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

842 F.Supp.2d 386

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.

ORDER ON MOTION FOR PRELIMINARY INJUNCTION

GEORGE Z. SINGAL, District Judge.

Before the Court is Plaintiffs' Motion for Preliminary Injunction (Docket # 13). For the reasons explained herein, the Court DENIES the Motion.

I. LEGAL STANDARD FOR PRELIMINARY INJUNCTION

Plaintiffs, as the moving party, bear the burden of persuasion to show: “(1) the likelihood of success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions, i.e., the hardship to the nonmovant if enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the effect (if any) of the court's ruling on the public interest.” Iantosca v. Step Plan Servs., Inc., 604 F.3d 24, 29 n. 5 (1st Cir.2010) (citation omitted). Likelihood of success on the merits is the “most important part of the preliminary injunction assessment.” Jean v. Mass. State Police, 492 F.3d 24, 27 (1st Cir.2007). Even if likelihood of success is low, a court might consider injunctive relief based on a very significant showing of irreparable harm. See Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 895 (7th Cir.2001) (explaining that the preliminary injunction “process involves engaging in ... the sliding scale approach; the more likely the plaintiff will succeed on the merits, the less the balance of irreparable harms need favor the plaintiff's position”). However, a showing of irreparable harm must be “grounded on something more than conjecture, surmise, or a party's unsubstantiated fears of what the future may have in store.” Charlesbank Equity Fund II v. Blinds to Go, 370 F.3d 151, 162 (1st Cir.2004). Ultimately, the Court must “bear constantly in mind that an ‘[i]njunction is an equitable remedy which should not be lightly indulged in, but used sparingly and only in a clear and plain case.’ ” Saco Def. Sys. Div., Maremont Corp. v. Weinberger, 606 F.Supp. 446, 450 (D.Me.1985) (quoting Plain Dealer Pub. Co. v. Cleveland Typographical Union No. 53, 520 F.2d 1220, 1230 (6th Cir.1975)).

II. PROCEDURAL BACKGROUND

Plaintiff Maine Education Association Benefits Trust (“MEABT” or the “Trust”) originally invoked three counts of its Amended Complaint (Docket # 23) in support of its request for a preliminary injunction: (1) ERISA Preemption (Count I); (2) Unlawful Taking (Count II) and (3) Impairment of Contract (Count IV). In responding to Plaintiffs' Motion for Preliminary Injunction, Defendant sought, by separate motion, to dismiss the ERISA Preemption claim and the Impairment of Contract claim. By separate order, the Court has determined that these claims, along with Count III, fail to state a claim and are subject to dismissal.

In light of that ruling, only Count II remains as a basis for the Motion for Preliminary Injunction.¹ Thus, the Court necessarily limits its consideration of the Motion for Preliminary Injunction to the Unlawful Taking claim. In laying out the factual background, the Court does not repeat all of the factual background contained in its Order on the Motion to Dismiss. Rather, the Court focuses its factual discussion on the supplementary factual record filed in connection with the Motion for Preliminary Injunction to the extent that the record contains facts that are relevant to Count II.

III. FACTUAL BACKGROUNDA. MEABT & Its Health Insurance Plan

MEABT currently covers approximately 67,000 members (school employees and dependents) in an insured plan underwritten by Anthem Blue Cross Blue Shield of Maine (“Anthem”). There are about 180 school districts of varying size which provide insurance through the MEABT program. (DeWeese Decl. (Docket # 15) ¶ 4.) All told, the Trust insures employees in 99 percent of Maine's school districts. (Diamond Decl. (Docket # 26) ¶ 5.) Eligibility for enrollment in the MEABT health insurance plan is determined by the collective bargaining agreements negotiated between local bargaining units and individual employers, predominantly school districts. The employees of an individual school district are eligible to participate in the MEABT plan if the largest collective bargaining unit in that school district is represented by the Maine Education Association (“MEA”). Once eligibility has been established, the school board and the employees decide together, by a collaborative vote, whether the employees will be offered the MEABT plan. Employees in bargaining units which have negotiated the right to enroll in the MEABT health insurance plan and who wish to become enrolled in the plan enroll directly with the plan's insurer, Anthem. MEABT has no contracts with any individual educational institution, and those institutions are not considered to be sponsors of the plan. (Burke Decl. (Docket # 18) ¶¶ 14 & 15.) Rather, based on the district's collective bargaining agreements, different school districts subsidize portions of the cost of health insurancefor employees and their dependents at different rates.² (Burke Decl. ¶ 18.)

Since the MEABT's inception, the insurance coverage it has made available to the employees of educational institutions has been “community-rated.” That is, all negotiations for insurance coverage have been conducted with the express understanding that it would be priced on the basis of the total utilization costs for the entire group state-wide, without geographic variation or the consideration of individual employers' demographic mix, prior utilization, or loss experience. (Burke Decl. ¶ 12.) The community-rated design of the MEABT plan has been widely known throughout the State of Maine for many years. (Burke Decl. ¶ 17.)

The decision to provide insurance coverage on a statewide, community-rated basis was a decision made by the Trustees in the exercise of their fiduciary responsibilities under the Trust, with the understanding that members of the statewide group who are actuarially better risks would help subsidize the premiums paid by other members who are actuarially less attractive to insurers. (Burke Decl. ¶ 12.) The community-rated plan design is intended to economically benefit employees of educational institutions in the State of Maine whose work forces are on average older and less healthy than other members of the group, and who reside in regions with higher health care costs. The MEABT regards this benefit as especially important since school employees in these areas—typically Northern and Eastern Maine—earn on average substantially less than their counterparts in Southern Maine. Thus, the design of the plan is intended, in part, to help mitigate that disparity. (Burke Decl. ¶ 13.)

On average, over the last four years, the loss ratio reported by Anthem's MEABT plan has been 90.8 percent after premium refunds.³ (DeWeese Decl. ¶ 7.) This loss ratio reflects lower than average administrative costs that MEABT accesses because of its current size. (DeWeese Decl. ¶ 11.) For the most recent plan year, the annual premium for the Anthem plan purchased by MEABT was approximately $370,000,000, which equals an average cost of approximately $460 per member per month (“PMPM”). (DeWeese Decl. ¶ 4.) The Trust itself maintains a reserve fund that according to its last available audit held in excess of $87 million dollars. (2010 MEABT Audit (Docket # 29–4) at Page ID 533; Diamond Decl. ¶ 6.) The reserve fund contains the premium refunds received from Anthem. The Trust uses these funds to buy down rate increases, thereby further avoiding increases in the PMPM cost charged to participants. (Diamond Decl. ¶ 6.)

B. 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 proposal process from qualified insurers at least once every 5 years commencing July 1, 2012. The administrator for any such group plan shall make the request for proposal responses available to requesting school administrative units, excluding any portions of the request for proposal responses considered to be confidential proprietary information by the submitting insurers. If any such individual school plan or group plan is subsequently self-insured, in whole or in part, the school board shall compare the overall cost of such a self-insured plan, including projected claims, all administrative expenses and reinsurance expenses, to the cost of insured products at least once every 5 years commencing July 1, 2012.

Id.

As amended 24–A M.R.S.A. § 2803–A(2) reads:

Disclosure of basic loss information. Upon written request, every insurer shall provide loss information concerning a group policy or contract to its policyholder, to a former policyholder or to a school administrative unit pursuant to Title 20–A, section 1001, subsection 14, paragraph E within...