CareFirst ruling could spark other challenges

CareFirst ruling could spark other challenges

Experts: Watchdog groups could benefit

Premium content from Washington Business Journal by Ben Fischer, Staff Reporter

Date: Friday, September 21, 2012, 6:00am EDT

Ben Fischer

Staff Reporter- Washington Business Journal

Some legal experts say the D.C. Court of Appeals has given consumer and public interest watchdog groups a new avenue to challenge pro-business regulatory decisions.

In a Sept. 13 opinion throwing out a D.C. insurance commissioner’s ruling that favored CareFirst BlueCross BlueShield, judges found that D.C. Appleseed — a CareFirst critic for more than a decade — would have had legal standing to object even if it weren’t a CareFirst customer because earlier work challenging the insurer’s business practices became one of its primary functions.

In other words, judges found, Appleseed could challenge a regulatory decision because that decision stemmed from a law it helped create, the 2009 Medical Insurance Empowerment Amendment Act, which triggered the review of CareFirst’s premium-funded reserves.

For nonprofit advocacy groups, neighborhood coalitions or environmental activists that fight businesses and the government on the regulatory matters, it’s a subtle, but potentially significant, expansion of their opportunities.

Under current law, such groups sometimes struggle to win the right to challenge rulings because they are pursuing a general social goal and can’t demonstrate a specific harm done to them.

“The court was careful to try to not have the barn door open too wide, but at this point, the barn door’s open,” said Thorn Pozen, a partner at Stinson Morrison Hecker LLP and former staffer in the D.C. Attorney General’s office.

CareFirst had argued Appleseed couldn’t prove it had been directly harmed by the regulatory ruling, in which then-Commissioner Gennet Purcell found that the Owings Mills, Md.-based insurer’s D.C. subsidiary did not have excessively large reserves.

The appeals court, led by Senior Judge Vanessa Ruiz, did not weigh in on the merits of Purcell’s ruling, but did order her successor, William White, to reconsider the case under different standards.

Ruiz wrote that Appleseed could expect a refund had the ruling gone another way, so it already suffered an injury.

Also, she said, D.C. Appleseed had invested so much of its time trying to get nonprofit CareFirst to bankroll more community health initiatives that Purcell’s ruling harmed its operations.

Even though Appleseed does not directly provide health care services, the court found it could sue in “light of its long and dedicated pursuits of the benefits to improved access to health care in the District of Columbia that would flow from greater community investment by [CareFirst],” the ruling reads.

It’s an opportunity, but not a decisive ruling, said Tillman Breckenridge, counsel at Reed Smith LLC and head of the firm’s D.C. and Virginia appellate group. In some detail, the court noted that Appleseed went to extraordinary lengths to press the CareFirst matter — beyond the usual lobbying role.

Some lawyers predicted a rash of lawsuits seeking more clarity on this issue.

“A lot of organizations will try to use this as a basis for standing in the future,” Breckenridge said. “And it remains to be seen whether the court will clarify its language about reducing the effectiveness [of the nonprofit] in a way that makes this decision a narrow one or a broad one.”

However, other lawyers dismissed the standing aspect altogether, saying the court was merely applying a precedent from the Havens Realty Corp. case in 1982, in which a Richmond low-income housing group successfully won the right to sue a real estate developer over allegedly illegal practices.

But, the court said Appleseed was more entitled to standing than another group in a prior case, the Friends of Tilden Park,which tried to stop construction of a Cleveland Park apartment building on the theory that it generally would lower the quality of the neighborhood.

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