1995

The Health Maintenance Organization of New Jersey, Inc., d/b/a/ HMO-NJ, Appellant, v. Christine Todd Whitman, as Governor of the State of New Jersey; Elizabeth Randall, as Commissioner of the Department of Insurance; Charles Wowkanech, as Chairman of the Individual Health Coverage Program, Appellees, Third Circuit, 72 F.3d 1123 (December 26, 1995)

• HMO-NJ argued that the premium assessments under the IHC Act were preempted by the Federal Employee Health Benefits Act because the assessments would increase the cost to federal employees of individual health care benefits, which are payable from the Federal Employee Health Benefits Fund. 
• The Circuit Court agreed with HMO-NJ that section 8909(f) of the FEHBA preempts premium assessments under the IHC Act when applied to insurance plans governed by FEHBA.
  
  

1997

In the Matter of Individual Health Coverage Program Final Administrative Orders Nos. 96-01 and 96-22, 302 N.J. Super. 360 (June 26, 1997)

• First Option Health Plan of New Jersey contested assessments levied upon it with respect to 1994 and 1995 reimbursable losses and administrative expenses of the IHC Program, claiming that it was not a member of the IHC Program during those time periods because it was precluded from writing individual health plans while it had not yet obtained approval as a federally qualified HMO, and that the IHC Board’s orders against it were arbitrary and capricious.
• The Appellate Court disagreed with First Option’s position, finding it was a member of the IHC Program whether or not it chose to issue one or more of the five standard plans, and further, that it was a business decision by First Option not to offer standard plans pending federal qualification, rather than any unconstitutional application of the IHC Act. 
  
  

2002

In the Matter of the New Jersey Individual Health Coverage Program’s Readoption of N.J.A.C. 11:20-1 et seq., 353 N.J. Super. 494 (May 24, 2002)

• Carriers (several CIGNA affiliates) challenged the IHC Board’s readoption of N.J.A.C. 11:20, which included amendments, arguing that the IHC Board lacked the authority to promulgate the regulations, and otherwise failed to follow legislatively mandated procedures for adopting the rules and procedures; that the IHC Board’s good faith marketing, second-tier assessment, and contested case procedures exceeded the IHC Board’s authority; and that the good faith marketing and second-tier assessment rules were arbitrary and capricious.  The carriers sought to have the loss assessments readjudicated beginning with year 1993.
  • The Appellate Court held that the IHC Board is authorized to promulgate regulations and did so in accordance with the legislation, and upheld the validity of the good faith marketing regulations, but found the second-tier assessment regulation invalid.
    
    

2004

In the Matter of the New Jersey Individual Health Coverage Program’s Readoption of N.J.A.C. 11:20-1 et seq., 179 N.J. 570 (May 10, 2004)

• Carriers (several CIGNA affiliates) challenged the IHC Board’s readoption of N.J.A.C. 11:20, which included amendments to the rules establishing exemptions from assessments, good faith marketing, and a second-tier assessment methodology.  Both the carriers and the IHC Board sought certification to review the Appellate Division’s decision with respect to the specific regulations (not the decision regarding broad rulemaking authority of the IHC Board).
• The New Jersey Supreme Court upheld the Appellate Division’s opinion striking down the second-tier assessment in its then-existing form.  In addition, the Supreme Court determined that certain of the good faith marketing provisions exceeded the Board’s regulatory authority finding that the provisions were in conflict with the source statute because they permitted a scheme for the inequitable apportioning of program losses.
  
  

2005

In the Matter of Request by CIGNA Healthcare of New Jersey, Along with Affiliated Carriers CIGNA Healthcare of Northern New Jersey, Inc., Insurance Company of North America, and Life Insurance Company of North America, for Exemption from Assessment for 1996 Reimbursable Losses, N.J. Super. Unpub. Dkt. No. A-1847-02T5 (August 23, 2005)

• Carriers (several CIGNA affiliates) challenged the IHC Board’s administrative decision denying their request for a pro rata exemption from the 1996 IHC Program’s reimbursable losses. The carriers having previously applied for an exemption, but having met less than 50% of their target enrollment, filed a good faith marketing report (in accordance with Board rules), in anticipation of receiving a pro rata exemption.  However, the IHC Board determined that the carriers did not market in good faith, and denied the pro rata exemption, substantially increasing the liability of the carriers for reimbursable losses, particularly with respect to the second tier assessment, to which the carriers would not have been subject otherwise, based on the Board’s rules.  The carriers claimed discrimination.  During the appeal, the New Jersey Supreme Court struck down the good faith marketing and second tier assessments, and the Board granted the carriers a 27.2% pro rata exemption, and sought to dismiss the matter.  The carriers claimed a continuing dispute on the relief sought, and requested a decision on the constitutional issues on public policy grounds believing the controversy was likely to recur.
• The Appellate Court remanded the matter to the Board to recalculate the assessment consistent with the pro rata exemption granted, but declined to take action on issues it considered speculative and not properly before the court.
  
