Health Alliance Medical Plans v. Department of Healthcare & Family Services

ILLINOIS OFFICIAL REPORTS
Appellate Court
Health Alliance Medical Plans, Inc. v. Department of Healthcare & Family Services, 2011
IL App (4th) 110495Appellate Court HEALTH ALLIANCE MEDICAL PLANS, INC., an Illinois Domestic
Caption Stock Insurance Corporation, Plaintiff-Appellee, v. THE DEPARTMENT
OF HEALTHCARE AND FAMILY SERVICES; JULIE HAMOS, in Her
Official Capacity as Director of The Department of Healthcare and
Family Services; THE EXECUTIVE ETHICS COMMISSION; MATT
BROWN, in His Official Capacity as Chief Procurement Officer of The
Illinois Executive Ethics Commission; THE DEPARTMENT OF
CENTRAL MANAGEMENT SERVICES; and JAMES P. SLEDGE, in
His Official Capacity as Director of Central Management Services,
Defendants-Appellants, and HEALTH CARE SERVICE
CORPORATION, as Parent Company of BlueCross BlueShield of
Illinois; BLUECROSS BLUESHIELD OF ILLINOIS BLUE
ADVANTAGE; BLUECROSS BLUESHIELD OF ILLINOIS HMO
ILLINOIS; PERSONAL CARE INSURANCE OF ILLINOIS, INC.; and
HEALTHLINK HMO, INC., Defendants, and HUMANA HEALTH
PLAN, INC.; and HUMANA INSURANCE COMPANY, Defendants-
Appellees.–HEALTH ALLIANCE MEDICAL PLANS, INC., Plaintiff-
Appellee, v. PERSONAL CARE INSURANCE OF ILLINOIS, INC.,
THE DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES;
JULIE HAMOS, in Her Official Capacity as Director of the Department
of Healthcare and Family Services; THE EXECUTIVE ETHICS
COMMISSION; MATT BROWN, in His Official Capacity as Chief
Procurement Officer of the Illinois Executive Ethics Commission; THE
DEPARTMENT OF CENTRAL MANAGEMENT SERVICES; JAMES
P. SLEDGE, in His Official Capacity as Director of Central Management
Services; and HEALTHLINK HMO, INC., Defendants-Appellants, and
HEALTH CARE SERVICE CORPORATION, as Parent Company of
BlueCross BlueShield of Illinois; BLUECROSS BLUESHIELD OF
ILLINOIS BLUE ADVANTAGE; and BLUECROSS BLUESHIELD OF
ILLINOIS HMO ILLINOIS, Defendants.
District & No. Fourth District
Docket Nos. 4-11-0495, 4-11-0545 cons.
Filed August 3, 2011
Modified upon
denial of rehearing September 12, 2011
Held The trial court properly entered an order staying the Department of
(Note: This syllabus Healthcare and Family Services’ awards of contracts for open-access-plan
constitutes no part of health insurance to state employees pending the ultimate determination
the opinion of the court of plaintiff’s action for administrative review, since the trial court had
but has been prepared jurisdiction under the Administrative Review Law and the findings that
by the Reporter of a stay was appropriate, did not endanger the public, and was not contrary
Decisions for the to public policy and that plaintiff would likely succeed on the merits were
convenience of the not an abuse of discretion.
reader.)
Decision Under Appeal from the Circuit Court of Sangamon County, No. 11-MR-250; the
Review Hon. Brian T. Otwell, Judge, presiding.
Judgment Affirmed.
Counsel on Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Appeal Solicitor General, and Paul Racette, Assistant Attorney General, of
counsel), for appellants.
Scott T. Schutte, Gregory T. Fouts, and Tedd M. Warden, all of Morgan,
Lewis & Bockius LLP, of Chicago, and Neal F. Perryman and David W.
Gearhart, both of Lewis, Rice & Fingersh, L.C., of St. Louis, Missouri,
for appellants Personal Care Insurance of Illinois, Inc., and Healthlink
HMO, Inc.
