UPDATES & ANALYSIS

State universities must pay health care association assessments, Iowa Supreme Court holds

by Rox Laird | January 5, 2024

The Iowa Legislature in 1995 enacted health care insurance reforms aimed at improving individual access to health insurance. Among other things, the legislation created the Iowa Individual Health Benefit Reinsurance Association, a private nonprofit corporation.

Individual health insurance providers are required by the statute, Iowa Code Chapter 513C, to pay assessments to the reinsurance association, which are used to equalize gains and losses among health insurance plans. Iowa’s three state universities have in recent years refused to pay the assessments, claiming they were exempt, which resulted in suits and countersuits and two appeals to the Iowa Supreme Court on the question of whether the universities are required by the statute to make payments to the Association.

In a Dec. 29 unanimous decision in the second appeal, the Court concluded the universities are required by the statute to pay the assessments and they jointly must pay $6.1 million in unpaid assessments and late fees owed to the Association.

In its previous decision in this case, the Supreme Court in 2016 ruled that the Association has statutory authority to sue its members over disputed assessments, and remanded the case to the Polk County District Court to resolve the parties’ claims. The trial court subsequently ruled for the Association and against the universities.

In their appeal of that decision, the universities argue they are not required by the statute to pay the assessments, and that the statute violates the Iowa Constitution as applied to them.

The Supreme Court, in its Dec. 29 decision, disagreed with both arguments.

On the question of whether the statute applies to the universities, the Court concluded they are obligated to pay the assessments based on the language in the statute saying “All persons that provide health benefit plans in this state including insurers providing accident and sickness insurance . . . shall be members of the association.”

The universities are “persons” as defined elsewhere in the Iowa Code, the Court said, and “It necessarily follows that the universities ‘shall be members of the association.’” It disagreed with the universities’ “unduly restrictive” reading of qualifying language in the otherwise “straightforward” statute.

The universities also argue the statute’s assessment provision, as applied to them, would violate Article VII, Section 1, of the Iowa Constitution, which states:

“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.”

The Court has previously held that this section is a narrow prohibition that “forbids the government from incurring secondary liability” but “does not prohibit the government from creating primary liability for itself.” By paying assessments to the Association, the Court said, the universities are paying not the debts of private insurers but a liability created by the statute imposed on all those who provide health benefit plans.

“Here, the statutory scheme benefits the state by facilitating healthcare coverage for all Iowans,” the Court said. “The statutory scheme also benefits the universities directly by allowing them to provide health benefit plans to their employees. The statute does so in a way that does not make them liable for the debts of another but instead creates a primary liability in exchange for the benefit.”

Tags: Iowa Supreme Court 2023-24