  

2007

In the Matter of the Challenges by CHUBB Colonial Life Insurance Company of America, Guardian Life Insurance Company, Jefferson Pilot Life Insurance Company, John Alden Insurance Company, Massachusetts Mutual Life Insurance Company, Time Insurance Company, and United States Life Insurance Company to the New Jersey Individual Health Coverage Program’s Interim Reconciliation of the 1996 Loss Assessment.  N.J. Super. Unpub. Dkt. No. A-6116-05T2 (August 28, 2007)

• Carriers challenged the interim reconciliation of the 1996 loss assessments (issued in 2006) having been done using the methodology that applied in 1996, arguing that it should have been based on a newer methodology adopted by the Board for the two-year calculation periods starting in 1997/1998, because the second-tier methodology applicable to the 1993 through 1996 periods had been invalidated by the Supreme Court in 2004.  Two carriers intervened in the Appellate case, supporting the Board’s use of the methodology in the 1996 interim reconciliation.  The Board’s position was that the interim reconciliation was based on the methodology that existed prior to the readoption of N.J.A.C. 11:20-1 et seq., and that it was the readoption (with amendments) methodology that was invalidated by the Supreme Court.  The Board further noted that the two-year calculation methodology was established due to 1997 statutory amendments that fundamentally changed the loss reimbursement mechanism, and should not be applied to earlier years.   The Board also posited that the challenge to the methodology was untimely, and should have been made following the initial assessments for 1996 losses, and that using the same long-unchallenged methodology for purposes of reconciliation as in the original assessments avoided significant and unanticipated shifts in liability among many carriers.
• The Appellate Court agreed that invalidation of the second-tier methodology did not apply to pre-1997 calendar-year assessments, and that the regulations adopted or amended after the 1997 statutory amendments to the loss reimbursement mechanism should not be applied retroactively to the 1996 calendar year assessments.  The court found that the repeal of N.J.S.A. 17B:27A-12(e) by the Legislature in 1997 created a clear distinction between assessments made before and after January 1, 1997.
• Related case:  In re  Appeal by United States Life Insurance Company of the City of New York of Its Loss Assessments by the Individual Health Coverage Program Board for the 1993, 1994, 1995 and 1996 Calculation Periods, No. A-1453-04 (App. Div. Nov. 21, 2006), and subsequent (denial of) petition for certification, 194 N.J. 269 (February 5, 2008).
   

2007

In the Matter of the Individual Health Coverage Program Board’s Adjustment of the Blue Cross and Blue Shield of New Jersey’s Request for Reimbursement of Losses for Calendar Years 1993 and 1994.  N.J. Super. Unpub. Dkt No. A-1797-04T5 (August 28, 2007)

• BCBSNJ challenged the Board’s refusal to reimburse the carrier for $6,092,000 in certain expenses for calendar years 1993 and 1994, which the Board stated the carrier had waived from its reports of reimbursable losses.  The carrier omitted the specific expenses from its Exhibit K (through which marketshare and losses are reported) for both years, and the carrier’s certification specified that both sets of expenses were taken out of the reported expenses; no rationale was stated.  Later, the contracted auditor did not disallow the carrier-excluded expenses, but lowered the total losses for the two years by about $1.9 million combined.  The Board adopted the auditor’s recommendations (reducing reported losses by $1.9 million), and based upon the certification submitted with the Exhibit K reports, did not include the specific expenses within the reimbursable losses either.  The carrier sought to amend its Exhibit K for both years to add back in the $6 million in expenses, but the Board denied the request, finding no mistake of fact with respect to the waiver, no statutory prohibition on a carrier electing to reduce its reported losses, no precedential value relative to loss adjustments in other carriers’ amendments of their Exhibit K reports to adjust marketshare, and no fault in the audit methodology.  The last issue was not raised in this appeal, except to support the carrier’s contention of mistake of fact with respect to the validity of any purported waiver.
• The Appellate Court agreed that the carrier made a valid waiver, thus keeping losses for the two years under $100 million (to reduce “sticker-shock” and help the newly-established IHC Program succeed), and that the unexpected reduction of its losses by the auditor did not constitute a mistake of fact under the laws of waiver.  The court did not construe the statute to preclude a carrier’s waiver of otherwise-reimbursable expenses, and found no reversible error by the Board in determining the experience of other carriers to be irrelevant to BCBSNJ’s decision to waive reimbursement of certain expenses.
  
  

2009

Celtic Insurance Company v. New Jersey Individual Health Coverage Program Board, New Jersey Department of Banking and Insurance, and the State of New Jersey, N.J. Super. Unpub. Dkt Nos.: A-1459-05T3, A-0071-06T3, A-0072-06T3, A-2908-06T3, A-4166-06T3 (April 3, 2009)

