Judge Heard What Healh Care Law Did Not Say

Judge Heard What Healh Care Law Did Not Say

It’s ironic that the ultimate fate of the nearly 3,000 page Patient Protection and Affordable Act (PPACA) may hinge on what was not included in the legislation.

Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.

This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.

Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.

I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.

So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.
Hearing Thursday on transparency for health insurer rate increases

Hearing Thursday on transparency for health insurer rate increases

A state Senate committee will hold a hearing at 1:30 p.m. Thursday in Olympia on a couple of our key legislative requests.

The first -- and the less controversial -- is that we retain the authority to review health insurance rate hikes in the individual market (e.g. insurance you buy yourself, instead of get through an employer.) If this bill doesn't pass, our authority do review those rates on behalf of consumers will end at the end of the year -- and the feds will do it instead. This is Senate Bill 5398.

The more controversial bill -- at least among insurers -- is our proposal to make public all the information that health insurers send us when filing for a rate increase. As things stand now, much of that information is secret. Hundreds of consumers have told us that they feel they have a right to see it. And we agree.

We're arguing that consumers should have the right to see what they're paying for, and exactly what's driving the large premium hikes in recent years. Everyone's data would be released, making it a level playing field for all the companies. (The bill is SB 5120.)

We don't have to look far to see how this process would work, because Oregon is already doing it. What's more, that state's largest health insurer said it supports a transparent filing process.

Washington State Insurance Commissioner Mike Kreidler testified about the transparency proposal last week in front of a House committee. Here's an excerpt:

Seattle Times weighs in on health insurer surpluses

Seattle Times weighs in on health insurer surpluses

Speaking of our legislation involving large surpluses held by nonprofit health insurers, the Seattle Times just posted an editorial on the topic.

It recounts testimony at Thursday's hearing in a state House of Representatives committee:

The companies testified against any penalty for piling up surplus, raising the specter of earthquakes, epidemics and President Obama's health-care reform. The first two might bite into their holdings, and the third, they said, surely would. They said they need every cent they have.

"How much is enough?" asked Rep. Kevin Van De Wege, D-Sequim.

Their answer was a thing with no defined form — something about consumers needing "strong, muscular companies." Van De Wege asked his question again, and again received vapor.
Self-Insurance Faces a Triple Regulatory Threat

Self-Insurance Faces a Triple Regulatory Threat

SIIA has reported recently on a series of the meetings with DOL and HHS officials to discuss PPACA-mandated studies on self-insurance. Our assumption is that at a minimum there is ignorance among regulators, but more likely a negative bias pervades.

We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.

While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.

The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.

Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:

"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).

So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.

Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.

But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.

A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.

So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.

Non-profit health insurer surpluses: Hearings scheduled for Weds and Thurs

The state House of Representatives and state Senate are holding hearings this week on some of our key bills.

We want to:
  1. Limit the rate increases of nonprofit health insurers once they build up a large cash surplus.
  2. Make health insurer rate filings public, like Oregon does. Much of the data is now considered a trade secret, meaning we can't release it.
  3. Renew our authority -- now set to expire at the end of this year -- to review individual health insurance rates.
The first hearing only includes the surplus bill, HB 1301/SB 5247. It's at 8 a.m. on Wednesday in Hearing Room 4 of the J.A. Cherberg Building, on the capitol campus in Olympia.

The second hearing -- which includes all three bills mentioned above -- is at 10 a.m. on Thursday in Hearing Room B of the John L. O'Brien Building, which is also on the capitol campus in Olympia.
A Tale of Two Domiciles

A Tale of Two Domiciles

This month brought interesting news from two neighboring captive domiciles that portend two different paths in the years ahead.

In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.

Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.

Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.

Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.

Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,

With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.

Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.

As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.

Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.

Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.

Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.

Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.

This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.

The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.

We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.

This tale of these two domiciles will continue.
Job opening: .NET application developer

Job opening: .NET application developer

We have a project job opening for a .NET application developer at our Tumwater office. The application period closes at 5 p.m. on Thursday.

This position will serve as a senior software developer for the agency, responsible for:

...analyzing system and business requirements, completing assigned coding and development assignments in accordance with defined project timelines and quality expectations, preparing user screen mockup and prototypes, preparing "developer" test cases and performing system testing and data verification. This position will perform this work using .NET programming skills including C#, ASP.NET, ADO.NET, MS SQL stored procedures and triggers.

The position, which is funded by a federal grant related to health care reform, is expected to last until Oct. 15, 2011.

