Blue cross memo in support of TRO request.pdf

7/27/2019 Blue cross memo in support of TRO request.pdf

1/22

01660055 1

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

BLUE CROSS BLUE SHIELD OF

MISSISSIPPI, A MUTUAL INSURANCE

COMPANY PLAINTIFF

vs. CIVIL ACTION NO.: 3:13cv655 HTW-LRA

GOVERNOR PHIL BRYANT, in his

Capacity as Governor of the State of

Mississippi DEFENDANT

MEMORANDUM IN SUPPORT OF BLUE CROSS

MOTION FOR TEMPORARY RESTRAINING ORDER

Pursuant to Federal Rule of Civil Procedure 65(b), Blue Cross Blue Shield of Mississippi,

A Mutual Insurance Company (Blue Cross) respectfully submits this Memorandum in support

of its Motion for Temporary Restraining Order. Blue Cross seeks entry of a temporary

restraining order to preserve the status quo and to prevent Mississippi Governor Phil Bryant from

taking any action to enforce Executive Order 1327 to the extent that it requires Blue Cross to re-

contract with and re-admit six HMA-owned hospitals into its provider Network.

The stated basis for Governor Bryants Executive Order is the threat that Blue Cross

may be in violation of various laws, including Insurance Code (Mississippi Code) 83-41-409

and 83-5-33. Less than a week ago, Mississippi Department of Insurance Commissioner Mike

Chaney responded to the Governors concerns and advised him in writing that he is aware of the

issue and is following the process set forth by statute to examine the Blue Cross network and

determine whether it complies with the statutory requirements of 83-41-409. Commissioner

Chaney also specifically advised the Governor that he has analyzed the allegations concerning

Case 3:13-cv-00655-HTW-LRA Document 5 Filed 10/23/13 Page 1 of 22


2/22

01660055 2

83-5-33 and that he believes the Governor has no authority to order Blue Cross to re-contract

with the HMA hospitals.

Rather than follow Commissioner Chaneys advice and the statutory framework for

addressing these issues, Governor Bryant has imposed an unprecedented, unconstitutional

mandatory injunction forcing Blue Cross to re-contract with the HMA hospitals--until it is

determined whether the law has been violated. Governor Bryant has no legitimate authority or

basis for his actions. Governor Bryant is merely responding to the political and public pressure

instigated by HMA, its lawyers and its lobbyists.

For the reasons discussed below, and in Blue Cross Petition [Docket No. 1],

incorporated herein by reference, Governor Bryant has absolutely no authorityconstitutional,

statutory or otherwiseto force Blue Cross, a private party, to enter into contracts with six

HMA-owned hospitals, other private parties. The effect of Executive Order 1327 is to take away

Blue Cross bargained for right to terminate its contracts with six HMA-owned hospitals without

the benefit of providing to Blue Cross the required notice and opportunity for Blue Cross to be

heard. Thus, Blue Cross constitutional rights clearly have been violated as a result of the entry

of Executive Order 1327, and Blue Cross is entitled to entry of the requested temporary

restraining order.

BACKGROUND FACTS

Blue Cross had agreements with ten HMA-owned for-profit hospitals pursuant to which

each hospital was a Blue Cross Network provider (Agreements). On June 18, 2013, the HMA

hospitals sued Blue Cross alleging, in part, breach of contract for insufficient payments. Jackson

HMA, LLC dba Central Mississippi Medical Center et al v. Blue Cross Blue Shield, et al, originally in

Hinds County and transferred to Rankin County Circuit Court, No. 2013-226. In that action, the HMA



3/22

01660055 3

hospitals seek to be paid more using Payment Rules different from every other Blue Cross

Network hospital.

Pursuant to the terms of each Agreement, each party had the right to terminate each

Agreement unilaterally, with or without cause. On June 25, 2013, Blue Cross exercised those

contractual rights and sent notices of termination of the Agreements to the HMA hospitals.

Following receipt of Blue Cross notices, the HMA hospitals embarked on a massive

public relations campaign to provide misinformation to the public concerning Blue Cross

termination of the agreements, the HMA hospitals pending lawsuit, and the loss of access to

care.

The HMA hospitals became non-Network effective September 1, 2013. That same

month, based on the Blue Cross/HMA network issue, the Mississippi Insurance Department (the

Department) requested and received Blue Cross network maps for the state. On September

16, 2013, at a joint hearing before the Insurance Committees of the Mississippi House of

Representatives and Senate, Insurance Commissioner Mike Chaney stated that Mississippi law

does not allow his office to intervene in the Blue Cross/HMA situation unless there is a problem

with access to care. See Exhibit C, Transcript of Chaneys Testimony at Legislative Hearing at

pp. 66-67 and information provided to Legislators by Commissioner Chaney. Commissioner

Chaney further stated that his office reviewed the networks and finished surveys the Friday of

the previous week, that, with regard to access, [f]rom what we see, there is no violation of the

law that we have today[,] and that this is a contractual dispute between two private parties. Id.

