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Legal News Report 7-22-2016
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Insurers, Pushing for Higher Rates, Challenge Key Component of Health Law
Jul 16, 2016 | The New York Times
By Robert Pear
WASHINGTON — For several years, the Obama administration has urged state insurance regulators to use tools provided by the Affordable Care Act to hold down health care premiums. -
Appeals court says Texas voter-ID law discriminates against minorities
Jul 20, 2016 | The Washington Post
By Robert Barnes
A federal appeals court ruled Wednesday that Texas’s strict voter-ID law discriminates against minority voters, and it ordered a lower court to come up with a fix for the law in time for the November elections. -
HSBC Foreign-Exchange Executive Charged With Fraudulent Trading
Jul 20, 2016 | The Wall Street Journal
By Christopher M. Matthews
When a top executive at HSBC Holdings PLC was told a client had approved a huge currency exchange that stood to enrich the bank by millions, federal prosecutors say he couldn’t believe his luck. -
U.S. Files Suits Seeking to Block Insurer Deals
Jul 21, 2016 | The Wall Street Journal
By Brent Kendall and Anna Wilde Matthews
WASHINGTON—Two health-insurance megamergers are headed to the courts for high-stakes legal battles after U.S. antitrust enforcers sued to block deals involving four of the industry’s largest players. -
EU Fines Truck Makers Over $3 Billion for Participation in Cartel
Jul 19, 2016 | The Wall Street Journal
By Natalia Drozdiak
BRUSSELS—The European Union on Tuesday hit five truck makers with its highest-ever cartel fine of about €3 billion (about $3.32 billion) for colluding on prices and the implementation of emissions technologies, confirming an earlier report by The Wall Street Journal.
Legal News
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Insurers, Pushing for Higher Rates, Challenge Key Component of Health Law
Jul 16, 2016 | The New York Times
By Robert Pear
WASHINGTON — For several years, the Obama administration has urged state insurance regulators to use tools provided by the Affordable Care Act to hold down health care premiums.
Now federal officials will have a chance to practice what they preach as they confront big increases proposed in several states where they are responsible for reviewing rates.
Federal officials defer to the insurance commissioners in 46 states deemed to have “effective rate review” programs. But in Missouri, Oklahoma, Texas and Wyoming, the federal government is in charge of reviewing rates.
And those reviews create an exquisite political challenge, spotlighting a pocketbook issue that affects millions of voters.
In Texas, Blue Cross and Blue Shield is requesting rate increases of nearly 60 percent for 2017. In Oklahoma, Blue Cross and Blue Shield has proposed increases that average 49 percent. And in Missouri, Humana has filed for a 34 percent increase. All three carriers say they have lost money on many policies sold to individuals and families under the Affordable Care Act.
Such large requests are not typical and will test the rate review process, described by the Obama administration as one of the most important consumer protections in the Affordable Care Act.
Federal officials have urged states to be aggressive in reviewing rates, but it is not clear how aggressive federal officials will be. Michael A. Rhoads, the deputy commissioner of the Oklahoma Insurance Department, said he doubted that federal officials would significantly pare back rates requested in his state, given that insurers had lost money on their exchange business and several had left the Oklahoma marketplace.
The political calendar puts pressure on the administration to rein in rates. The next open enrollment period starts Nov. 1, and insurers will be notifying consumers of rate increases in the weeks before Election Day, Nov. 8.
Donald J. Trump, the presumptive Republican presidential nominee, regularly cites high premiums as evidence of the law’s failure. “The numbers are astronomical,” he said at a rally this month.
But administration officials say the “sticker price” does not matter for consumers because most people in the public insurance exchanges receive subsidies to help pay premiums, and they can also shop for less expensive insurance.
Among people receiving subsidies, the average beneficiary’s share of the premium rose by just $4 a month, to $106 a month in 2016, said Kevin J. Counihan, the chief executive of the federal insurance marketplace.
Gregory A. Thompson, a spokesman for Blue Cross and Blue Shield plans in five states, including Oklahoma and Texas, said the reason for the big rate requests was simple. “It’s underlying medical costs,” he said. “That’s what makes up the insurance premium.”
For every dollar in premiums collected last year, Blue Cross and Blue Shield plans say they paid out $1.26 on claims in Texas and $1.38 in Oklahoma. This, they say, is not sustainable.
