Opinion ID: 852907
Heading Depth: 2
Heading Rank: 2

Heading: Exceptions to the Exhaustion Requirement

Text: The HMOs argue that even if the doctrine of exhaustion of administrative remedies applies to ICHIA's Plan of Operation, exceptions to that doctrine excuse exhaustion in this case. A. Futility The HMOs argue that they need not exhaust their administrative remedies because exhaustion would be futile. Exhaustion of administrative remedies may be excused if the exercise would be futile. Town Council of New Harmony v. Parker, 726 N.E.2d 1217, 1224 (Ind.2000). However, the exhaustion requirement ... should not be dispensed with lightly on grounds of `futility.' Id. The HMOs' argument as to futility is based on the affidavit of the president of M-Plan in which he reports conversations he had with the president of ICHIA and the Commissioner of Insurance and says the Commissioner did not demand that the HMOs pursue administrative appeal and told him that legal action may be the only option for the HMOs. Even if accepted at face value, this conversation does not rise to the status of an act of the Department of Insurance. The HMOs were aware of the administrative remedy in the plan of operation and do not claim lack of notice of the procedure. To prevail upon a claim of futility, one must show that the administrative agency was powerless to effect a remedy or that it would have been impossible or fruitless and of no value under the circumstances. Smith v. State Lottery Comm'n, 701 N.E.2d 926, 931 (Ind.Ct.App.1998) (quoting Ind. State Bldg. and Constr. Trades Council v. Warsaw Cmty. Sch. Corp., 493 N.E.2d 800, 806 (Ind.Ct.App. 1986)). The HMOs have not suggested that either ICHIA or the Commissioner is powerless to effect a remedy. Even if the HMOs are unsuccessful in an administrative challenge, resort to the Commissioner may produce a reasoned explanation of the considerations going into adoption and approval of this allocation of costs of a statutorily mandated program. That in itself is of value before resort to the courts to resolve such an issue. Turner v. City of Evansville, 740 N.E.2d 860, 862 (Ind.2001) (one of the benefits of exhaustion of administrative remedies is that a record for judicial review may be created). B. Invalidity of an Administrative Rule The HMOs contend exhaustion of administrative remedies is not required because the challenged assessment methodology is both unauthorized and unconstitutional. Citing Indiana Department of Insurance v. Golden Rule Insurance Co., 639 N.E.2d 339, 342 (Ind.Ct.App.1994), the HMOs assert that when an administrative rule is challenged as facially invalid, administrative remedies are not required. The HMOs challenge the application of ICHIA Plan of Operation to them, not the fundamental issue of ICHIA's power to make such allocations. Different members of ICHIA are affected in different ways by ICHIA's assessment method. The HMOs essentially argue that ICHIA's methods, in concert with taxation of HMOs, is unfair to HMOs. ICHIA responds that taxation of HMOs is essentially a function of the HMOs' election to do business in that form. These questions are specific to the HMOs' situation and can best be resolved by the agency in the first instance. C. Refusal to Act as Required by Law The HMOs argue that they are relieved from the exhaustion requirement by the agency's failure to act on their petition. The HMOs cite MHC Surgical Center Associates, Inc. v. State Office of Medicaid Policy and Planning, 699 N.E.2d 306, 309 (Ind.Ct.App.1998), for this proposition. In that case, the court held that the plaintiffs were not required to exhaust administrative remedies because the agency had not taken action on the petitioner's claims in over four years. Id. No such delay is asserted here. Nor have the HMOs shown that ICHIA has otherwise deliberately refused to follow the law.