On October 10, 2013, representatives of the Mississippi Department of Insurance met

with Blue Cross representatives to discuss the status of the Departments ongoing examination of

Blue Cross. See Exhibit D, October 17, 2013 Letter from Chaney to Carol Pigott. As part of that



4/22

01660055 4

meeting, the Department informed Blue Cross that its examiners would be following up

specifically in the area concerning network adequacy and compliance within Miss. Code Ann.

83-41-409. Id.

On October 14, 2013, Blue Cross offered to reinstate four HMA hospitalsAmory

HMA, LLC (Gilmore) in Amory, Clarksdale HMA, LLC (Northwest) in Clarksdale,

Alliance Health Partners, LLC (Tri-Lakes) in Batesville, and ROH, LLC (Womans)into

its provider Network. The offer was made noting that payments would be made pursuant to the

same agreements and payment terms under which those hospitals had accepted payments for

eighteen months before filing suit. HMA rejected the offer.

On October 17, 2013, Commissioner Chaney sent a letter to Blue Cross stating that the

Departments review of network adequacy was included in the initial scope of its examination,

which began around May 1, 2013, and was concluded prior to the Blue Cross/HMA dispute, and

that, in light of the departure of the ten HMA hospitals from the Network, it is necessary for the

Department to perform an in-depth subsequent review to determine compliance with applicable

market conduct standards and statutory provisions. See Exhibit D. According to the

Commissioner, the Departments goal is to complete this review by December 1, 2013. Id.

That same day, the Governor sent a letter to Blue Cross stating that he is concerned that

the hospitals exclusion from the BCBS network will do serious harm to BCBS enrollees and

patients of these hospitals and reduce access to care in the State generally. See Exhibit E,

October 17, 2013 Letter from Governor Bryant to Carol Pigott. He stated that he has become

convinced that the exclusion of the hospitals from the BCBS network may not be within the

limits of the law. Id. (emphasis added). He then cited three alleged legal issues. Id. First, he

stated that under Miss. Code Ann. 83-41-409(b) (the Mississippi Patient Protection Act of



5/22

01660055 5

1995), Blue Cross, as a managed care entity operating a managed care plan, is required to

[d]emonstrate that its provider network has providers of sufficient number throughout the

service area to assure reasonable access to care with minimum inconvenience by plan enrollees.

Id. He also vaguely stated that state law broadly prohibits insurers from engaging in unfair or

deceptive acts or practices, apparently referencing Miss. Code Ann. 83-5-33, et. seq. Id.

Finally, he stated that he is concerned that this situation may raise serious issues under

Mississippis antitrust laws. Id. (emphasis added).

Based on these issues, the Governor stated that he asked the Mississippi Department of

Insurance whether it intends to act immediately to return the ten affected hospitals to the BCBS

network[,] because, if not, he [i]ntends to issue an executive order to that end. Id. According

to the Governor, [a]ny further delay risks irreparable harm and a loss of the access to care,

which he alleged is his only concern. Id. The Governor stated that that [t]he threat to patients

that [he] feels compelled to address can be avoided only if all ten of the affected hospitals are

returned to the BCBS network immediately. Id. (emphasis added). As far as [he] is

concerned, until [the Blue Cross/HMA litigation] is settled by the parties or resolved by a court,

BCBS may simply return the hospitals to the status quo as it existed before their contracts were

terminated, i.e., BCBS may continue to interpret and apply the contracts as BCBS understands

them. Id.

By another letter dated October 17, 2013, the Governor asked Commissioner Chaney to

rethink his position that the Department does not have authority to act to immediately require

Blue Cross to enter into a contract with HMA to return HMAs ten hospitals into Blue Cross

Network. See Exhibit F, October 17, 2013 Letter from Governor Bryant to Chaney.



6/22

01660055 6

On October 18, 2013, Commissioner Chaney responded to the Governors letter. See

Exhibit G, October 18, 2013 Letter from Chaney to Governor Bryant. In his response,

Commissioner Chaney states that he agrees that regulatory enforcement action is appropriate, as

long as that enforcement action is supported by applicable law with sufficient evidence. Id.

(emphasis added). He noted that the Department has been looking at the issue of reasonable

access under Miss. Code Ann. 83-41-409(b) for some time, and that the Department is

aggressively using the tools the law gives [it] to determine whether [Blue Cross] current

network provides adequate access to care. Id. He stated that [i]f the examination reveals that

there is not reasonable access to care due to inadequate network coverage in a geographic region,

the primary remedy available will be to require [Blue Cross] to pay providers at in-network

benefit levels until the inadequate access issue is correct. Id.