• The carrier appealed from three separate final administrative determinations denying it full reimbursement of its net paid losses for 1997-1998, asserting that the Board improperly applied the statutorily amended reimbursement formula to a period prior to the amendment’s effective date (of July 1, 1997), which the carrier argued was both contractually and constitutionally defective.  The carrier sought payment of an additional $4.4 million for the period of January 1 through June 30, 1997, arguing that the new formula should not have applied retroactively to January 1997.  Similarly, the carrier argued that the Board’s rules implementing the new formula following the New Jersey Supreme Court’s invalidation of the Board’s readoption with amendments of N.J.A.C. 11:20-1 et seq., should not apply retroactively either, and that the assessment formula for at least 1993-2000 should be the same.  (In 2006, following the Supreme Court’s decision in 2004, the Board adopted amendments to its regulations relating to the 1997 statutory amendment of the reimbursement mechanism, setting forth a “net earned premium” methodology, applicable from January 1, 1997.  The Board then issued interim reconciliations for the 1997-1998 and 1999-2000 periods.)
• The Appellate Court found that, because the Legislature expressly established the beginning point of the change in methodology as January 1, 1997, and because the Board applied both the formula invalidated by the Supreme Court and new 2006 formula for the entirety of the 1997-1998 calculation period based on the 1997 Legislative change, the Board had acted appropriately within its authority and the terms of the statute, and there was no manifest injustice in not using the same formula applied in 1993 through 1996 to any subsequent period after 1996. 
  
  

2009

In the Matter of the Challenges by CHUBB Colonial Life Insurance Company of America, Guardian Life Insurance Company, Jefferson Pilot Life Insurance Company, John Alden Insurance Company, Massachusetts Mutual Life Insurance Company, Time Insurance Company, and United States Life Insurance Company to the New Jersey Individual Health Coverage Program’s Adoption of New Regulation N.J.A.C. 11:20-2.17.  N.J. Super. Unpub. Dkt. No.: A-2911-06T3 (April 3, 2009)

• Arguing violations of the Equal Protection Clause of the State and Federal Constitutions, multiple carriers challenged the assessment methodology used by the IHC Program for years 1993, 1994, 1995 and 1996, claiming that the Board should have reassessed for losses incurred for each of those calendar years using the same “adjusted net earned premium” methodology adopted by regulation in December 2006 which was used to reassess for losses incurred during calculation periods 1997-1998 and 1999-2000.  Two carriers intervened in support of the Board’s position.  The Board continued to argue that the New Jersey Supreme Court expressly did not invalidate the pre-1997 second-tier methodology because there existed legislative distinctions between the 1996 and 1997 periods, and further argued that the formula used by the Boards implementing those distinctions in assessing years before and after 1997 were rational and lawful.
• The Appellate Court agreed with the Board, noting the significant nature of the statutory amendments resulting from enactment of P.L. 1997, c. 146.  The court determined that the carriers had not been deprived of equal protection because the Board applied the loss assessment methodology in force during each assessment period equally to all carriers without arbitrary classifications; and further, the Board reasonably distinguished between assessments for years prior to 1997 and years starting on and after 1997, when P.L. 1997, c. 146 substantially altered potential assessment liability for members with any type of exemption.
  
  

2009

In the Matter of the Challenge and Request for Hearing by Guardian Life Insurance Company of America regarding the New Jersey Individual Health Coverage Program Board of Directors’ Issuance of the December 18, 2009, Interim Reconciliations of the 1997/1998 and 1999/2000 Loss Assessment.  N.J. Super. Unpub. Dkt. No.: A3635-06T3 (April 3, 2009)

• The carrier appealed the Board’s denial of the carrier’s request for a hearing, challenging the Board’s refusal to treat the 1993 through 1996 assessment years the same as the 1997 through 2000 calculation periods, and contending that if the earlier years were not recalculated in line with the later calculation periods using the adjusted net earned premium methodology, there remains no rational basis for treating any of the eight years differently, so the later calculation periods should be treated in the same manner as the earlier years.
• The Appellate Court determined there was no basis to conclude that the Board’s regulations adopted or amended in response to In re N.J. Indiv. Health Coverage Program’s Readoption of N.J.A.C. 11:20-1 et seq., 179 N.J. 570 (2004) should apply retroactively.  Further, based on the Appellate Court’s CHUBB decision, there was a rational basis for establishing a different methodology. The Appellate Court found no equal protection issues arise just because the methodology differs over the years in question if all carriers are treated alike and consistently with the applicable regulations in each of the years. 
  
  

2011

In the Matter of the Appeal of the Protective Life Insurance Company of the Individual Health Coverage Program Board of Directors’ Final Decision Denying Request for Independent Adjudicatory Hearing.  N.J. Super. Unpub. Dkt. No.: A-0599-09T2 (January 12, 2011)

• The carrier appealed a final decision of the IHC Board requiring the carrier to repay with interest all loss reimbursements and assessment credits it received for the 1997/1998 calculation period.  The carrier reported losses and received reimbursement payments in advance of an audit of its losses and credits against administrative assessments it owed (consistent with the custom of the IHC Board at that time), but was later unable to produce all of the relevant data required to verify the losses reported.  The carrier argued the Board’s request for payment of sums owed, including interest, was arbitrary and capricious when the carrier had substantiated its losses for 13 of 24 months in question.
• The Appellate Court affirmed the Board’s decision, finding that the Board acted neither arbitrarily nor capriciously in determining that the months making up the 24-month period were not fungible and insisting on accurate and complete documentation for the entire calculation period in order to verify the reported losses.