The Obama administration has repeatedly said proposed rate increases are less worrisome than they appear because they are often reduced in the review process. Those reviews, coupled with larger subsidies in the form of tax credits, mean “individuals are not seeing the increases,” said Jason Furman, the chairman of the White House Council of Economic Advisers.
The law’s opponents are unconvinced.
“The subsidy doesn’t change the actual cost,” said Representative Mike Kelly, Republican of Pennsylvania. “At the end of the day, somebody still has to pick up the tab, and that’s the taxpayer.”
Many people buying insurance on their own do not receive subsidies. The Congressional Budget Office estimates that 12 million people will receive premium tax credits next year. But it says that an equal number — three million on the exchanges and nine million buying insurance outside the exchanges — will have to pay the full, unsubsidized price.
While the higher premiums proposed for 2017 in Missouri, Oklahoma and Texas do not reflect a national trend, they are not isolated examples, either.
Humana is seeking a 39 percent increase in Michigan, according to data posted by the State Insurance Department. The Oregon insurance commissioner recently approved a 24 percent increase for Providence Health Plan, which has the largest enrollment of any carrier in the state’s individual insurance market. The largest insurer in Tennessee, Blue Cross and Blue Shield, has requested rate increases averaging 63 percent, according to the state insurance commissioner. Blue Cross and Blue Shield of North Carolina, which raised individual rates by an average of 32.5 percent this year, has requested a further increase of 18.8 percent for 2017.
In Wyoming, the proposed rate increases are relatively modest, less than 10 percent. But Wyoming already has some of the highest rates in the country, with premiums for a benchmark plan second only to those in Alaska, among states using HealthCare.gov.
Federal and state officials and insurers point to several factors pushing rates higher. Prescription drug costs are surging, they say. And two temporary programs to stabilize premiums, by compensating insurers with sicker patients and high claims costs, are ending.
But, Mr. Counihan said, “there is not any monolithic or consistent level of rate increases nationally.”
In a study of premiums in 2015-16, Linda J. Blumberg, a health economist at the Urban Institute, a nonprofit research organization, found that “rates of increase vary tremendously across states and across rating areas within states.”
Jan M. Graeber, the chief health actuary at the Texas Department of Insurance, said her agency reviewed proposed rates for compliance with Texas law, which says rates must be reasonable and adequate, but not excessive or “unfairly discriminatory.” In many cases, Ms. Graeber said, Texas officials have found that the companies’ actual claims and losses were higher than anticipated, supporting rate increases on their individual health plans, many of which will be sold on the federal marketplace.
The federal government and Texas often review rates at the same time, Ms. Graeber said, but “we don’t make recommendations to federal officials on their review process or anything like that.”
Gov. Jay Nixon of Missouri signed a bill this month that authorizes the state to review rates, starting with insurance contracts that take effect in 2018.
Consumer groups applauded the change. “People in the Missouri Department of Insurance know a lot more about the Missouri market than people in Washington,” said Jennifer G. Bersdale, the executive director ofMissouri Health Care for All, a grass-roots group.
http://www.nytimes.com/2016/07/17/us/politics/insurers-pushing-for-higher-rates-challenge-key-component-of-health-law.html
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Appeals court says Texas voter-ID law discriminates against minorities
Jul 20, 2016 | The Washington Post
By Robert Barnes
A federal appeals court ruled Wednesday that Texas’s strict voter-ID law discriminates against minority voters, and it ordered a lower court to come up with a fix for the law in time for the November elections.
The full U.S. Court of Appeals for the 5th Circuit, one of the most conservative in the country, declined to strike down the law completely but said provisions must be made to allow those who lack the specific ID the law requires to be able to cast a vote.
Nine of the 15 appellate judges who heard the case generally upheld a district court’s finding that 600,000 people, disproportionately minorities, lack the specific kind of identification required — a driver’s license, military ID, passport or weapons permit, among them — and that it would be difficult for many to secure it.
African American, Hispanic and poor voters were most likely to be affected, the court found.
“It would be untenable to permit a law with a discriminatory effect to remain in operation” for the coming election, wrote U.S. Circuit Judge Catharina Haynes for the majority, made of up five judges nominated by Democratic presidents and four nominated by Republicans.
Those who possess the necessary ID must show it to vote in November, Haynes wrote. But she said the district court judge who first heard the case should fashion a remedy to rectify “the discriminatory effect on those voters who do not have . . . ID or are unable to reasonably obtain such identification.”