With regard to the Governors citation of Miss. Code Ann. 83-5-33, Commissioner

Chaney stated that

[t]hese statutes provide that where the Commissioner determines that a person hasengaged in an unfair trade practice in the business of insurance, he must serve theperson with notice of the charges and conduct an evidentiary hearing. At theconclusion of the hearing, if the Commissioner determines that an unfair tradepractice has occurred, he shall issue an order requiring the person to cease anddesist from the acts, methods, or practices complained of. In addition to, or inlieu of, the cease and desist order, the Commissioner may impose anadministrative penalty not to exceed five thousand dollars ($5,000.00) perviolation.

The Department has reviewed the eight named practices that would be consideredunfair trade practices under Section 83-5-55, and at this time, we have notuncovered any act or practice on the part of [Blue Cross] in its dealings withHMA that would constitute an unfair trade practice.

Id. Accordingly, he stated that the Department has serious concerns whether ordering [Blue

Cross] to reinstate the hospitals is a remedy supported by and available under the Unfair Trade

Practices Act[,] since, [a]gain, unfair trade practice violations are remedied through cease and



7/22

01660055 7

desist orders and fines. Id. He then reiterated that he would be concerned about the legal

viability of ordering the parties to re-contract on the ground that [Blue Cross] has violated the

Unfair Trade Practices Act. Such a remedy simply does not appear to be sustainable under that

Act. Id. The Commissioner also requested that the Governor furnish to the Department copies

of any evidence he has which reveals that Blue Cross has violated either Section 83-41-409(b) or

Section 83-5-33, et seq.Id.

That same day, Blue Cross filed the instant action seeking injunctive and declaratory

relief regarding the unprecedented and unconstitutional executive action threatened in the

Governors letter. Moreover, Blue Cross again offered to reinstate the Gilmore, Northwest, Tri-

Lakes and Womans hospitals into the Network.

On October 21, 2013, after receiving no response from HMA, Blue Cross unilaterally

recognized four HMA hospital -- Gilmore in Amory, Northwest in Clarksdale, Tri-Lakes in

Batesville, and Womans in Flowood -- as Network providers, providing Network-level benefits

for Blue Cross members at those hospitals. The six remaining HMA-owned hospitals that

remain out of Blue Cross provider Network--Jackson HMA, LLC (CMMC), Biloxi HMA,

LLC (Biloxi), Brandon HMA, LLC (Crossgates), Madison HMA, LLC (Madison),

Natchez Community Hospital, LLC (Natchez), and River Oaks Hospital, LLC (River

Oaks)are all in urban areas with other acute inpatient hospitals in the Blue Cross Network.

Further, on October 21, 2013, Blue Cross finalized a managed care accessibility analysis

that concludes, even with the exclusion of the ten HMA-owned hospitals from its Network, Blue

Cross has a sufficient provider network in compliance with the requirements of Mississippi Code

83-41-409(b). See Exhibit 1 to the Affidavit of Jeffery Leber, attached hereto as Exhibit A.

Stated differently, Blue Cross current provider network has providers of sufficient number



8/22

01660055 8

throughout its service area to assure reasonable access to care with minimum inconvenience to

its subscribers. Every subscriber has reasonable access to an acute care Network hospital in

every Mississippi service area. The exclusion of HMA owned hospitals from Blue Cross

provider Network will not prevent any subscriber from seeking emergency services at these

hospitals, and Blue Cross will continue to cover these emergency services at Network levels,

which is the law. If services are covered and can only be provided at a Non-Network hospital,

Network benefits will be provided to the subscriber for such covered services, as set forth in

every Blue Cross policy and plan.

On October 22, 2013, Governor Bryant entered Executive Order Number 1327. See

Exhibit H. Without affording to Blue Cross notice and an opportunity to be heard, Governor

Bryant determined based largely on self-serving HMA statements and his flawed interpretation

of press releases that the exclusion of the [ten HMA] hospitals from the BCBS network of

providers threatens patients access to care and raises other serious legal issues. Governor

Bryant determined that interim relief is necessary until the Mississippi Insurance

Commissioner can determine if, in fact, access to care is impacted by the exclusion of the ten

HMA-owned hospitals from Blue Cross provider Network. Thus, through Executive Order

1327, Governor Bryant voided Blue Cross bargained for contractual right to terminate the

Agreements with HMA and essentially entered a mandatory injunction requiring Blue Cross to

return the HMA-owned hospitals to its provider Network.

