Me. Educ. Ass'n Benefits Trust v. Cioppa

842 F.Supp.2d 373

281 Ed. Law Rep. 1003

MAINE EDUCATION ASSOCIATION BENEFITS TRUST et al., Plaintiffs,

v.Eric CIOPPA, in his official capacity as Superintendent of Insurance of the State of Maine, Defendant.

No. 1:11–cv–381–GZS.

United States District Court, D. Maine.

Feb. 3, 2012.

Christopher C. Taintor, Norman, Hanson & DeTroy, Portland, ME, for Plaintiffs.

Jonathan R. Bolton, Thomas A. Knowlton, Office of the Attorney General, Andrew L. Black, Maine Attorney General's Office, Augusta, ME, for Defendant.

Melissa A. Hewey, George V. Royle, Drummond Woodsum, Portland, ME, for Intervenor Defendants.

ORDER ON MOTION TO DISMISS

GEORGE Z. SINGAL, District Judge.

Before the Court is Defendant's Partial Motion to Dismiss (Docket # 30). For the reasons explained herein, the Court GRANTS the Motion.

I. LEGAL STANDARD

A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) tests the “legal sufficiency” of a complaint. Gomes v. Univ. of Me. Sys., 304 F.Supp.2d 117, 120 (D.Me.2004). The general rules of pleading require a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This short and plain statement need only “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations and alteration omitted).

However, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation omitted). Thus, faced with a motion to dismiss, the Court must examine the factual content of the complaint and determine whether those facts support a reasonable inference “that the defendant is liable for the misconduct alleged.” Id. In conducting this examination of the complaint, the Court must accept as true all well-pleaded factual allegations in the complaint and draw all reasonable inferences in plaintiff's favor. Gargano v. Liberty Intern. Underwriters, Inc., 572 F.3d 45, 48 (1st Cir.2009). However, the Court need not accept “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S.Ct. at 1949. In distinguishing sufficient from insufficient pleadings, which is a “context-specific task,” the Court must “draw on its judicial experience and common sense.” Id. at 1950 (internal citation omitted).

II. BACKGROUND

Plaintiff Maine Education Association Benefits Trust (“MEABT” or the “Trust”) was formed in 1993. The Maine Education Association (“MEA”) is the settlor of the Trust and the Trust furthers MEA's organizational principle and goals. MEABT is governed by a nine member board of trustees, all of whom are current or retired Maine public school employees.¹ Since its inception, MEABT has made group health insurance available to employees of Maine's public school districts. In addition to public school employees, the MEABT plan covers employees of several private secondary schools that were “grandfathered” in 1993 as well as employees of MEABT and MEA. MEABT qualifies as a voluntary employees' beneficiary association (“VEBA”) pursuant to Section 501(c)(9) of the Internal Revenue Code.

A. The MEABT Plan

MEABT insures participating employees by purchasing an insurance policy from Anthem, a state regulated insurance company.The current contract between Anthem and MEABT was executed by Anthem on August 9, 2011 and by MEABT on August 24, 2011 (the “Contract”). The Contract is effective from July 1, 2011 through June 30, 2012. ( See Compl. Ex. 2 (Docket # 1–2).) ² As the plan sponsor and group policy holder of the Contract, MEABT provides health coverage to approximately 65,000 individuals, including employees in approximately 99 percent of Maine public schools. However, MEABT has no contracts with any school district or other educational institutions and such institutions and districts do not act as sponsors or participants in the MEABT health plan. Eligibility for enrollment in the MEABT health plan is determined by individual collective bargaining agreements negotiated between local bargaining units and the school districts or other education institutions. If the bargaining unit has negotiated the right to enroll in the MEABT health insurance plan, individual employees enroll in the plan directly with the insurer—currently, Anthem.