That was similar to a federal judge’s decision Tuesday that voters in Wisconsin who have trouble meeting that state’s voter-ID requirements should still be allowed to vote by signing an affidavit attesting to the voter’s identity.
Every judge who has considered the Texas law has found it discriminatory, but it still has been used in elections there. Challengers to the law had asked the Supreme Court to stop the law from being used in November, and the high court had given the 5th Circuit a Wednesday deadline to make its own decision about the law.
Texas could appeal the 5th Circuit decision to the Supreme Court. But the high court is split 4 to 4 on ideological grounds, and it would require the vote of five to overturn the circuit court decision.
The law has been challenged since its enactment by a broad coalition of civil rights groups and others, including the Obama administration.
“Today is a great day for the secure voting rights of all Americans, but it is a watershed day in the protection of voters in Texas who have recently been under attack by state leaders,” said Chad Dunn, a lawyer for some of the plaintiffs. “Help is on the way to our clients and hundreds of thousands of Texans like them.”
Texas contended that the earlier decisions were incorrect and that challengers have not been able to prove the law has reduced turnout or participation in any of the three statewide or five local elections in which the law has been used.
“Preventing voter fraud is essential to accurately reflecting the will of Texas voters during elections, and it is unfortunate that this common-sense law, providing protections against fraud, was not upheld in its entirety,” said Texas Attorney General Ken Paxton.
The full appeals court said U.S. District Judge Nelva Gonzales Ramos had gone too far in finding that the Texas legislature had a discriminatory intent in passing the law. But it did find there was reason for her to reexamine the question under more demanding standards.
That drew a scathing dissent from six of the court’s judges.
“By keeping this latter claim alive, the majority fans the flames of perniciously irresponsible racial name-calling,” wrote Judge Edith J. Jones. She compared the majority with “Area 51 alien enthusiasts who, lacking any real evidence, espied a vast but clandestine government conspiracy to conceal the ‘truth.’”
The state relied on a 2008 Supreme Court decision upholding an Indiana law that recognized a state’s interest in requiring voter IDs to maintain a fair and honest voting system.
Attorneys for the law’s challengers said the Voting Rights Act requires courts to look closely at the context and consequences of the changes and whether they are needlessly burdensome.
Challengers, including the NAACP Legal Defense and Educational Fund, said the legislature’s purpose, in part, was to curb the increasing power of minority voters in the state. It said the legislature worked “with surgical precision” to rule out the kinds of identification — government employment cards, for instance, or college IDs — that minorities were most likely to hold.
The Texas law, known as SB 14, is one of several that will face court tests between now and the general election. Seventeen states have more-restrictive voting laws than they did during the presidential election four years ago, and several are under court scrutiny.
A voter-ID law in North Carolina was recently upheld, and that case now heads to the U.S. Court of Appeals for the 4th Circuit in Richmond. Virginia’s less-restrictive law was upheld as well.
But the Texas law has a long legal past. It was passed in 2011, but challenged under Section 2 of the Voting Rights Act, which forbids changes that discriminate against minorities.
https://www.washingtonpost.com/politics/courts_law/appeals-ourt-says-texas-voter-id-law-has-discriminatory-effect/2016/07/20/781bf340-4cef-11e6-aa14-e0c1087f7583_story.html
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HSBC Foreign-Exchange Executive Charged With Fraudulent Trading
Jul 20, 2016 | The Wall Street Journal
By Christopher M. Matthews
When a top executive at HSBC Holdings PLC was told a client had approved a huge currency exchange that stood to enrich the bank by millions, federal prosecutors say he couldn’t believe his luck.
“Ohhhh, f—ing Christmas,” replied Mark Johnson, the bank’s global head of foreign-exchange cash trading, according to a transcript of a call recorded in 2011.
Now, his luck has turned. The details of the call were spelled out in a criminal complaint unsealed by federal prosecutors in Brooklyn on Wednesday, hours after Mr. Johnson was arrested by federal agents at New York’s John F. Kennedy International Airport.
Prosecutors charged Mr. Johnson and a colleague, Stuart Scott, the former HSBC European head of currency trading, of fraudulently front-running a $3.5 billion currency trade for a client, in a deal that netted millions in profits for the bank.
Mr. Johnson, 50 years old, appeared in Brooklyn federal court Wednesday afternoon. He didn’t enter a plea, and was released on $1 million bail. His lawyer declined to comment.
Mr. Scott, 43, hasn’t been arrested. His lawyer, Richard Beizer, didn’t respond to requests for comment.