ARGUMENT AND AUTHORITIES

A temporary restraining order is warranted here, as (1) Blue Cross is substantially likely

to prevail on the merits of its claim for declaratory relief; (2) there is a substantial threat that

Blue Cross will suffer immediate and irreparable injury if Governor Bryant is permitted to take



9/22

01660055 9

any action to enforce Executive Order 1327 to the extent that it requires Blue Cross to re-admit

six HMA-owned hospitals into its provider Network; (3) the threatened harm to Blue Cross

outweighs any theoretical harm the Defendant may suffer; and (4) granting the temporary

restraining order is consistent with public policy as it will preserve the status quo and will ensure

that a private party is not forced to enter into a contract with other private parties in violation of

its constitutionally protected rights guaranteed by the United States Constitution and the

Mississippi Constitution. See e.g., Canal Authority v. Calloway, 489 F.2d 567, 572 (5th Cir.

1974).

I. Blue Cross is substantially likely to prevail on the merits of its claim.

[N]o Governor, or for that matter, any governmental official, can exercise power beyond

their constitutional authority.Barbour v. State ex rel. Hood, 974 So. 2d 238, 239 (Miss. 2008)

(citing Fordice v. Bryan, 651 So. 2d 998, 1003 (Miss. 1995) (citation omitted)). Any executive

action by Governor Bryant forcing Blue Cross to re-admit six HMA-owned hospitals into its

provider Network will result in a clear violation of Blue Cross constitutionally protected rights

under the Due Process Clause, Contracts Clause and Equal Protection Clause of both the United

States Constitution and the Mississippi Constitution. Accordingly, Blue Cross is substantially

likely to succeed on the merits of its claim for declaratory relief.

A. The executive action violates the Due Process Clause of the

Fourteenth Amendment to the U.S. Constitution and 14 of the

Mississippi Constitution.

The Due Process Clause of the Fourteenth Amendment to the United States Constitution

provides that no State shall deprive any person of life, liberty or property, without due process

of law. U.S. Const. amend. XIV, 1. The Mississippi Constitution similarly declares that [n]o

person shall be deprived of life, liberty or property except by due process of law, Miss. Const.



10/22

01660055 10

art. III, 14, and is construed the same as the United States Constitution, seeSec. of State v.

Wiesenberg, 633 So. 2d 983, 996 (Miss. 1994). A corporation is a person within the meaning

of the due process clause. See Grosjean v. American Press Co., 297 U.S. 233, 244 (1936); First

Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 780 n. 15 (1978) (It has been settled for almost a

century that corporations are persons within the meaning of the Fourteenth Amendment.);

Southern Ry. v. Greene, 216 U.S. 400, 412 (1910) (That a corporation is a person, within the

meaning of the 14th Amendment, is no longer open to discussion). The right to contract is

both a liberty and a property right within the protection of the Fourteenth Amendment. Pyeatte

v. Board of Regents of Univ. of Okl., 102 F. Supp. 407, 412 (W.D. Okla. 1951), judgment aff'd,

342 U.S. 936 (1952) (citingHolden v. Hardy, 169 U.S. 366 (1898);Allgeyer v. State of La., 165

U.S. 578 (1897)). Accordingly, the threatened executive action against Blue Cross is a violation

of both procedural and substantive due process.

1. The executive action is a violation of procedural due process.

Entry of Executive Order 1327 without the required notice to Blue Cross and an

opportunity to be heard deprives Blue Cross of its right to contract without procedural due

process of law. Blue Cross was not afforded the required notice, pursuant to the United States or

Mississippi Constitutions or the relevant Mississippi statutes, or an opportunity to be heard prior

to the Governor determin[ing] that BCBSs exclusion of the [HMA-owned] hospitals from the

BCBS network of providers threatens patients access to care. . . . See Exhibit H at pg. 3. An

essential principle of due process is that a deprivation of life, liberty, or property be preceded by

notice and opportunity for hearing appropriate to the nature of the case Cleveland Bd. of Ed. v.

Loudermill, 470 U.S. 532, 542 (1985). These very rights are codified by both of the statutes

cited by the Governor in his attempt to justify his threatened executive action. See Miss. Code



11/22

01660055 11

Ann. 83-41-405 and 83-5-39. In this instance, the Governor has eviscerated these bedrock

rights. Therefore, his executive action violates procedural due process.

In Mathews v. Eldridge, 424 U.S. 319, 334 (1976), the Supreme Court recognized that

[d]ue process, unlike some legal rules, is not a technical conception with a fixed content

unrelated to time, place and circumstances. Id. (quoting SeeCafeteria Workers v. McElroy, 367

U.S. 886, 895 (1961). [D]ue process is flexible and calls for such procedural protections as the

particular situation demands. Morrissey v. Brewer, 408 U.S. 471, 481 (1972). Accordingly,

Mathews described a sliding-scale test for determining whether a particular set of procedures was

constitutionally adequate. Under it, a court looks at three factors: (1) the private interest at stake;

(2) the risk that existing procedures will wrongly impair this private interest, and the likelihood

that additional procedural safeguards can affect a cure; and (3) the governmental interest in

avoiding these additional procedures.Mathews, 424 U.S. at 335.