Because of the size of the membership pool, MEABT is able to minimize administrative costs and spread the costs of large claims over the group thereby resisting fluctuations in premiums. In furtherance of its cost spreading goals, the MEABT plan is “community-rated” meaning the coverage is priced “based on the total utilization costs for the entire group statewide, without geographic variation or the consideration of individual employers' demographic mix, prior utilization or loss experience.” (Am. Compl. (Docket # 23) ¶ 23.) MEABT's trustees decided in an exercise of their fiduciary duties to provide insurance coverage on a statewide community-rated basis with the understanding that participants who are actuarially better risks would help subsidize the premiums paid by other members who are actuarially less attractive to insurers and the goal of ensuring that the entire group would have access to reasonably affordable health insurance. The Trustees' decision to charge one statewide rate for each benefit package is a central part of the plan's design and well-known by participants and employers.

The alternative to MEABT's “community-rated” insurance would be “experience–rated” group health insurance—that is, group health insurance coverage rated and priced based on the loss experience of an individual district or other education institution. In general, for a variety of reasons, health care costs and health insurance premium rates in Northern and Eastern Maine are greater, on average, than the costs and premium rates in Southern Maine. As a result, “experience rated” group health insurance would typically be more expensive for a school district in Northern or Eastern Maine than it would be for one in Southern Maine.

B. MEABT's Position on Loss Information

As defined in Maine statute, “loss information” includes “the amount of premium received, the amount of claims paid and the loss ration” but excludes “any information or data pertaining to medical diagnosis, treatment or health status that identifies an individual covered under the group contract or policy.” 24–A M.R.S.A. § 2803–A.

Under the MEABT Trust Agreement, the Trustees have “absolute discretion and authority to make all fiduciary decisions, plan provision interpretations and constructions and other determinations under this Trust and any plans maintained under the Trust ... including without limitation, decisions relating to the use and dissemination (if any) of the participant claims experience data under any plan maintained by the Trust.” (Am. Compl. ¶ 85.)

Over the years, various school districts have requested loss information and claims experience data for their district from the Trust. The Trust has responded to each request by indicating that it does not calculate or release loss information for districts or other groups within the Trust. ( See Am. Compl. ¶ 34.) MEABT has deliberating decided that “organizing the experience and claims history date by [district] would undermine the Trust's ability to charge one statewide rate for insurance coverage.” (Am. Compl. ¶ 36.) As a result, MEABT has always negotiated with its insurer that “loss experience and claims histories for individual employers would not be revealed to anyone, whether outside or inside of Anthem or its predecessors' organizations, without express permission of MEABT.” (Am. Compl. ¶ 37.) The current Contract between MEABT and Anthem specifically states:

All experience data relative to the MEABT and its subgroups is owned by the Trust, and that data will not be released, either directly or indirectly, by Anthem without the prior written consent of the Trust, and the Trust can withhold its permission for any reason it deems appropriate. Additionally, Anthem agrees not to utilize data relating to specific active subgroups for standalone rating purposes.

(Contract (Docket # 1–2) at 5.) MEABT avers that an identical provision has appeared in each contract since 2005. Pursuant to this provision, MEABT and Anthem consider the loss information and claims history of individual districts to be the confidential property of the Trust and a trade secret owned by the Trust. As an asset of the Trust, the Trustees are obligated to manage this information for the sole benefit of the beneficiaries and plan participants.

C. LD 1326

In this case, MEABT seeks to challenge sections of the State of Maine's L.D. 1326, “An Act to Allow School Administrative Units to Seek Less Expensive Health Insurance Alternatives” (hereinafter “LD 1326”). LD 1326 was passed by the Maine Legislature on June 16, 2011, signed into law on June 21, 2011, and became effective on October 1, 2011. In this case, MEABT seeks to challenge the portions of that state law that are codified at 20–A M.R.S.A. § 1001(14)(D) and 24–A M.R.S.A. § 2803–A(2).

As amended 20–A M.R.S.A. § 1001(14)(D) reads:

Insurance purchase by competitive bidding....

D. In order to facilitate the competitive bidding process in procuring health insurance for a school administrative unit's employees under this subsection, the administrator for an individual school plan or for a group plan for a multiple-school group shall seek and obtain competitive bids through a request for...