Mr. Johnson’s arrest adds to a long list of legal woes for HSBC. In the highest-profile case, the bank avoided criminal charges over money laundering by entering a $1.9 billion settlement and five-year deferred prosecution agreement with the Justice Department in 2012.
The crimes alleged Wednesday predate that settlement and are unlikely to affect it, a person familiar with the matter said.
The bank also paid $614 million in 2014 to settle allegations it rigged benchmark currency rates. Mr. Scott was fired shortly after that settlement. The bank is still under investigation by the Justice Department for alleged rigging of the foreign-exchange market, and the charges filed Tuesday grew out of that probe, people familiar with the matter said.
http://www.wsj.com/articles/hsbc-foreign-exchange-executive-charged-with-front-running-order-1469021412
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U.S. Files Suits Seeking to Block Insurer Deals
Jul 21, 2016 | The Wall Street Journal
By Brent Kendall and Anna Wilde Matthews
WASHINGTON—Two health-insurance megamergers are headed to the courts for high-stakes legal battles after U.S. antitrust enforcers sued to block deals involving four of the industry’s largest players.
The Justice Department on Thursday filed a pair of lawsuits in a Washington, D.C., federal court challenging Anthem Inc.’s proposed acquisition of Cigna Corp. and Aetna Inc.’s planned combination with Humana Inc., alleging the mergers would harm consumers, employers and health-care providers with an unacceptable reduction in competition.
“If these mergers were to take place, the competition among these insurers that has pushed them to provide lower premiums, higher quality care and better benefits would be eliminated,” Attorney General Loretta Lynch said.
The lawsuits counter aggressive efforts by the health insurers to consolidate. The deals would have turned the top five national health insurers into three giant companies, each with revenue of more than $100 billion a year.
The $48 billion Anthem-Cigna acquisition would create the largest health insurer by enrollment, with more than 54 million members. Aetna’s $34 billion proposed acquisition of Humana would allow it to become the biggest seller of Medicare Advantage plans, and have overall revenue of about $115 billion combined based on 2015 totals.
Companies involved in both deals indicated they were ready to fight to save their transactions.
Aetna Chief Executive Mark T. Bertolini in an interview said the company is going to fight the Justice Department’s suit because “we can win it.”
Mr. Bertolini and Humana CEO Bruce D. Broussard, interviewed separately, said they will argue that the government is wrong in how it views the competitive landscape for Medicare Advantage plans, which are private Medicare plans in which a combined Aetna-Humana would have a leading position. The companies believe that traditional government Medicare should be included in the antitrust analysis, and that they have proposed adequate remedies to any competitive concerns.
Anthem and Cigna put out separate statements setting markedly different tones, amidlingering tension between the two companies. Anthem said it is “fully committed to challenging the DOJ’s decision in court but will remain receptive to any efforts to reach a settlement.”
Cigna noted that Anthem had led the regulatory process and said it is “currently evaluating its options consistent with its obligations under the agreement.”
Both lawsuits argue the mergers create collective problems. Justice officials indicated that they would seek to have the two cases tried together in front of the same judge. The lawsuits use identical language arguing the deals would eliminate “two innovative competitors”—Cigna and Humana—“at a time when the industry is experimenting with new ways to lower health-care costs.”
The Anthem-Cigna lawsuit focuses on the deal’s alleged impact on commercial insurance, the type of coverage sold to employers and individual consumers. The department focuses particularly on the market for national employers, which the deal would leave with “only three meaningful options,” the suit said.
The suit also argues the deal would reduce competition for the business of large local employers and individual insurance, the type sold through the Affordable Care Act’s exchanges. Health-care providers would also be hurt, with the deal likely leading to “lower reimbursement rates, less access to medical care, reduced quality.”
Anthem has in the past argued its deal will reduce prices for consumers and boost innovative cooperation with health-care providers.
The Aetna suit focuses on the market for private Medicare plans, Humana’s main business. The suit also argues the Aetna-Humana deal would hurt consumers who buy individual commercial plans through the ACA’s marketplaces.
Justice officials signaled it was unlikely the insurers could settle the cases by offering asset sales, or divestitures. “There are some mergers which can be solved through divestitures. We’ve seen nothing to suggest that these can,” said Bill Baer, the acting associate attorney general.
The lawsuits come at the twilight of the tenure of the Obama administration, which has blocked several controversial mergers, even as it has approved others with conditions attached.