-2-
R. Mark Mifflin, David A. Herman, Christopher E. Sherer, and Melissa
G. Steward, all of Giffin, Winning, Cohen & Bodewes, P.C., of
Springfield, for appellee Health Alliance Medical Plans, Inc.
William A. Chittenden III, David J. Novotny, and Craig M. Bargher, all
of Chittenden, Murday & Novotny LLC, of Chicago, and Steve W.
Kinion, of Zack Stamp, Ltd., of Springfield, for appellees Humana Health
Plan, Inc., and Humana Insurance Company.
Panel JUSTICE STEIGMANN delivered the judgment of the court, with
opinion.
Presiding Justice Knecht and Justice Cook concurred in the judgment and
opinion.
OPINION
¶1 On June 6, 2011, Health Alliance Medical Plans, Inc. (Health Alliance), filed a complaint
(1) challenging the decision by the director of the Department of Healthcare and Family
Services (DHFS) not to renew its contract to provide open-access-plan (OAP) health
insurance to state employees and (2) requesting a stay pending the outcome of its challenge.
On June 10, 2011, the circuit court entered an order staying the awards of the OAP contracts
“pending the ultimate determination” of this action for administrative review.
¶2 DHFS (No. 4-11-0495) and PersonalCare Insurance of Illinois, Inc. (PersonalCare) (No.
4-11-0545) (collectively appellants), appeal, arguing that the circuit court erred by granting
Health Alliance’s motion for stay pending administrative review. We disagree and affirm.
¶3 I. BACKGROUND
¶4 A. State Employees Group Insurance Act of 1971
¶5 The State Employees Group Insurance Act of 1971 (Insurance Act) (5 ILCS 375/1
through 17 (West 2010)) provides that it is the State’s policy to assure “quality benefits” for
state employees. See 5 ILCS 375/5 (West 2010). To effectuate that policy, the Insurance Act
requires the director of the Department of Central Management (CMS) to contract for–or
otherwise make available–health benefits for those employees. 5 ILCS 375/5 (West 2010).
(In April 2005, however, the Governor signed an executive order, transferring the
responsibilities related to state health-care purchasing under the Insurance Act from the
-3-
director of CMS to the director of DHFS.) The Insurance Act further provides that with
respect to self-insurance, the director must seek the “advice and consent” of the Commission
on Government Forecasting and Accountability (COGFA). 5 ILCS 375/6.2 (West 2010).
COGFA is a legislative support services agency, the membership of which consists of a
bipartisan group of 12 members of the General Assembly appointed by the leadership of the
General Assembly as provided by statute (25 ILCS 130/1-5(3) (West 2008) (as amended by
Pub. Act 96-959 (eff. July 1, 2010))). Among its many duties, COGFA is charged with
studying and providing the General Assembly with information on economic development
and fiscal trends in Illinois and on the operations of state government, recommending state
fiscal and economic policies to improve the functioning of state government, and developing
a three-year budget forecast for the State, including opportunities and threats concerning
anticipated revenues and expenditures (25 ILCS 155/3(1) through (3), (12), (14) (West 2010)
(as amended by Pub. Act 96-958 (eff. July 1, 2010))). COGFA is also charged with
overseeing the administration of the State Employees’ Group Insurance Program. See 5 ILCS
375/4, 5 (West 2010).
¶6 B. The Types of Health Insurance the State Provides
¶7 The State provides health insurance benefits in two ways: (1) through managed-care
plans, which include (a) health maintenance organizations (HMOs) and (b) OAPs, and (2)
through preferred provider organizations (PPOs). The State self-insures the OAPs and the
PPOs, which means that the State contracts with the OAPs and PPOs to administer the plans
but otherwise (1) assumes all the risks and (2) pays the claims made under those plans. In
contrast to the OAPs and PPOs, the State fully insures the HMOs, which means that the State
pays each HMO a fixed fee, including a risk premium, and the HMO administers the plans
and assumes all the risks and pays the claims made under each plan.
