CHICAGO — A federal judge in Chicago recently granted summary judgment in favor of the U.S. Department of Health and Human Services in a case brought by a company that claimed it had been wrongly stripped of its designation to act as a "Navigator" to help people purchase health insurance under the Affordable Care Act, commonly known as Obamacare.
The decision was handed down on April 16 by U.S. District Judge Matthew F. Kennelly.
The case stems from HHS’ decision to not give R&B Solutions a health insurance marketplace “Navigator” grant after the department had earlier announced such a designation for the company in a press release. The Navigator program is part of a relationship under which HHS allows third parties to help individuals navigate state health insurance exchanges set up under the ACA.
R&B Solutions filed suit, claiming the “last-minute decision” was “arbitrary and capricious” and that the department had overstepped its bounds when making the decision. The company further alleged in its complaint that HHS was negatively influenced by media coverage of its Chapter 11 bankruptcy proceedings, according to the court’s decision.
“The grant application did not request, and R&B did not provide, information about bankruptcy,” Kennelly wrote in the decision.
In 2014, R&B Solutions, based in north suburban Waukegan, applied for a grant to serve as a Navigator in Wisconsin, Indiana, Illinois, Iowa and North Carolina for the 2014-15 period, and on Sept. 8, 2014, HHS announced via a press release that it had awarded the company a grant as part of a disbursement of $60 million, according to the court’s decision.
However, CMS later found out through an article published by the News & Observer, a Raleigh, N.C.-based newspaper, that R&B Solutions was in bankruptcy proceedings, which prompted CMS to reconsider awarding the company the grant.
On Sept. 14, 2014, CMS sent a letter to R&B informing the company that it had decided to revoke the grant.
“The letter explained that CMS continued to have concerns regarding R&B's financial and organizational stability after reviewing the May 2014 bankruptcy court order approving the plan of reorganization,” Kennelly wrote in the court’s decision. “The letter also stated that R&B violated the terms and conditions of its 2013 grant award when it failed to notify CMS in writing within five days of filing its first amended plan of reorganization with the bankruptcy court. In light of these concerns, CMS said, it would not be awarding R&B a 2014-2015 grant.”
R&B Solutions then filed suit against HHS.
“R&B filed suit against HHS in September 2015, and in April 2016, R&B amended its complaint to add (Julia) Dreier (the director of the Navigator program at CMS) and five "John Does" as defendants,” Kennelly wrote in the decision. “The amended complaint alleged violations of the Due Process Clause, the Takings Clause and the APA (Administrative Procedure Act), as well as an ‘inalienable rights’ violation arising out of HHS's last-minute decision not to award R&B a 2014-2015 Navigator grant. The court has dismissed all of R&B's claims with the exception of its claim against HHS for injunctive and declaratory relief under the APA.”
Both parties filed motions for summary judgment on the remaining APA claim, according to the court’s decision.
R&B Solutions argued it complied with the terms of the grant because it “filed for bankruptcy in 2012, before it became a Navigator grantee.”
HHS, for its part, argued in its motion that R&B Solutions did not provide any “factual or legal support for its own motion for summary judgment and that it has failed to meet its burden to show that CMS's decision not to award the company a 2014-2015 Navigator grant was arbitrary or capricious or otherwise contrary to law,” Kennelly wrote in the decision.
Kennelly, however, granted HHS’s motion and denied R&B Solution’s motion, ruling that the company failed “to challenge CMS's additional reason for denying it a 2014-2015 award: concerns about the company's financial and organizational stability in light of the ongoing bankruptcy proceedings.”
“It was reasonable and entirely permissible for CMS to consider R&B's bankruptcy status as it related to the company's financial stability as part of the pre-award business review, which, as previously noted, involves a determination of ‘the adequacy of the applicant's financial and business management capabilities that will support the expenditure of and accountability for CMS funds,’” Kennelly wrote in the decision. “This is the case even if the grant application itself did not include a question regarding prior bankruptcy filings and even if some CMS officials were aware of R&B's bankruptcy prior to September 2014, as R&B alleges.”
R&B is represented in the case by attorney Roderick Andrew Drobinski, of Waukegan.