arrangement, it would be agreed that plaintiffs' payments pursuant to the New York risk adjustment regulation would not be due until 7 days after a decision by the Second Circuit affirming Judge Koeltl's decision. Plaintiffs would be willing to escrow the funds in a mutually agreeable manner. Please let us know if the state is interested in this approach. We are of course flexible regarding our proposed briefing deadlines.


3

Steve Steven Rosenbaum Covington & Burling LLP One CityCenter, 850 Tenth Street, NW Washington, DC 20001-4956 T +1 202 662 5568 | [email protected] www.cov.com

This message is from a law firm and may contain information that is confidential or legally privileged. If you are not the intended recipient, please immediately advise the sender by reply e-mail that this message has been inadvertently transmitted to you and delete this e-mail from your system. Thank you for your cooperation. IMPORTANT NOTICE: This e-mail, including any attachments, may be confidential, privileged or otherwise legally protected. It is intended only for the addressee. If you received this e-mail in error or from someone who was not authorized to send it to you, do not disseminate, copy or otherwise use this e-mail or its attachments. Please notify the sender immediately by reply e-mail and delete the e-mail from your system.


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