Health Law Daily Wrap Up, HEALTH CARE REFORM—D.D.C.: QHP certification denial not arbitrary and capricious where applicant demonstrated pattern of missteps, (Oct 15, 2024)

By Jeffrey H. Brochin, J.D.

CMS action is only arbitrary and capricious if the agency relied on factors which Congress did not intend it to consider or if it entirely failed to consider an important aspect of the problem.

A federal district court for the District of Columbia has granted the motion for summary judgment filed by CMS in a judicial review lawsuit brought by Antidote Health Plan of Arizona, Inc. The plan filed the lawsuit after CMS denied its application for participation in the states’ health insurance exchanges established pursuant to the Patient Protection and Affordable Care Act (ACA) (P.L. 111–148). However, the agency’s denial was not found to be arbitrary and capricious where the applicant submitted erroneous datasets at each step along the way of the application process, and otherwise demonstrated that it lacked the requisite technical knowledge and oversight capabilities for certification as a qualified health plan (QHP) (Antidote Health Plan of Arizona, Inc. v. Becerra, No. 1:23-cv-03578 (TNM) (D.D.C. Oct. 11, 2024)).

QHP certification process. The ACA recites standards as to which health insurance providers get to participate on the exchanges. Only QHPs are entitled to offer their services to potential beneficiaries, and for an issuer to become a QHP, it must go through CMS. That means making two broad showings to the agency: that the plan meets the requirements for certification, and that making available such health plan through such exchange is in the interests of qualified individuals and qualified employers in the state where the exchange operates. Where an exchange is created by the federal government, it is called a Federally-Facilitated Exchange (FFE).

Three requirements for certification relevant to the instant case were: first, a plan must submit accurate rate and benefit information to CMS; second, it must provide an accurate directory of in-network medical providers so that beneficiaries can get in touch with their doctors; and third, the plan must meet “network adequacy” standards, meaning it must have enough in-network providers across various specializations that have agreed to accept the plan’s rates as payment in full for covered items and services.

2024 plan year. Prior to the application window, CMS publishes guidance about the highly technical steps an issuer must take to be considered for certification. CMS then issues a bulletin specifying deadlines for the upcoming plan year. For the 2024 plan year, there were four key deadlines in the summer of 2023: (1) the optional “early bird” deadline on May 17; (2) the initial application submission deadline on June 14; (3) the second deadline on July 19; and (4) the final deadline on August 16. Because the process of data submission can be complicated, especially for first-timers, applicants collaborate with CMS to refine their datasets, deadline-by-deadline, with the “early bird” deadline being for those who need even more help, allowing novice applicants to perfect their applications by the time the final deadline rolls around.

Erroneous submissions. Despite CMS collaborating with Antidote to assist with their application process, Antidote nevertheless gravely missed the mark on the network adequacy requirement. CMS tried to remedy their data deficiencies, (setting up video calls and offering additional resources), however, when the second deadline came around, Antidote again failed to meet network adequacy standards, and in fact obtained a network adequacy compliance rate that was the lowest among all FFE applicants that year.

It therefore raised eyebrows when Antidote’s dataset submissions for the final deadline resulted in the very highest network adequacy compliance rate, leading CMS to undertake a deep dive with an independent contractor on the datasets to understand the about-face. The reviews revealed extensive errors and “egregious misrepresentations” in all of Antidote’s datasets, and, even when Antidote was among the poorest rated applicants, their submitted datasets contained skewed numbers that artificially inflated those poor scores. CMS sent notice of a final denial in which it noted that it could not “reasonably document” all the errors due to their “frequency and extent.” CMS advised Antidote that it could seek reconsideration of the denial, and Antidote then proceeded to the reconsideration stage.

Certification denial sustained. In its reconsideration request, Antidote noted that it had already “resubmitted corrected network adequacy data” and it emphasized that it had “taken action to meaningfully improve its vendor oversight program and updated its Delegation Oversight Policy,” which was purportedly attached to the request, but no policy was provided. CMS acknowledged that Antidote’s final data submission appeared to have corrected the significant errors CMS identified in its initial denial of QHP certification, but that was not enough, and Antidote still failed to show certification would be in the interest of qualified individuals, under 42 U.S.C. §18031(e)(1)(B). The instant appeal followed.

Arbitrary and capricious standard. On appeal, Antidote claimed that CMS’s determination was arbitrary and capricious in violation of the Administrative Procedure Act, and, that the determination process had violated the Due Process Clause of the Fifth Amendment. The appeals court disagreed, noting that CMS action is only arbitrary and capricious if the agency relied on factors which Congress did not intend it to consider or if it entirely failed to consider an important aspect of the problem; or if the agency offered an explanation for its decision that ran counter to the evidence or was so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Here, however, the court observed that Antidote had in fact benefited from the process based on the fact that Antidote ultimately satisfied the network adequacy requirements. But Antidote further objected that once the standards were met, it became unreasonable for CMS to double-down on its denial. The appeals court disagreed, pointing out that certification required that an applicant must demonstrate both that it “meets the requirements for certification” and that “making available such health plan through such Exchange is in the interests of qualified individuals and qualified employers in the State or States in which such Exchange operates.”

Pattern of missteps. The pattern of grossly inadequate oversight by Antidote that led it to submit erroneous provider and rate filing information to CMS over the span of multiple months, gave CMS reasonable concerns that the pattern would continue into the plan year and affect consumers directly, especially since Antidote would rely on contractors to administer parts of its health plan. Their pattern of missteps, dissimulations, and lapses in oversight would spell trouble for health care recipients. CMS recounted those mistakes with specificity and directly linked them to the potential harm they would wreak upon consumers if allowed to continue.

Based on the foregoing, the court denied Antidote’s motion for summary judgment and granted same to CMS.

The case is No. 1:23-cv-03578 (TNM).

Judge: McFadden, T.

Attorneys: Andrew S.M. Tsui (Greenberg Traurig, LLP) for Antidote Health Plan of Arizona, Inc. and Antidote Health Plan of Ohio, Inc. M. Jared Littman, U.S. Attorney's Office, for Xavier Becerra.

Companies: Antidote Health Plan of Arizona, Inc.; Antidote Health Plan of Ohio, Inc.

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