Tex. App. Court rejects sov. immunity claim by Medicaid agency
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Two managed care organizations (MCOs) sued the Texas Health and Human Services Commission (HHSC) for failing to disenroll underweight newborns eligible for SSI from the capitated Medicaid managed care program. The state claimed that the court did not have jurisdiction based on sovereign immunity and also appealed the declaratory judgment that HHSC was violating federal and state statutes. The intermediate Texas appellate court affirmed the trial court’s determination that there was jurisdiction to hear the claim and also affirmed the declaratory relief. Hawkins v. El Paso First Health Plans, Inc., 2007 WL 74325 (Tex.App. Jan. 11, 2007).
Under federal law, a child born to a Medicaid or CHIP beneficiary is generally enrolled in the same plan as its mother. However, if the child is underweight, then the child may be eligible for SSI. While a child who has SSI would also be eligible for Medicaid, the child could not, under federal law, be automatically enrolled in a capitated managed care plan. In one Texas county, pursuant to a section 1915(b) waiver and state law, the child could not be enrolled in a capitated managed care plan. In all other Texas counties, the child could only be enrolled in a capitated managed care plan voluntarily, if chosen by the parent.
The MCOs sued HHSC for failing to disenroll the SSI eligible newborns from their capitated managed care plans retroactive to the date of birth. The state was expecting the MCOs to utilize its monthly capitated rate to cover the cost of the newborns’ hospital care, even though the infants were not permitted to be automatically enrolled in these managed care plans.
The state’s first defense was that the suit was barred by sovereign immunity. The MCOs sought declaratory relief pursuant to the Texas Uniform Declaratory Judgments Act (UDJA). The Texas Court of Appeals noted that the UDJA “is merely a procedural device for deciding matters already within a court’s subject matter jurisdiction” and does not extend or confer jurisdiction. The court held that the MCOs had standing to seek a declaration construing the federal and state statutes, because their rights are affected by the statutes. The declaratory relief would determine whether the MCOs must pay for healthcare services rendered to the SSI eligible infants. The court noted that the purpose of the MCOs’ declaratory judgment action is to determine the proper construction of the applicable statutes and to obtain a declaration of their rights, not to impose liability against the State. As a result, the court concluded that the case falls squarely within the type of suit that is not barred by sovereign immunity, specifically, a suit for declaratory relief against official state actors who allegedly act without legal or statutory authority. The court noted that the MCOs did not seek money damages and did not seek to hold the state liable for breach of contract. (The MCOs claim for injunctive relief was denied by the trial court, and the MCOs did not appeal that ruling.) The court therefore rejected the state’s sovereign immunity claim.
On the merits, the appellate court also affirmed the lower court’s ruling. HHSC argued that the contracts between the state and MCOs establish that the MCOs are responsible for all costs incurred during the hospital stay of the infants. The court rejected the state’s argument, noting that the contract provisions applied only to “mandatory-enrolled members,” and SSI eligible newborns may not be automatically enrolled in a capitated managed care plan. The court held that the declarations issued by the trial court regarding the responsibility of HHSC to disenroll the children retroactively were consistent with federal and state law, administrative rules, and the contracts governing the parties.