Blue Cross private interest, i.e. its right to contract, will be affected by the executive

action. This right is both a liberty and a property right within the protection of the Fourteenth

Amendment. Pyeatte, 102 F. Supp. at 412. Again, the effect of Executive Order 1327 is to take

away Blue Cross bargained for contract right to terminate the Agreements with HMA and

mandates that Blue Cross enter into new contracts with six HMA-owned hospitals.

Regarding the second factor, as noted above, the Governor initially stated that he has

become convinced that the exclusion of the hospitals from the BCBS network may not be

within the limits of the law[,] including the Mississippi Patient Protection Act of 1995, that

State law broadly prohibits insurers from engaging in unfair or deceptive acts or practices, and

that he is concerned that this situation may raise serious issues under Mississippis antitrust

laws. See Exhibit E (emphasis added). In Executive Order 1327, he states that he has now



12/22

01660055 12

determined that BCBSs exclusion of the [HMA-owned] hospitals from the BCBS network of

providers threatens patients access to care. . . . See Exhibit H at pg. 3. The Executive Order

requiring Blue Cross to contract with other private parties based on what amounts to nothing

more than the Governors concern that Blue Cross may not be within the law amounts to an

erroneous deprivation of Blue Cross interest without any procedural safeguards whatsoever.

There would be great value in allowing Blue Cross to defend itself against such charges in the

proper forum.

Furthermore, contrary to the Governors claim that he is simply requiring Blue Cross to

return the hospitals to the status quo, what he is calling for is a mandatory injunction. A

mandatory injunction compels the performance of an affirmative act and, therefore, does not

maintain the status quo. The Governor initially stated that until that dispute is settled by the

parties or resolved by a court, BCBS may simply return the hospitals to the status quo as it

existed before their contracts were terminated, i.e., BCBS may continue to interpret and apply

the contracts as BCBS understands them. Exhibit E. The status quo is that the contracts of the

six HMA-owned hospitals have been terminated and those hospitals are not in Blue Cross

provider Network. Through entry of Executive Order 1327, the Governor has now ordered Blue

Cross to return the six HMA-owned hospitals to its provider Network. See Exhibit H at pgs. 5-6.

Such action, in effect, gives HMA a mandatory injunction against Blue Cross without requiring

HMA to meet the high burden of demonstrating to the Rankin County Circuit Court that it is

entitled to such relief.

The third factorthe Governments interest, including the burdens that the

additional/substitute procedural requirement would entailalso weighs in favor of Blue Cross

since, as stated above, the very statutes cited by the Governor require a hearing before any action



13/22

01660055 13

is taken. See Miss. Code Ann. 83-41-405 and 83-5-39. Moreover, as Commissioner Chaney

has stated, the Department is aggressively seeking to determine whether Blue Cross current

network provides adequate access to care, and it has not uncovered any act or practice on the part

of Blue Cross in its dealings with HMA that would constitute an unfair trade practice. Exhibit G.

Accordingly, the executive action violates procedural due process.

2. The executive action is a violation of substantive due process

because it has no reasonable relation to any proper

governmental purpose and is an arbitrary exercise of

governmental power.

Entry of Executive Order 1327 also results in a violation of Blue Cross substantive due

process rights. Substantive due process is the concept that there are certain rights so fundamental

to our traditions of justice that, no matter what procedural guarantees the government affords, the

government cannot abridge those rights. See Simi Inv. Co., v. Harris Cnty., 236 F.3d 240, 249

(5th Cir. 2000), cert. denied, 534 U.S. 1022 (2001). If a regulation has no reasonable relation to

any proper governmental purpose, or is so far beyond the necessity of the case as to be an

arbitrary exercise of governmental power, it violates substantive due process. Id.

The Governors executive action in entering Executive Order 1327 is not reasonable in

relation to its purported purpose. The Governors actions have nothing to do with access to

health care. Access to quality healthcare is available to every Blue Cross member. Blue Cross

members may go to any hospital they desire. More importantly, every Blue Cross policy covers

emergency care and pays Network level benefits for emergency care even at non-Network

hospitals. 29 CFR 2590.715-2719A(b). Further, if covered services are not available to a

member at a Network hospital, such services may be obtained from a non-Network hospital at

Network rates.



