Iowa Individual Health Benefit Reinsurance Ass'n v. St. Univ. of Iowa

999 N.W.2d 656

IOWA INDIVIDUAL HEALTH BENEFIT REINSURANCE ASSOCIATION, Appellee,

v.STATE UNIVERSITY OF IOWA, Iowa State University of Science and Technology, and University of Northern Iowa, Appellants.

No. 22-1213

Supreme Court of Iowa.

Submitted September 14, 2023

Filed December 29, 2023

Amended January 2, 2024

Appeal from the Iowa District Court for Polk County, Heather Lauber, (summary judgment) and Celene Gogerty (summary judgment and trial), Judges.

Appeal and cross-appeal from a decision of the district court holding that state universities were members of a statutorily created health benefit reinsurance association and were required to pay assessments to the association. Affirmed in Part, Reversed in Part, and Remanded.

Brenna Bird, Attorney General; Jeffrey S. Thompson, Solicitor General; Tessa ?. Register (argued), Assistant Solicitor General; David Faith (until withdrawal), Deputy Attorney General; and Jordan Esbrook, Assistant Attorney General (until withdrawal), for appellants.

Gregory ?. Lederer (argued) of Lederer Weston Craig PLC, West Des Moines, for appellee.

McDonald, J., delivered the opinion of the court, in which all justices joined.

McDonald, Justice.

In 1995, the legislature passed the Individual Health Insurance Market Reform Act. 1995 Iowa Acts ch. 5, §§ 3–13 (codified at Iowa Code chapter 513C (1997)). The stated purpose of the Act was "to promote the availability of health insurance coverage to individuals" and to "improve the overall fairness and efficiency of the individual health insurance market." Iowa Code § 513C.2 (2013). To advance that purpose, the Act created a nonprofit corporation, the Iowa Individual Health Benefit Reinsurance Association (IIHBRA). Under the law, "[a]ll persons that provide health benefit plans in this state … shall be members of the association." Id. § 513C.10(1)(a). All members of IIHBRA are required to provide IIHBRA with information regarding their earned premium and associated losses. Id. § 513C.10(3). IIHBRA is statutorily authorized to assess its members based on that information and to use the assessments to help equalize gains and losses of its members. Id. §§ 513C.10(4)–(7).

At all times relevant to this litigation, the State University of Iowa (UI), Iowa State University (ISU), and the University of Northern Iowa (UNI) provided self- funded health benefit plans to their respective employees. In 2011, IIHBRA assessed the universities, but the universities refused to pay the assessment. The universities contended that, among other things, they were not members of IIHBRA subject to assessment and that the statute, as applied to them, violated article VII, section 1 of the Iowa Constitution, which prohibits the state from acting as a surety for another.

IIHBRA sued the universities for the unpaid assessments. Following a bench trial on a stipulated record, IIHBRA was awarded over $4 million as damages for unpaid assessments. The universities filed this appeal. They contend the district court erred in concluding they were subject to assessment. They also contend the statutory scheme, as applied to them, violates article VII, section 1 of the Iowa Constitution. IIHBRA filed a cross-appeal. IIH- BRA contends the district court erred in not awarding it additional damages, including late payment fees and its costs and attorney fees incurred pursuing this litigation.

I.

IIHBRA initiated this suit in November 2013. IIHBRA sought to compel the universities to provide their earned premium and associated loss information and sought to collect unpaid assessments for the years 2010 and 2011. On the universities’ motion, the district court dismissed the case on the ground that IIHBRA did not have the statutory authority to sue its members. This court reversed the judgment of the district court and remanded the case for further proceedings. Iowa Individual Health Benefit Reins. v. State Univ. of Iowa (2016 IIHBRA), 876 N.W.2d 800, 812 (Iowa 2016).

In that decision we provided an overview of the statutory scheme:

The purpose and intent of this chapter is to promote the availability of health insurance coverage to individuals regardless of their health status or claims experience, to prevent abusive rating practices, to require disclosure of rating practices to purchasers, to establish rules regarding the renewal of coverage, to establish limitations on the use of preexisting condition exclusions, to assure fair access to health plans, and to improve the overall fairness and efficiency of the individual health insurance market.