The cases have been assigned initially to U.S. District Judge John D. Bates, a George W. Bush appointee who in 2004 rejected a Federal Trade Commission bid to block a $364 million mining acquisition by Arch Coal Inc.
If the deals are blocked, the insurers to be acquired would be due to receive substantial breakup fees.
Humana is supposed to receive $1 billion from Aetna, according to the merger agreement. Cigna would be in line to get $1.85 billion from Anthem, though the fee wouldn’t be owed if Cigna makes a “willful breach of its obligations” to complete the deal.
The companies could struggle with months of business uncertainty as the cases proceed. And the companies would all face business challenges if they had to move forward alone in the shadow of the much larger industry leader, UnitedHealth Group Inc. Analysts have said at least some of them might try to buy a smaller insurer focused on Medicaid or acquire Medicare business as a way to bulk up.
http://www.wsj.com/articles/u-s-files-lawsuits-challenging-health-insurer-deals-1469112236
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EU Fines Truck Makers Over $3 Billion for Participation in Cartel
Jul 19, 2016 | The Wall Street Journal
By Natalia Drozdiak
BRUSSELS—The European Union on Tuesday hit five truck makers with its highest-ever cartel fine of about €3 billion (about $3.32 billion) for colluding on prices and the implementation of emissions technologies, confirming an earlier report by The Wall Street Journal.
“We have today put down a marker by imposing record fines for a serious infringement,” said EU Competition Chief Margrethe Vestager, adding it was “a clear message to companies that cartels are not accepted.”
The European Commission, the bloc’s antitrust regulator, said Volkswagen AG’s MAN SE,Volvo AB, Daimler AG, Paccar Inc.’s DAF and CNH Industrial NV’s Iveco colluded for 14 years, between 1997 and 2011, on the factory prices of medium and heavy trucks.
They also coordinated on when to implement new emissions technologies and agreed to pass the extra costs of complying with the stricter environmental standards onto customers, the EU said.
Daimler faces the largest fine of around €1 billion, followed by DAF with penalties of €753 million. Volvo has to pay around €670 million and Iveco about €500 million. MAN hasn’t been fined, avoiding a penalty of about €1.2 billion, because it disclosed the cartel to the commission, the EU said.
All the companies except MAN had set aside hundreds of millions of dollars in provisions in preparation for the decision.
The truck makers acknowledge their involvement and agreed to settle the case, the EU added.
“The settlement ends the EU antitrust investigation. Daimler regrets these occurrences and took appropriate action some time ago,” the company said in a statement.
Volvo said the €650 million previously set aside largely covers the cost of the fine but that an additional provision of €20 million to pay the full penalty would impact operating profit in the third quarter.
“While we regret what has happened, we are convinced that these events have not impacted our customers,” Volvo Chief Executive Martin Lundstedt said in a statement.
MAN acknowledged in a statement it had escaped the fine by informing the commission of the cartel.
In a statement, Paccar said it didn’t believe “the exchange of factory list prices among manufacturers had (any) effect on truck sales prices negotiated between DAF’s independent dealers and its customers.” CNH, owner of Iveco, declined to comment.
At a news conference Tuesday, Ms. Vestager divulged more details about how senior managers at the companies founded the cartel in January 1997 when they met in “a cozy hotel” in Brussels.
She said the truck makers met regularly to manage the cartel, sometimes at the margins of trade fairs and other events.
The companies then changed their approach in 2004, Ms. Vestager said. For the remaining duration of the cartel, the collusion was organized by the truck makers’ subsidiaries in Germany, she said, adding lower-level managers also exchanged their information by email.
The commission sent the truck makers a formal charge-sheet in November 2014, several years after opening its investigation and raiding the companies’ premises.
The EU at the time also opened proceedings against Scania, another Volkswagen company, but on Tuesday said the company didn’t participate in the settlement decision and the investigation into the firm would therefore continues.
Scania said it fully cooperated with the commission, but didn’t agree to a settlement because it doesn’t accept the EU’s accusations.
“We don’t share the view that Scania has entered into a pan-European pricing agreement,” said Susanna Berlin, a spokeswoman for Scania, adding the company didn’t participate in delaying the introduction of new emissions technologies.
Despite admitting to wrongdoing, the companies that agreed to the settlement with the EU can always appeal the decision in court, particularly with respect to the size of the fines.
http://www.wsj.com/articles/eu-fines-truck-makers-3-billion-for-participation-in-cartel-1468924871
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