14/22

01660055 14

To the extent the Governor contends his concern is that Blue Cross may not have

Network providers of sufficient number throughout the service area to assure reasonable access

to care with minimum inconvenience by plan enrollees as required by Miss. Code Ann. 83-41-

409(b), it is again important to note that he does not have nor does he cite any basis for that

concern. On September 16, 2013, Commissioner Chaney stated that Mississippi law does not

allow his office to intervene in the Blue Cross/HMA situation unless there is a problem with

access to care. See Exhibit C. He further stated that his office reviewed the networks and

finished surveys the previous week, and that, [f]rom what we see, there is no violation of the

law that we have today[.] Id.

1

Further, on October 21, 2013, Blue Cross finalized a

management care accessibility analysis that concludes, even with the exclusion of all ten HMA-

owned hospitals for its Network, Blue Cross has a sufficient provider Network that meets the

requirements of Mississippi Code 83-41-409(b). See Exhibit 1 to the Affidavit of Jeffery

Leber, attached hereto as Exhibit A. Finally, it should be noted that the six HMA-owned

hospitals that remain excluded from Blue Cross provider Network are located in Jackson,

Biloxi, Brandon, Madison, Natchez and Flowood, all urban areas with other acute inpatient

hospitals in the Blue Cross Network.

Quite simply, no basis exists for the Governors arbitrary action based on an alleged

concern about access to care. Since the executive action is not reasonable in relation to its

subject and was not adopted in the interests of the community, it violates substantive due

process.

1 The Department is currently performing an in-depth review to determine whether Blue Cross currentnetwork provides adequate access to care, and that review is expected to be completed on or beforeDecember 1, 2013.



15/22

01660055 15

B. The executive action violates the Contracts Clause of Article 1,

Section 10 of the United States Constitution and Article 3, Section 16

of the Mississippi Constitution.

The United States Constitution provides that [n]o State shall pass any Law

impairing the Obligation of Contracts," U.S. Const. Art. I, 10. The Contracts Clause of the

Mississippi Constitution, Miss. Const. Art. 3, 16, similarly states that laws impairing the

obligation of contracts [] shall not be passed[,] and therefore, is generally construed under the

same standards and analyses. Pub. Employees' Ret. Sys. v. Porter, 763 So. 2d 845, 84950

(Miss. 2000).

The Supreme Court has set forth a three-step procedure for analyzing federal

constitutional claims that a state law impairs contractual obligations. See United Healthcare Ins.

Co. v. Davis, 602 F.3d 618, 627 (5th Cir. 2010). First, the threshold inquiry is whether the state

law has, in fact, operated as a substantial impairment of a contractual relationship. Lipscomb v.

Columbus Mun. Separate Sch. Dist., 269 F.3d 494, 504 (5th Cir. 2001). This first step has three

elements: whether there is a contractual relationship, whether a change in law impairs that

contractual relationship, and whether the impairment is substantial. General Motors Corp. v.

Romein, 503 U.S. 181, 186 (1992).

If there is a substantial impairment, in the second step the Court must examine the state's

asserted justification for the impairment, which must be a significant and legitimate public

purpose. Davis, 602 F.3d at 627. The requirement of a legitimate public purpose guarantees

that the State is exercising its police power, rather than providing a benefit to special interests.

Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 412 (1983). See

also Davis, 602 F.3d at 631. At this stage, [t]he scrutiny to which the court subjects the state



16/22

01660055 16

law is proportional to the degree of impairment. Lipscomb, 269 F.3d at 504; Energy Reserves

Grp., 459 U.S. at 411.

Third, if the public purpose is adequate, courts then must consider whether the

challenged law was reasonably necessary to achieve the purpose. Davis, 602 F.3d at 627

(quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 260 (1978)); Energy Reserves

Grp., 459 U.S. at 412. Under this inquiry, a state must do more than mouth the vocabulary of

the public weal in order to reach safe harbor .... MercadoBoneta v. Administracion del Fondo

de Compensacion al Paciente, ex rel. Ins. Commissioner of Puerto Rico , 125 F.3d 9, 13 (1st

Cir.1997) (quotingMcGrath v. R.I. Ret. Bd., 88 F.3d 12, 16 (1st Cir. 1996) (ellipsis in original)).

The executive action at issue operates as a substantial impairment of the contractual

relationships between Blue Cross and the HMA hospitals. When Executive Order 1327 was

entered on October 22, 2013, the Agreements between Blue Cross and the HMA hospitals had

been appropriately terminated for a period of fifty-two days. Specifically, those contractual

relationships had been terminated by Blue Cross pursuant to the terms of the Agreements, which

stated:

Either party may terminate this Agreement, with or without cause, by giving priorwritten notice of at least sixty (60) days to the other party, provided terminationshall be made effective on the last day of the calendar month. Nothing containedin this Agreement shall be construed to limit either partys lawful remedies in theevent of a material breach of this Agreement. (emphasis added).

