Lawsuit challenging state-managed public health insurance option dismissed

Carson City District Court Judge Kristin Luis dismissed a lawsuit challenging Nevada's public health insurance option last month, citing a lack of standing or proof of harm.

The lawsuit was filed by state Sen. Robin Titus (R-Wellington) and the National Taxpayers Union (a conservative taxpayer advocacy group) and challenged the constitutionality of SB420, the 2021 public health care option law. Nevada is one of four states that have adopted a public option law — which are policies aimed at lowering insurance premiums — that requires insurers who contract with Nevada Medicaid offer a discounted insurance plan on the state's health insurance marketplace. It's set to begin in 2026.

The dismissal filed July 30 noted that the injury claims were "purely speculative," given that the law is not yet in effect and that standing cannot be established just because someone is a taxpayer.

"If and when the law is fully implemented and facts are known as to the impact of the legislation, perhaps a more appropriate plaintiff or plaintiffs will bring the claims," the order states. "Plaintiffs have not met their burden in this case."

Pete Sepp, the president of the National Taxpayers Union, called the judge's ruling disappointing but vowed to continue fighting the law.

"We are pleased the Court recognizes this issue is of the utmost importance and will continue to pursue in future proceedings a legal ruling to stop the state from taking any further action to implement, enforce, or execute this law," Sepp wrote in an emailed statement Wednesday.

Titus did not return a request for comment.

The state-managed public health insurance option aims to leverage the state's purchasing power with Medicaid managed care organizations — private insurance companies that contract with the state to provide insurance coverage to low-income populations, children, pregnant people and people with disabilities — to get insurers to also offer public option plans. Those plans will resemble existing qualified health plans on the state's health insurance exchange, though they will be required to be offered at a 4 percent markdown with the goal of reducing the plans' premium costs by 15 percent over four years.

Titus and the National Taxpayers Union's legal challenge — which was filed in January 2024 — said the law violates the Nevada Constitution in three ways, one of which is that it generates public revenue but was not passed by the required two-thirds majority vote of legislators.

The lawsuit also alleged that the public option law gives the state treasurer and Department of Health and Human Services director "nearly unlimited discretion to use unspecified amounts of funds from the state treasury for unspecified purposes" the Legislature did not approve and violates the separation of powers principle by "impermissibly delegat[ing] lawmaking authority to executive branch agency directors" without any guardrails.

To bring a lawsuit against the public option in the future, the order dismissing the case noted that plaintiffs would need to demonstrate actual harm caused by the legislation. It noted that plaintiffs would also have to properly name the state of Nevada, along with the state officials and employees, as defendants in the lawsuit.

The lawsuit was the latest challenge in Nevada's ongoing saga to implement a state-managed public health insurance option by the legislatively imposed deadline of 2026. It came amid opposition from insurance industry leaders and an attempted rebranding of the law by Republican Gov. Lombardo's administration as a "market stabilization program" that would see a reinsurance program established as part of the public option implementation.

Reinsurance programs function as insurance for insurance companies, paying a portion of high-cost claims and thus allowing insurers to lower the premiums for individual health insurance plans.

Read More: Lombardo to move forward with public option with a new twist — reinsurance

State officials filed a waiver to seek federal funding to support the proposed public option program late last year, and told The Nevada Independent Wednesday that the application is paused as officials work on an amendment to reflect more accurate actuarial assumptions.

The state anticipates lifting the pause in the coming weeks, restarting the public comment period and decision timelines.

The state is accepting bids for the project.

This story was updated on 8/14/2024 at 8:37 a.m. to include additional information about the waiver seeking federal funding to support the public option and again at 1:14 p.m. to include a statement from the National Taxpayers Union.