For more, please see the full job listing.
Washington state fines six Chubb subsidiaries $534,000 for violations

Washington state fines six Chubb subsidiaries $534,000 for violations

Washington State Insurance Commissioner Mike Kreidler has ordered six subsidiaries of Chubb & Son to pay a $534,000 fine for repeatedly violating state insurance laws.

Federal Insurance Co, Pacific Indemnity Co, Great Northern Insurance Co, Executive Risk Indemnity, Inc.; Vigilant Insurance Company and Northwestern Pacific Indemnity Co. agreed to pay the fine. An additional $534,000 fine was suspended, as long as the companies follow an agreed-to compliance plan that, among other conditions, requires semi-annual self-audits.

In November, Kreidler called for a $534,000 fine and a nine-month suspension of the six companies’ insurance certificates, which would have barred them from writing new coverage during that time period. Under the consent order, there will be no suspension as long as the companies commit no further violations for three years.
“The companies have assured me that compliance is a top priority,” said Kreidler, “and I’m hopeful that this approach will resolve these ongoing problems.”
A key issue was the companies’ repeated failure to properly document the reasons for charging higher or lower rates on certain policies. Exams and audits dating back to 1998 found the same problems cropping up repeatedly. Since 2000, Washington state insurance officials have repeatedly fined Chubb and Chubb subsidiaries, and urged them to fix the problems.

Nonetheless, repeated examinations and a series of company self-audits ordered by Kreidler since 2007 found hundreds of violations of state law, including numerous recent ones. In some cases, more than half the sample files checked had violations.

Fines imposed by the state insurance commissioner’s office do not go to the agency. The money is deposited in the state’s general fund to pay for other state services.

(And here's the link to search disciplinary orders by Washington state's insurance department.)
Kreidler responds to health reform repeal efforts

Kreidler responds to health reform repeal efforts

On the eve of the first vote to repeal health reform, Commissioner Kreidler joined Gov. Chris Gregoire in a letter to the Washington delegation, touting the progress made to date and their willingness to enhance the Affordable Care Act where it falls short. They called out several new consumer protections already benefiting our family, friends and neighbors:

  • Children with significant health care needs cannot be turned away by insurance plans.
  • Young adults can stay on their parents' health plan until age 26.
  • No more cost sharing for preventive service, including cancer screenings and immunizations.
  • People with pre-existing conditions who've been uninsured for at least six months can get health insurance through the new federally-funded Pre-existing Condition Insurance Plan.
  • Small businesses that offer their employees health insurance can qualify for tax credits.

In a news release issued by the Washington Public Interest Rearch Group yesterday, Kreidler said, “Putting politics aside, our current health insurance system is unsustainable. Washington families and businesses are hurting. They contact my office every day, calling for help, because they can’t find insurance or afford the coverage they have. The new reforms just starting to take effect will help, but we need the full reforms coming in 2014. Any effort to repeal health reform now is short-sighted and will only harm consumers.”

Both Kreidler and Gregoire admit in their letter to the delegation that the Affordable Care Act may not be perfect, but they make the argument that repealing it - and all of the work that has been done to date to implement the reforms - would be a giant step backwards for our state and nation.
New 2011 open-enrollment periods announced for kids

New 2011 open-enrollment periods announced for kids

The individual health insurance market will have two special open-enrollment periods for children this year. Parents who want to add their children to their individual health plans or buy child-only plans can do so from March 15 to April 30, 2011 and from Sept. 15 to Oct. 31, 2011.

Commissioner Kreidler created the open-enrollment periods through a regulation filed today. The individual health insurance market is for people who do not have access to employer-sponsored health insurance.

New consumer protections under the federal Affordable Care Act prevent health insurers from denying coverage to children with pre-existing health conditions. However, special open-enrollment periods are allowed.

During open-enrollment times, children under age 19 cannot be denied health insurance because of a pre-existing condition. People looking for coverage for their children outside of the enrollment dates can apply either to the Washington State Health Insurance Pool (WSHIP), or if they qualify, to the new Pre-existing Condition Insurance Plan (PCIP-WA). To enroll in PCIP-WA, you must have been uninsured for at least six months and have a pre-existing medical condition.

Exceptions where parents can apply for individual coverage for their kids anytime include the birth or adoption of a child or if a child or the parent:

• Is no longer eligible for a state program.
• Loses coverage due to a divorce.
• Loses employer-sponsored coverage.
• Moves and their plan is not available where they live.

In 2014, when the full health reforms take effect, no one of any age can be denied insurance because of a pre-existing condition.

