April 3, 2009
IN THE MATTER OF THE CHALLENGE AND REQUEST FOR HEARING BY GUARDIAN LIFE INSURANCE COMPANY OF AMERICA REGARDING THE NEW JERSEY INDIVIDUAL HEALTH COVERAGE PROGRAM BOARD OF DIRECTORS' ISSUANCE OF THE DECEMBER 18, 2006, INTERIM RECONCILIATIONS OF THE 1997/1998 AND 1999/2000 LOSS ASSESSMENTS AND THE 2001/2002 LOSS ASSESSMENT.
On appeal from the New Jersey Individual Health Coverage Program Board of Directors.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 4, 2009
Before Judges Stern, Rodríguez and Payne.
Guardian Life Insurance Company of America appeals from the February 13, 2007 order of the Board of Directors of the New Jersey Individual Health Coverage Program ("IHCP") rejecting challenges to the December 18, 2006 invoices embodying interim reconciliations of the 1997-1998 and 1999-2000 loss assessments, and the amended regulations on which they are based, and denying its request for a hearing and payment into escrow.*fn1 It challenges the Board's December 2006 refusal "to provide similar treatment for the 1993 to 1996 assessment years" as applied retroactively to the years 1997 to 2000, and also contends that "if this [c]court upholds the IHCP Board's refusal to recalculate the assessments for 1993 to 1996... the IHCP Board must act similarly with respect to the 1997 to 2000 period."
As we stated in In re Challenges by Chubb Colonial Life Ins. Co., decided today, L. 1997, c. 146 and its repeal of N.J.S.A. 17B:27A-12(e) did not apply to pre-1997 loss assessments and there is no basis on which to conclude that the regulations adopted or amended in response to In re N.J. Indiv. Health Coverage Program's Readoption of N.J.A.C. 11:20-1 et seq., 179 N.J. 570 (2004) should apply retroactively. We therefore upheld the Board's second-tier methodology for 1993-1996 in In re Chubb Colonial.
In response to the Supreme Court opinion, on October 17, 2006, the Board adopted a new IHCP loss-assessment methodology (the adjusted net earned premium or "ANEP" methodology), effective on December 18, 2006, to apply to the 1997-1998 loss assessment calculation and to the calculation for all periods thereafter. Guardian asserts that the ANEP methodology should have been applied to the 1993-1996 loss assessments as well. It attacks retroactivity in 2006 to 1997-1998 and 1999-2000 and the $1,468,216.33 added interim assessment for 1997-1998 and $313,057.21 for 1999-2000, and claims that, if that application is sustainable there is no "rational basis" for treating 1993-1996 assessments differently than 1997-2000. It notes both sets of assessments are "not yet final." In other words, Guardian asserts the Board must either recalculate the 1993-1996 loss assessments under the new methodology or apply a similar methodology for all years and recalculate the interim reconciliations for the 1997-1998 and 1999-2000 loss assessments.
Guardian is correct that in our 2002 opinion, we declined to address retroactivity and to invalidate application of the second-tier methodology "to the assessments made prior to  or its 'two year calculation period.'" See In re N.J. Indiv. Health Coverage Program's Readoption of N.J.A.C. 11:20-1 et seq., 353 N.J. Super. 494, 526 (App. Div. 2002), aff'd in part, rev'd in part, 179 N.J. 570 (2004). We expressly declined to address 1996 loss assessments, and the Supreme Court affirmed our "invalidation of N.J.A.C. 11:20-2.17 as amended effective August 7, 1998." See In re IHCP's Readoption, supra, 179 N.J. at 582. Hence, the Board could continue to use the second-tier methodology for years prior to the 1997 amendment and make the new ANEP methodology applicable only to the calculation periods commencing in 1997.
Our opinions in In re Chubb Colonial*fn2 underscore the basis for a rational distinction between the years 1993-1996 and the 1997-2000 calculation periods. In addition to raising the retroactivity challenge, Guardian argues, however, that there are additional reasons the same calculations should apply to it for all eight years. It asserts that only a few carriers initially challenged the 1997-2000 assessments, and it is now fundamentally unfair to assess it to provide relief to those that did not challenge the assessments prior to the Supreme Court's decision.*fn3 It also asserts that as no other carrier is making the argument it now advances, there is a basis for treating it differently than other carriers by granting it the relief it seeks. The Board contends that no equal protection problem arises from treating different years and calculation periods dissimilarly, and that the carriers cannot be treated dissimilarly by applying the rules differently for the same periods of time. The Board further notes that the ongoing litigation and the Supreme Court's opinion affecting methodology therefore had to affect all carriers and their expectations.
We reject the equal protection attack based on the use of different loss assessment methodology for 1993-1996 and post-1996 for the reasons stated in our In re Chubb Colonial opinion decided today.