Id. at 802–03 (quoting Iowa Code § 513C.2). We explained in detail how IIHBRA was formed and how it operated, see id. at 802–04, and we need not repeat that discussion herein. We held that IIHBRA had "the capacity to sue its members to compel reporting and to collect assessments owed under chapter 513C." Id. at 809. We specifically declined, however, to "reach the question whether the universities [were] members of the IIHBRA, an allegation the universities accepted as true for purposes of the motion to dismiss," and we stated the parties "may litigate that issue on remand." Id. at 804 n.2. We also declined to reach the universities’ constitutional argument arising under article VII, section 1 of the Iowa Constitution because the universities raised the constitutional argument for the first time on appeal. Id. at 812. We concluded the "universities may raise that constitutional issue on remand." Id.

We remanded the case to the district court in April 2016. On remand, IIHBRA filed an amended petition. In the amended petition, IIHBRA sought to compel the universities to provide premium and loss information for the years 2011-2014 and sought to recover any unpaid assessments for those same years.

In response, UNI and ISU filed counterclaims against IIHBRA. Between 1997 and 2010, UNI and ISU provided self-funded health benefit plans to their employees. Between 1997 and 2010, UNI and ISU acted as members of IIHBRA and paid assessments to IIHBRA in the amount of $856,546.58 and $2,421,036.60, respectively. In their counterclaims, UNI and ISU claimed that they were mistaken to pay the assessments, that IIHBRA lacked the authority to collect these assessments, that IIHBRA was unjustly enriched by UNI and ISU’s payments, and that IIHBRA should have to repay the assessments UNI and ISU voluntarily paid for thirteen years.

UI did not assert a similar counterclaim because it had not paid any assessments between 1997 and 2010. During that time, UI contracted with an insurer to provide health benefit plans to its employees. UI’s insurer, as the provider of the health bene- fit plan, rather than UI, was a member of IIHBRA. In 2010, UI switched to a self-funded health benefit plan. UI took the position that it was not a member of IIHBRA as defined in section 513C.10(1)(a). It was at this time that UNI and ISU also claimed they were not members of IIHBRA.

After the filing of the amended petition, answers, and counterclaims, the case inexplicably languished for years. In the summer of 2019, the parties filed cross-motions for summary judgment on the question of whether the universities were members of IIHBRA. In support of its motion, IIHBRA filed several exhibits. The first was a memorandum dated February 1996 from an assistant attorney general provided to the Iowa Insurance Commissioner. In the memorandum, the assistant attorney general opined that self-funded government health plans were "required to be part of the IIHBRA." The second was an insurance bulletin issued by the insurance commissioner in March 1996 stating that IIHBRA included "self-insured plans for government employees authorized under Iowa Code Chapter 509A." The universities’ health benefit plans are provided pursuant to chapter 509A. The third was a memorandum from the Director of the Iowa Department of Management to the insurance commissioner dated October 2012. The memorandum concluded that the universities were members of IIHBRA and were "required to pay assessments as set forth in the formula established by the Association." The fourth was an affidavit from the firm administering IIHBRA’s assessment process. The affidavit stated that UNI and ISU participated as members of IIHBRA from IIHBRA’s inception until 2010.

In the cross-motions for summary judgment, the parties also contested the constitutionality of the assessment. Article VII, section 1 of the Iowa Constitution provides as follows:

The credit of the state shall not, in any manner, be given or loaned to, or in aid of, any individual, association, or corporation; and the state shall never assume, or become responsible for, the debts or liabilities of any individual, association, or corporation, unless incurred in time of war for the benefit of the state.

In the universities’ view, the statutory assessment scheme, as applied to them, violated this constitutional provision.

In October 2019, the district court granted IIHBRA’s motion for summary judgment and denied the universities’ motion for summary judgment. The district court held the universities were members of IIHBRA as set forth in section 513C.10(1)(a). The district court rejected the universities’ constitutional argument. The district court reasoned that the statutory assessment did not make the universities sureties or otherwise responsible for the debt of another. Almost two years after the district court filed its ruling, the universities filed a second motion for summary judgment and again contested the issue of whether they were members of IIHBRA. The district court again denied the motion. The universities challenge these summary judgment rulings in this appeal.

Trial was scheduled to occur in February 2022. In preparation for trial, the universities filed their witness and exhibit list and moved in limine to exclude certain evidence of damages. In support of their motion in limine, the universities explained that IIHBRA had provided an exhibit purporting to...