Anyone with questions about the individual health insurance market is encouraged to call our Insurance Consumer Hotline at 1-800-562-6900.
Insurers fined more than $580,000 in Washington in 2010

Insurers fined more than $580,000 in Washington in 2010

In 2010, we issued more than $580,000 in fines against insurers for a variety of violations, including illegal phone solicitation and overcharging customers.

The Doctor's Company, of Napa, Calif., for example, was fined $104,200 -- with $50,000 suspended -- for failing to file insurance rates with us prior to using those rates.

Metropolitan Casualty Insurance Co., of Warwick, R.I., and several related entities were fined $45,000 with $20,000 suspended after an examination found numerous problems with insurance documentation. Among the problems: $190,704 in overcharges to senior citizens. (The company also refunded the money to the affected policyholders.)

The point of the fines is to ensure that insurers follow the rules. This protects consumers and preserves a fair marketplace.

We should probably also point out that the money doesn't go to our agency. It's deposited in the state's general fund to pay for other state services. In 2009, fines totaled $407,600. A year earlier, the total was more than $1.2 million.

Here's a link to a list of our enforcement actions over the past six months.

And to search more than a decade's worth of past orders and fines -- including violations by agents and brokers -- check out this online lookup tool we built.
Job opening: Staff attorney

Job opening: Staff attorney

We're trying to fill a staff attorney position in our Tumwater office. (We're the state agency that regulates the insurance industry in Washington state.)

The person will provide legal advice to agency staff, handle enforcement matters, and participate in the drafting of legislation and regulations, among other duties. Some travel is expected for witness interviews and to work with other insurance regulators.

The application period will be open until the position is filled. For more details, including salary, benefits, and qualifications, please see the full job listing.

Why we're proposing legislation to limit the surpluses of non-profit health insurers

Among our legislative proposals this year: a bill to limit non-profit health insurers' rate hikes once the company's surplus funds grow above a certain level.

It would allow the insurers a substantial cushion of cash for unforeseen emergencies, but also help keep premiums from growing any more than absolutely necessary.

The background: Insurers, by the nature of their business, collect and invest substantial amounts of money. They need to do this, in order to pay out claims. They have to comply with solvency regulations designed to ensure that the company can make good on its promises to policyholders. If that's in doubt, we can take the company over and try to rehabilitate them so that policyholders and medical providers are protected.

But at this point, the state's three major non-profit health insurers (Regence, Premera, and Group Health) have large surpluses that have grown dramatically over the past 8 years. Together, they have more than $2 billion more than they expect to pay out in claims. At the same time -- this will come as news to no one -- health insurance rates have grown dramatically.

So we're seeking the explicit authority to consider surpluses -- and investment income -- when reviewing proposed rates.

Here's what those surpluses look like. (Capital and surplus means the balance of assets after making provisions for the payment of claims):

Our proposal would work like this: Once an insurer has enough to pay its expected claims plus an extra three months of average claims, we would not approve a rate that adds more to the surplus. (An exception could be granted, however, if the restriction would threaten an insurer's financial health.)

The three insurers listed above have surpluses equal to 4-5 months of claims each. They'd still have a substantial cash cushion in case of unforeseen costs, but we believe our proposal would also help keep premiums down.

The proposal would affect the lines of insurance over which we have the authority to review rates: individual and small group coverage.

The legislative session begins next week. Stay tuned.


Tyrell v. Bruce, [2010] O.J. No. 5245 (S.C.J.).

The defendants brought a motion alleging that the plaintiff failed to meet the threshold pursuant to section 267.5(5) of the Insurance Act.

The plaintiff was taken to hospital the night of the accident and released. He did not see his family doctor for 2 months. He continued taking courses at college and worked a telemarketing job and at a convenience store for a period of time. Over the years, he saw several health care providers and reported to them complaints of pain in his head, neck, shoulders, back, legs, knees and ankles. Various x-rays and MRIs showed no other evidence of injury other than soft tissue strain and sprain. The court held that most of the medical evidence relied on subjective reporting by the plaintiff, and the plaintiff was not a believable person. The plaintiff recorded four rap music videos which had been placed on YouTube which showed him able to walk and move about without difficulty. His explanation was that it was a good day for him.

The court found that the plaintiff claimed to be injured when it suited him; for example, when he was receiving Ontario Disability Support Program Benefits. On the other hand, when he ran into a legal problem with the criminal justice system he got a letter from the health care provider to say that he was financially independent and working.

The court held that the plaintiff had not proven on a balance of probabilities that he had a permanent, serious impairment of an important physical, mental or psychological function.

Credibility of the plaintiff is extremely important. Tyrell shows that presenting facts from a variety of sources, such as medical records, social services records, social networking and the internet can go a long way in assisting the defence.