Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

THE EFFECT AND FATE OF THE ACA’S TRANSITIONAL REINSURANCE PROGRAM IS UNCLEAR

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On November 19, Senator Thune of South Dakota introduced S. 1724, the “Union Tax Fairness Act,” which proposes to provide that the reinsurance fee to be paid by health insurers and third-party administrators (on behalf of group plans) under the transitional reinsurance program of the Patient Protection and Affordable Care Act (“ACA”) be applied equally to all such issuers and administrators so that no special exemptions are available. This requirement would not be waivable. The bill (which can be read here) has been referred to the Committee on Health, Education, Labor, and Pensions. A companion house bill, H.R. 3755, was introduced by Congressman Perry of Pennsylvania on December 12 and has been referred to the House Committee on Energy and Commerce.

In other ACA reinsurance-related legislative activity, Congressman Tiberi of Ohio introduced on November 13 H.R. 3489, a bill to amend Section 1341 of the ACA to repeal entirely the funding mechanism for the transitional reinsurance program. The bill (which can be read here) reminds that the transitional reinsurance program was established to stabilize risk in the individual health insurance market during the first three years of the health insurance exchanges established by the ACA, but it then emphasizes (1) that the reinsurance fees to be paid to the U.S. Treasury serve as a disincentive for employers to continue offering coverage to all employees and (2) that employers do not receive any benefits of the program. That bill has been referred to the House Subcommittee on Health.

This post written by Kyle Whitehead.

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SPECIAL FOCUS: AN UPDATE ON CLASS ARBITRATION WAIVERS

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There has been a great deal of litigation over the past couple of years regarding the validity of class action arbitration waivers. In a Special Focus article, Re-Revisiting AT&T v. Concepcion: Yes, We Hear You Now (Mostly), John Pitblado provides an update on some of the most recent appellate cases in this area.

This post written by John Pitblado.

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WEST VIRGINIA SUPREME COURT SUPPLIES GUIDANCE ON COMPELLING CONSUMER ARBITRATION

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In the ongoing dialectic between West Virginia’s high court and the U.S. Supreme Court (e.g., Marmet Health Care Center Inc. v. Brown, 132 S. Ct. 1201 (2012)) regarding enforcement of arbitration provisions, the state court has issued its latest contribution. In West Virginia v. Webster, the Court heard an appeal from an order denying a motion to compel individual arbitration in a case arising from a dispute between Ocwen Loan Servicing, LLC (“Ocwen”) and mortgage holders, respondents Robert and Tina Curry (the case is styled to reflect the procedural posture of a writ of prohibition, which the state brings on behalf of the petitioner, against the trial judge). Ocwen sought to compel arbitration of a dispute about certain fees Ocwen charged, pursuant to an arbitration provision contained in the parties’ relevant agreement. The trial court found the agreement unenforceable under the Dodd-Frank Act, and also unconscionable under West Virginia state law contract principles. The high court reversed, finding the Act was not applicable because the agreement was formed before it took effect. The West Virginia Supreme Court also disagreed with the trial court’s conclusion that the contract was unconscionable, and entered granted the request for a writ prohibiting the trial court from enforcing its order denying the motion to compel. West Virginia v. Webster, No. 13-0151 (W. Va. Nov. 13, 2013).

This post written by John Pitblado.

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NONAPPEALABILIY CLAUSES IN ARBITRATION AGREEMENT HELD NOT ENFORCEABLE IN THE NINTH CIRCUIT

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Faced with a question of first impression, the Ninth Circuit recently held that a clause in an arbitration agreement that eliminates any and all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act, is unenforeceable. The Court reasoned that allowing parties to “contractually eliminate all judicial review of arbitration awards . . . run[s] counter to the text of the FAA,” and “would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.” In re Wal-Mart Wage and Hour Employment Practices Litigation, No. 11-17718 (9th Cir. Dec. 17, 2013).

This post written by Abigail Kortz.

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COURT AGREES TO PERMANENTLY SEAL CONFIDENTIAL PORTIONS OF MEMORANDA AND DEPOSITION TESTIMONY IN REINSURANCE DISPUTE

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In a reinsurance dispute, a court agreed to seal portions of two memoranda of law and exhibits containing excerpts of deposition testimony of the reinsurer’s vice president. The court had previously provisionally sealed the material pursuant to the parties’ stipulated protective order, subject to the reinsurer’s submission of the particular lines and/or passages of testimony to be sealed and the particular grounds for such sealing. After the reinsurer submitted this information, the court agreed to maintain the sealing. Regarding the relevant portions of the memoranda, the court found that they contain confidential business information, and that sealing was appropriate in light of the fact that the cedent had also filed redacted versions of both documents. The court also agreed to permanently seal the deposition excerpts because the court found that they “contain sensitive and confidential business information, disclosure of which could materially affect [the reinsurer’s] ability to compete effectively as a business,” and because the request was narrowly tailored. Travelers Indemnity Co. v. Excalibur Reinsurance Corp., Case No. 3:11-cv-1209 (USDC D. Conn. Nov. 26, 2013).

This post written by Michael Wolgin.

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