¶8 C. The Procedural History of This Case
¶9 1. The Underlying Contracts
¶ 10 Beginning in September 2010, DHFS issued requests for insurance proposals, seeking
proposals from organizations to administer OAPs and/or HMOs beginning July 1, 2011.
Health Alliance and Humana Health Plan, Inc. (Humana)–organizations that were
administering plans for the State at that time–submitted bids to continue to administer OAPs
and HMOs.
¶ 11 In April 2011, DHFS issued a notice of intent to award (1) OAP contracts to HealthLink
HMO, Inc. (HealthLink), and PersonalCare Insurance of Illinois, Inc. (PersonalCare), and (2)
HMO contracts to organizations owned by BlueCross BlueShield of Illinois (BlueCross). As
unsuccessful bidders, Health Alliance and Humana filed protests with the State’s chief
procurement officer, and the contract awards were stayed pursuant to the Administrative
Code (44 Ill. Adm. Code 1.5550(d) (2011)) until their protests were resolved.
¶ 12 While those protests were pending, COGFA, in response to the changes in health
insurance administrators, held a series of hearings on the subject of whether the State should
allow self-insurance plans. In conjunction with those hearings, COGFA’s co-chairpersons
-4-
requested an opinion from the Illinois Attorney General regarding the extent of authority
granted COGFA under the Insurance Act. Specifically, the co-chairpersons requested the
Attorney General’s opinion regarding the phrase contained in section 6.2 of the Insurance Act
that when the director, “with advice and consent of [COGFA],” determines that it would be
in the best interests of the State and its employees, the program of health benefits may be
administered with the State as a self-insurer in whole or in part. Shortly thereafter, the
Attorney General responded that the phrase “with advice and consent of [COGFA]” confers
upon COGFA “the authority to review and approve or disapprove the recommendation that
the State act as a self-insurer, in whole or in part, for health benefits.”
¶ 13 On May 24, 2011, six days later, the State’s chief procurement officer denied the protests
of Health Alliance and Humana.
¶ 14 The next day, COGFA declined to approve the expansion and continuation of self-
insurance by the State through the OAPs in PersonalCare and HealthLink. Shortly thereafter,
DHFS nevertheless awarded the OAP contracts to PersonalCare and HealthLink, as outlined
in its notice of intent to award.
¶ 15 2. Health Alliance’s Complaint and the Proceedings Below
¶ 16 On June 6, 2011, Health Alliance filed (1) a verified complaint, naming DHFS; Julie
Hamos, in her official capacity as director of DHFS; the Executive Ethics Commission (the
Commission); Matt Brown, in his official capacity as chief procurement officer of the
Commission; CMS; James P. Sledge, in his official capacity as director of CMS; Health Care
Service Corporation as Parent Company of BlueCross; Bluecross Blueshield of Illinois Blue
Advantage; Bluecross Blueshield of Illinois HMO Illinois; Humana; Humana Insurance
Company; PersonalCare; and Healthlink, seeking mandamus relief, administrative review,
declaratory judgment, and review of the procurement officer’s denial, and (2) a motion for
stay or temporary restraining order (Sangamon County case No. 11-MR-250). The next day,
Humana, like Health Alliance, filed a complaint, raising similar issues but also seeking an
order to force DHFS to award it OAP and HMO contracts (Sangamon County case No. 11-
MR-259). (Humana later voluntarily dismissed its complaint.)
¶ 17 On June 10, 2011, the circuit court issued a seven-page written order staying the awards
of the OAP contracts “pending the ultimate determination of [p]laintiffs’ actions *** for
administrative review,” finding, in pertinent part, as follows:
“The action of COGFA on May 25, 2011, in deciding to refuse advice and consent
for DHFS to continue the award of self-insurance contracts provides more than sufficient
basis for predicting success on the merits. COGFA is charged by law with overseeing the
administration of the State Insurance Program. ***
Prior to its ruling on May 25, 2011, COGFA sought the opinion of the Attorney
General as to the extent of its authority under [Illinois law]. The Attorney General
responded by opinion letter dated May 18, 2011, *** which clearly supports the position
of *** [p]laintiffs that the determination by DHFS to proceed after May 25, 2011, with
the award of self-insurance contracts violates [the Insurance Act].”