The executive action substantially impairs the contractual relationships between Blue

Cross and the HMA hospitals by, in effect, deleting this bargained for right to terminate the

Agreements with or without cause. In their pending state court lawsuit, the HMA hospitals do

not even seek the remedy the Governor has provided through Executive Order 1327the



17/22

01660055 17

reinstatement of the Agreements. Therefore, Blue Cross satisfies the first step of the Supreme

Courts analysis.

With regard to the second step of the analysis, because the executive action completely

impairs the rights of the parties under the Agreements, the Court should apply the highest

scrutiny to such action. The Governors asserted justification for the contractual impairment is

his alleged concern about access to care. However, again, this concern is without any basis in

fact whatsoever. As noted above, Blue Cross recently completed a managed care accessibility

analysis and concluded that the exclusion of the HMA-owned hospitals from its provider

Network will not deny its subscribers reasonable access to care. See Exhibit 1 to the Affidavit of

Jeffery Leber, attached hereto as Exhibit A. Moreover, the six HMA hospitals that are not being

recognized as Network providers are in unquestionably urban areas where there can be no doubt

as to members access to care by Network providers. Furthermore, these six hospitals have made

it clear that they will not bill their patients for the difference between the non-network benefits

paid and the amount of payments that would have been made if the hospitals were still in Blue

Cross provider Network. Therefore, to require Blue Cross to contract with those hospitals

would serve no legitimate public purpose, but rather, would provide a benefit to special interests.

Finally, even if the Court were to find that the asserted public purpose was adequate, the

challenged action was not reasonable necessary to achieve the purpose in light of the location of

the six hospitals and the availability of reasonable alternatives.

Accordingly, the executive action violates the Contracts Clause of Article 1, Section 10

of the U.S. Constitution and Article 3, Section 16 of the Mississippi Constitution.



18/22

01660055 18

C. The executive action violates the Equal Protection Clause of the

Fourteenth Amendment to the United States Constitution and 14 of

the Mississippi Constitution.

The Equal Protection Clause of the Fourteenth Amendment states that no State shall

deny to any person within its jurisdiction the equal protection of the laws. U.S. Const. amend.

XIV, 1. Mississippi finds an equal protection component in its Due Process Clause, Miss.

Const. art. III, 14. The equal protection clause essentially requires that all persons similarly

situated be treated alike. Travis v. Stockstill, 2013 WL 5204669, *6 (S.D. Miss. Sept. 16, 2013)

(quotingMahone v. Addicks Util. Dist. of Harris Cnty., 836 F.2d 921, 932 (5th Cir. 1988)). A

private corporation is a person within the meaning of the Equal Protection Clause. See Grosjean,

297 U.S. at 244;Bellotti, 435 U.S. at 780 n. 15; Greene, 216 U.S. at 412.

To state a claim for equal protection violation as a class of one, a plaintiff must

establish that [it] has been intentionally treated differently from others similarly situated and

that there is no rational basis for the difference in treatment. Stockstill, 2013 WL 5204669, *6

(quoting Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)). [I]f the challenged

government action does not appear to classify or distinguish between two or more relevant

persons or groups, then the actioneven if irrationaldoes not deny them equal protection of

the laws. Stockstill, 2013 WL 5204669, *6 (quoting Johnson v. Rodriguez, 110 F.3d 299, 306

(5th Cir. 1997) (quotingBrennan v. Stewart, 834 F.2d 1248, 1257 (5th Cir. 1988))).

Blue Cross has been intentionally treated differently from others similarly situated in that

the Governor is attempting to interpret and apply two statutes, Miss. Code Ann. 83-41-409(b)

and Miss. Code Ann. 83-5-39, in ways that they are not and have never been applied to any

other managed care entity or person engaged in the business of insurance in the state,

respectively. Namely, he is seeking to use Section 83-41-409(b), which provides for



19/22

01660055 19

certification, recertification or decertification of managed care plans, as a means to force Blue

Cross to contract with another private party against its will. The same is true with regard to the

Governors references to Miss. Code Ann. 83-5-39, which concerns unfair trade practices. The

classifications created by the executive action impinge upon Blue Cross exercise of its right to

contract. However, they cannot be upheld, as no rational basis exists for the difference in

treatment. Therefore, the executive action violates the Equal Protections Clause of the

Fourteenth Amendment to the United States Constitution and 14 of the Mississippi

Constitution.

