Dexter A. Johnson LEGISLATIVE COUNSEL 900 COURT ST NE S101 SALEM, OREGON 97301-4065 (503) 986-1243 FAX: (503) 373-1043 www.oregonlegislature.gov/lc STATE OF OREGON LEGISLATIVE COUNSEL COMMITTEE Representative Mike McLane 900 Court Street NE H395 Salem OR 97301 Re: Cover Oregon switch to HealthCare.gov Dear Representative McLane: You requested a legal opinion in response to the following questions: 1. Does the Cover Oregon board of directors have the authority to transition from the Cover Oregon website to the federal exchange? We do not believe the Cover Oregon board of directors has the authority to abandon the Cover Oregon website in favor of healthcare.gov, the federal exchange. 2. If the board has the authority, what are the sources of that authority? While the board lacks the authority under state law to abandon the Cover Oregon website in favor of healthcare.gov, the United States Department of Health and Human Services (HHS) could find that the Cover Oregon website does not satisfy the requirements of the Patient Protection and Affordable Care Act 1 (ACA) and could require the state to transition to healthcare.gov. Under the Supremacy Clause of the United States Constitution, the board would be required to comply. 3. If the board does not have that authority, what steps would be required to switch from Cover Oregon to the federal exchange? The Legislative Assembly would have to amend a substantial number of Oregon statutes to give the board the authority to transition entirely to healthcare.gov. In addition, the board would have to give the HHS 12 months advance notice before voluntarily ceasing the operation of the state-based exchange. 2 If, instead of abandoning the Cover Oregon website entirely, the board decided to enter into a state partnership exchange in cooperation with HHS, the board would exceed its authority if it proceeded without assurances from HHS that Cover Oregon would be responsible for certifying health plans offered to Oregonians through healthcare.gov. Our answers to your questions are based on the following legal analyses. Background and context 1 P.L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). 2 45 C.F.R. 155.106.
Page 2 In 2009, the Legislative Assembly enacted House Bill 2009, which required the Oregon Health Authority, in consultation with the Department of Consumer and Business Services, to develop a plan for creating a health insurance exchange in Oregon. The health insurance exchange would offer to consumers the ability to select and purchase, through a website, health plans that meet certain standards established by law. The bill required the Oregon Health Policy Board, by October 1, 2010, to submit a request to Legislative Counsel for a measure to implement the plan. 3 The Oregon Health Policy Board developed the plan and it became Senate Bill 99, described below. In 2010, the United States Congress enacted the ACA, which created a nationwide health insurance marketplace composed of state-based health insurance exchanges and, for states that choose not to implement a state-based exchange, a federal health insurance exchange operated by the HHS. The federal exchange is known as healthcare.gov. Oregon s Health Insurance Exchange In 2011, the Legislative Assembly enacted Senate Bill 99. 4 Section 3 of the bill, codified at ORS 741.002, provides that the Oregon Health Insurance Exchange Corporation (now called Cover Oregon) has the duty to [a]dminister a health insurance exchange in accordance with federal law to make qualified health plans available to individuals and groups throughout this state. Sections 3 and 11 (codified at ORS 741.310) of the bill require Cover Oregon to perform many functions, including to: Adopt by rule uniform requirements, standards and criteria for the certification of each qualified health plan (QHP). 5 ORS 741.310 (4). Adopt and implement procedures to screen, certify and recertify QHPs. ORS 741.002 (1)(d). Decertify or suspend the certification of QHPs that fail to meet standards. ORS 741.002 (1)(e). Grade QHPs. ORS 741.002 (1)(g). Establish open and special enrollment periods. ORS 741.002 (1)(h). Assist individuals and groups to enroll in QHPs. ORS 741.002 (1)(i). Certify the eligibility of individuals to be exempt from federal tax penalties. ORS 741.002 (1)(m). Establish one streamlined and seamless application and enrollment process for both the exchange and the state medical assistance programs. ORS 741.310 (6). 3 Section 17, chapter 595, Oregon Laws 2009. 4 Chapter 415, Oregon Laws 2011. 5 A qualified health plan is a health plan that has been certified to be offered through an exchange.