As part of its order, the court denied all of the other relief requested.
-5-
¶ 18 Shortly thereafter, DHFS and PersonalCare filed separate interlocutory appeals (Nos. 4-
11-0495 and 4-11-0545, respectively), which this court later consolidated.
¶ 19 II. ANALYSIS
¶ 20 Appellants argue that the circuit court erred by granting Health Alliance’s motion for
stay pending administrative review. We disagree.
¶ 21 A. The Circuit Court’s Jurisdiction
¶ 22 Initially, we note that as part of its argument, DHFS contends that the circuit court lacked
jurisdiction to grant the stay under section 3-111(a)(1) of the Administrative Review Law
(Review Law) (735 ILCS 5/3-111(a)(1) (West 2010)) because the Review Law does not
apply to state contract awards. Specifically, DHFS asserts that because the chief procurement
officer, rather than the director of DHFS, took the action complained of, no “administrative
decision” was made that would merit review under the Review Law. We are not persuaded.
¶ 23 The Review Law applies to “every action to review judicially a final decision of any
administrative agency where the Act *** conferring power on such agency, by express
reference, adopts the provisions of [a]rticle III of [the Review Law] or its predecessor, the
Administrative Review Act.” 735 ILCS 5/3-102 (West 2010). As previously stated, the
Insurance Act confers upon the DHFS director the power to “contract or otherwise make
available group life insurance, health benefits and other employee benefits.” 5 ILCS 375/5
(West 2010). Moreover, the Insurance Act expressly adopts the Review Law, as follows:
“Any final order, decision or other determination made, issued or executed by the
Director under the provisions of this Act whereby any contractor or person is aggrieved
shall be subject to review in accordance with the provisions of the [Review Law] and all
amendments and modifications thereof, and the rules adopted pursuant thereto, shall
apply to and govern all proceedings for the judicial review of final administrative
decisions of the Director.” 5 ILCS 375/15(h) (West 2010).
¶ 24 Although the State’s chief procurement officer denied Health Alliance’s protest, the
Insurance Act confers upon the DHFS director the power to make the final
determination–with the advice and consent of COGFA–as to which insurance providers the
OAP contracts should be awarded–which is precisely what the DHFS director did in this
case. We further note that the circuit court denied all relief other than the stay pending
administrative review of the director’s decision regarding self-insurance, which was made
in disregard of COGFA’s explicit decision to withhold its “advice and consent.” Thus, the
decision of the State’s chief procurement officer is not before us in this appeal. Accordingly,
we conclude the circuit court properly exercised jurisdiction under the Review Law.
¶ 25 B. Appellants’ Claim That the Circuit Court
Erred by Granting the Motion for Stay
¶ 26 Having concluded that the circuit court properly exercised jurisdiction in this case, we
turn to appellants’ contention that the circuit court erred by granting Health Alliance’s
-6-
motion for stay pending administrative review.
¶ 27 1. The Circuit Court’s Power To Issue a Stay
and the Standard of Review
¶ 28 Section 3-111(a)(1) of the Review Law (735 ILCS 5/3-111(a)(1) (West 2010)) outlines
the power of the circuit court to stay the decision of an administrative agency, pending
administrative review, as follows:
“(a) The Circuit Court has power:
(1) with or without requiring bond ***, and before or after answer filed, upon
notice to the agency and good cause shown, to stay the decision of the administrative
agency in whole or in part pending the final disposition of the case. For the purpose
of this subsection, ‘good cause’ requires the applicant to show (i) that an immediate
stay is required in order to preserve the status quo without endangering the public,
(ii) that it is not contrary to public policy, and (iii) that there exists a reasonable
likelihood of success on the merits[.]”