II. Injunctive relief is necessary to prevent irreparable harm to Blue Cross.

Executive Oder 1327, which forces Blue Cross to re-admit six HMA-owned hospitals

into its provider Network, will irreparably harm Blue Cross as it will result in a violation of Blue

Cross constitutionally protected rights under the Due Process Clause, Equal Protection Clause

and Contracts Clause of both the United States Constitution and the Mississippi Constitution.

[S]uits for declaratory and injunctive relief against the threatened invasion of a

constitutional right do not ordinarily require proof of any injury other than the threatened

constitutional deprivation itself. Davis v. District of Columbia, 158 F.3d 1342, 1346 (D.C. Cir.

1998). [T]here is a presumed availability of federal equitable relief against threatened

invasions of constitutional interests. Id. (quoting Hubbard v. EPA, 809 F.2d 1, 11 (D.C. Cir.

1986) (quotingBivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 404 (1971) (Harlan,

J., concurring))). Although a plaintiff seeking equitable relief must show a threat of substantial

and immediate irreparable injury, a prospective violation of a constitutional right constitutes

irreparable injury for these purposes. Davis, 158 F.3d at 1346 (citing O'Shea v. Littleton, 414

U.S. 488, 502 (1974); Ross v. Meese, 818 F.2d 1132, 1135 (4th Cir. 1987)). See also Opulent



20/22

01660055 20

Life Church v. City of Holly Springs, Miss., 697 F.3d 279, 295 (5th Cir. 2012) (citing Elrod v.

Burns, 427 U.S. 347, 373 (1976); quoting 11A Charles Alan Wright, Arthur R. Miller & Mary

Kay Kane, Federal Practice and Procedure 2948.1 (2d ed. 1995) ([w]hen an alleged

deprivation of a constitutional right is involved, most courts hold that no further showing of

irreparable injury is necessary.).

Thus, injunctive relief is necessary to prevent irreparable harm to Blue Cross.

III. The threat of harm to Blue Cross outweighs the threat of harm that

injunctive relief may cause to the Defendant.

The threatened harm to Blue Cross business operations substantially outweighs any

theoretical harm the Defendant might suffer. The threat of a violation of its constitutional rights

is extremely harmful to Blue Cross and outweighs any threat of harm to the Governor,

particularly as the only harm asserted by the Governor are his conclusory, unfounded concerns of

a lack of access that simply does not exist. Granting an injunction on the enforcement of the

executive action until its constitutionality can be determined will, therefore, not harm the State.

IV. Granting the requested injunctive relief will not disserve public interest.

The entry of this request is consistent with public policy and in the interest of the public.

The injunction will further the public interest by ensuring that private parties and persons are not

forced to contract in violation of their constitutional rights guaranteed by the United States

Constitution and the Mississippi Constitution or their common law rights.

CONCLUSION

The harm Blue Cross will suffer as a result of the Governors unprecedented and

unconstitutional action of entering Executive Order 1327 is of an immediate and ongoing nature.

The only way to protect Blue Cross from suffering irreparable harm is to maintain the status quo



21/22

01660055 21

by enjoining the enforcement of Executive Order 1327 until its constitutionality can be

determined.

ACCORDINGLY, Blue Cross respectfully submits that it has met its burden under

Federal Rule of Civil Procedure 65(b), and that it is entitled to entry of a temporary restraining

order, preserving the status quo, and precluding the Governor from taking any action to enforce

Executive Order 1327 to the extent that it requires Blue Cross re-contract with and re-admit six

HMA-owned hospitals into its provider Network. Blue Cross respectfully requests any

additional relief that the Court deems just and proper.

Dated: October 23, 2013.

Respectfully submitted,

BLUE CROSS & BLUE SHIELD OF MISSISSIPPI,A MUTUAL INSURANCE COMPANY

By: __/s/ R. David Kaufman_____________________One of Its Attorneys

OF COUNSEL:

R. David Kaufman, Esq. (MSB No. 3526)Cheri D. Green, Esq. (MSB No. 4988)Brunini, Grantham, Grower & Hewes, PLLCPost Office Drawer 119Jackson, Mississippi 39205Telephone: (601) 948-3101Facsimile: (601) 960-6902



22/22

01660055 22

CERTIFICATE OF SERVICE

I, R. David Kaufman, certify that I have this day caused the above and foregoing pleading

or other document to be served via ECF and HAND DELIVERY on the following:

Attorney General Jim HoodWalter Sillers Building

550 High Street, Suite 1200Jackson, MS 39201

Governor Phil BryantWalter Sillers Building

550 High Street, 19th FloorJackson, MS 39201

Dated: October 23, 2013.

_/s/ R. David Kaufman___________R. David Kaufman


Date post:	14-Apr-2018
Category:	Documents
Upload:	the-kingfish
View:	220 times
Download:	0 times

Blue cross memo in support of TRO request.pdf

Documents