Page 3 These and other provisions in Senate Bill 99 reflect the conscious decision of the Legislative Assembly to operate a state-based exchange instead of relying on the federal exchange. In the debate on Senate Bill 99 on the Senate floor, Senator Monnes Anderson, the chair of the Senate Committee on Health Care, Human Services and Rural Health Policy, the committee that recommended adoption of the bill, stated: Senate Bill 99 does give local control. If Oregon does not develop its own... insurance exchange, the federal government will create one. This legislation is our own plan that takes our state s specific needs into account with a consumer-driven mission and local control. The health insurance exchange will give [Oregonians] more health care options, a greater number of affordable plans and more information about which one will best meet their needs. 6 Senator Kruse, the vice chair of the Senate Committee on Health Care, Human Services and Rural Health Policy, added: When we went at this proposal we made it very clear on the front end that regardless of what happened on the federal level we wanted to create something that will work for Oregon. And that [has] been our intent all the way through on this, is to make something that works for Oregon.... It was incumbent upon us to do something Oregon specific because, quite honestly, I don t want the federal government coming in and running things in the State of Oregon. So this was our option. 7 The bill passed the House of Representatives without any further amendments. The clear legislative intent behind Senate Bill 99 was for the state to operate its own exchange and not rely upon the federal exchange. Therefore, the Cover Oregon board of directors does not have the authority under state law to abandon a state-based exchange and transition to the federal exchange entirely without significant and substantial amendments to existing state statutes. State Partnership Exchange HHS has issued guidance on a hybrid model of an exchange, called a State Partnership Exchange. 8 This model may be used by states as they transition to a workable state-based exchange. In this hybrid model, states use the federal exchange but may choose to assume primary responsibility for many of the functions, including the following: Issue applications for the federal exchange. 6 Senate floor session, April 25, 2011, beginning at 28 minutes, 27 seconds into the session. 7 Senate floor session, April 25, 2011, beginning at 36 minutes, 35 seconds into the session. 8 See <http://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/partnership-guidance-01-03- 2013.pdf > (visited ).
Page 4 Collect issuer and plan data for the certification of QHPs. Submit to HHS; - Recommendations for the certification, recertification and decertification of QHPs offered to residents of the state. - The results of rate reviews conducted by the state. Serve as the point of contact for issuers and consumers. Ensure compliance by insurers with certification standards and take appropriate enforcement actions authorized by state law. A state that wishes to implement a State Partnership Exchange must enter into a memorandum of understanding with HHS describing the respective roles and duties of the state and HHS. However, there is a conflict between the requirements of a State Partnership Exchange as set out in the HHS guidance and Oregon law. The guidance provides that HHS is responsible for certifying QHPs in a State Partnership Exchange, although HHS will work with states to agree upon processes that maximize the probability that HHS will accept state recommendations without the need for duplicative reviews from HHS. Specifically, HHS will accept or respond to state QHP recommendations within 14 business days of receipt.... HHS does not intend to re-review QHP data or otherwise duplicate work performed by the state. 9 If the executive director of Cover Oregon, through a memorandum of understanding with HHS, can get assurances from HHS that HHS will adopt Cover Oregon s certification recommendations, the board would be within its authority to enter into a State Partnership Exchange. If the executive director cannot obtain such assurances, ORS 741.002 and 741.310 would have to be amended to allow the state to cede to the federal exchange the authority to certify QHPs until the state can fully implement a state-based exchange. Federal Preemption Article VI, clause 2 of the United States Constitution, provides that [t]his Constitution, and the Laws of the United States... shall be the supreme Law of the Land;... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. This is known as the Supremacy Clause. A state law that directly conflicts with a federal law is considered to be preempted by the federal law and cannot be enforced, as long as the federal law is within the scope of powers delegated to Congress by Article I of the United States Constitution. The ACA provides that a state law is preempted by the federal Act if the state law prevents the application of the provisions of the Act. 42 U.S.C. 18041(d). The question of whether the ACA is within the scope of powers delegated to Congress was addressed by the United States Supreme Court in National Federation of Independent Business et al. v. Sebelius, 567 U.S., 132 S.Ct. 2566 (2012). The Court decided that except for the ACA requirement that states expand eligibility for Medicaid at the risk of losing all federal Medicaid funding, the rest of the ACA was within the scope of powers delegated to Congress by the United States 9 Memo from Center for Consumer Information and Insurance Oversight, an agency of the United States Department of Health and Human Services, on the subject, Guidance on the State Partnership Exchange, dated January 3, 2013, at page 7. See footnote 7.
Page 5 Constitution. Therefore, Oregon is bound by the ACA requirement to either operate a statebased exchange or facilitate the use of the federal exchange. If HHS determines that Oregon is not operating a state-based exchange that complies with the requirement of the ACA, HHS could force the state to use the federal exchange instead. The opinions written by the Legislative Counsel and the staff of the Legislative Counsel s office are prepared solely for the purpose of assisting members of the Legislative Assembly in the development and consideration of legislative matters. In performing their duties, the Legislative Counsel and the members of the staff of the Legislative Counsel s office have no authority to provide legal advice to any other person, group or entity. For this reason, this opinion should not be considered or used as legal advice by any person other than legislators in the conduct of legislative business. Public bodies and their officers and employees should seek and rely upon the advice and opinion of the Attorney General, district attorney, county counsel, city attorney or other retained counsel. Constituents and other private persons and entities should seek and rely upon the advice and opinion of private counsel. Very truly yours, DEXTER A. JOHNSON Legislative Counsel By Lorey H. Freeman Senior Deputy Legislative Counsel