¶ 29 “Section 3-111(a)(1) of the [Review Law] gives the circuit court broad discretion to stay
an administrative decision pending review.” Metz v. Department of Professional Regulation,
332 Ill. App. 3d 1033, 1035, 773 N.E.2d 1234, 1236 (2002). Thus, our standard of review
is highly deferential, and the circuit court’s decision to grant a stay will be reversed only
upon a finding of an abuse of discretion. Metz, 332 Ill. App. 3d at 1035, 773 N.E.2d at 1236
(citing Marsh v. Illinois Racing Board, 179 Ill. 2d 488, 498, 689 N.E.2d 1113, 1119 (1997)).
¶ 30 2. The Circuit Court’s Order To Stay in This Case
¶ 31 a. Preserving the Status Quo
¶ 32 As previously outlined, section 3-111(a)(1)(i) of the Review Law requires that the circuit
court find that an immediate stay is necessary to preserve the status quo without endangering
the public. 735 ILCS 5/3-111(a)(1)(i) (West 2010). The status quo is “the last actual,
peaceful, non-contested status which preceded the pending controversy.” (Internal quotations
marks omitted.) Markert v. Ryan, 247 Ill. App. 3d 915, 918, 617 N.E.2d 1373, 1376 (1993).
¶ 33 Here, the circuit court found that preserving the status quo at the time of Health
Alliance’s lawsuit–which sought to have the health benefits to state employees continue to
be administered as they had been to that point–was appropriate and did not endanger the
public. Our review of the record shows that the court’s finding in that regard was not an
abuse of discretion.
¶ 34 b. Protecting Public Policy
¶ 35 Next, section 3-111(a)(1)(ii) of the Review Law requires that the circuit court find that
a stay is not contrary to public policy. 735 ILCS 5/3-111(a)(1)(ii) (West 2010). “Questions
of public policy *** are ultimately left for resolution by the courts.” American Federation
of State, County & Municipal Employees v. Department of Central Management Services,
-7-
173 Ill. 2d 299, 318, 671 N.E.2d 668, 678 (1996). “Illinois courts have recognized our state’s
public policy of protecting the physical health and safety of its citizens.” Metz, 332 Ill. App.
3d at 1036, 773 N.E.2d at 1237.
¶ 36 Given the facts of this case, we conclude that the circuit court did not abuse its discretion
by finding that the stay was not contrary to public policy. Indeed, preserving the status quo
pending the outcome of this litigation supports the public policy of ensuring that state
employees affected by DHFS’s decision would (1) understand the scope of their health
insurance coverage and (2) be assured coverage in all 102 Illinois counties.
¶ 37 c. The Likelihood of Success on the Merits
¶ 38 Finally, section 3-111(a)(1)(iii) of the Review Law requires that the trial court find “that
there exists a reasonable likelihood of success on the merits.” 735 ILCS 5/3-111(a)(1)(iii)
(West 2010).
¶ 39 Here, as the trial court pointed out, DHFS ignored COGFA’s decision to deny the
expansion and continuation of self-insurance by the State through PersonalCare and
HealthLink. We agree with the Attorney General’s opinion that COGFA possesses the
authority to make that determination. DHFS asserts that “COGFA *** is not authorized to
pick and choose [which health insurance providers to contract with] *** because the statute
limits its authority to making general determinations.” DHFS’s position, however, would
render merely hortatory the “advice and consent” language of section 6.2 of the Insurance
Act. We note that the phrase “advice and consent” has long been understood as allowing
legislative bodies the power to reject executive actions, such as appointing judges or high
ranking officers in the executive branch of government. See, for example, Edmond v. United
States, 520 U.S. 651, 659-60 (1997) (explaining that the advice and consent language of
article II of the United States Constitution (U.S. Const., art. II, § 2, cl. 2) vests the President
with the power to make appointments to such positions but reserves for the Senate the power
to reject individual appointees).
¶ 40 Accordingly, we conclude that the circuit court did not abuse its discretion by finding that
Health Alliance would likely succeed on the merits on administrative review.
¶ 41 In closing, we commend the circuit court for its thoughtful written order, which we found
very helpful.
¶ 42 III. CONCLUSION
¶ 43 For the reasons stated, we affirm the circuit court’s judgment.
¶ 44 Affirmed.
-8-