Michigan Health Plan Tax Lawsuit Tests Business Community Priorities

Michigan Health Plan Tax Lawsuit Tests Business Community Priorities

A lawsuit filed last week in Federal Court seeking a declaration that Michigan’s Health Insurance Claims Assessment Act is preempted by the Employee Retirement Income Security Act (ERISA) will certainly test existing legal precedent, but perhaps the more interesting test will be how the business community responds.

This blog previously reported that officials from one prominent business organization in the state had no intention of pushing back against the legislation at the time citing both internal and external political concerns. That said, they suggested that there would likely be “private” support of a legal challenge from within their organization if in fact the law was challenged.

It will be interesting to see how this “leading from behind” approach plays out. In a conversation with my source shortly before the lawsuit was filed, it was noted that Michigan self-insured employers are now starting to pay more attention to the law and what it means to them.

More specifically, this blog has learned that one prominent multi-state self-insured employer based in Michigan calculated its yearly projected expenses to comply with new law to be more than $250,000. Of course, the administrative headaches are just a bonus.

But even with such a direct adverse impact on their company, senior company executives remain guarded about expressing opposition to the new law.

Now that the legal flaws of new law have been laid bare in the detailed complaint filed against the state and word is starting to get out about its practical impact, we’ll see if any heads pop up out of the foxholes.

And while the this legal challenge is important to self-insured employers in Michigan and to other entities that pay healthclaims for Michigan residents for services received within the state, its significance extends more broadly.

Michigan is not the only state that is strapped for cash and looking for new revenue streams. If its new health plan tax law goes unchallenged, this will likely embolden other states to consider this same approach and the cornerstone of ERISA preemption will be greatly compromised, and with it, the viability of self-insured health plans.

I suspect that if Michigan self-insured employers in large numbers estimated the financial impact to their balance sheets if they were forced to switch to fully-insured health plans and publicly communicated this to policy-makers and business association leaders early on this train would have been pulled off the track before arriving at the courthouse door.

The state has declined to comment on the lawsuit thus far but is required to file a formal legal response in the next 30 days so it will soon become clear how they intend to fight this challenge.

Perhaps the business community may yet demonstrate some clarity with regard to where it stands.
A Tale of Two Domiciles...Revisted

A Tale of Two Domiciles...Revisted

We suggested a narrative earlier this year that two southern captive insurance domiciles would be worth watching to compare and contrast based on insurance commissioner appointments in each state. Let’s review.

The captive industry in South Carolina fell on hard times during the regime of Insurance Commissioner Scott Richardson who left office at the end of 2010. When newly-elected Governor Nikki Haley named David Black as his replacement in February, this blog reflected the puzzlement expressed by many industry and political insiders.

Mr. Black was a largely unknown quantity aside from being the CEO of an inconsequential life insurance company.

But the sparse resume and lack of ART industry credentials didn’t deter Governor Haley from appointing Mr. Black and pronouncing him as a savior. Consider her comments when naming him to the position where she said “Understanding the importance of your industry, I chose David Black to lead the Department of Insurance. He has the energy and capability to revitalize the captive industry for our state.”

As it turned out, he had neither

Earlier this week, Mr. Black abruptly announced his resignation to his staff via e-mail giving no specific reason for his decision.

So now Governor Haley has a chance for a second bite of the apple to get it right. This means naming someone to the position who is willing and capable to shake up the bureaucracy within the department and establish a firewall between the regulation of traditional insurance companies and alternative risk transfer programs, as originally envisioned by former commissioner Ernie Csiszar more than a decade ago.

A tall order for sure and we’ll be watching.

A very different story continues to play out in nearby Tennessee where Governor Bill Haslam tapped Julie Mix McPeak to head up the insurance department in that state.

This blog noted that Ms. McPeak had both the credentials and reputation to turn heads within the ART marketplace when word of her appointment surfaced. But her future success was not assured.

The first order of business as it related to the ART industry was to shepherd a bill through the Legislature that made comprehensive updates to the state’s captive statute. This effort proved more difficult than expected but Ms. McPeak was up to the task and that legislation, which she helped draft, was signed into law.

Since that development, she has been working methodically to assemble a top notch regulatory team and now most of the key positions have been filled and she introduced these individuals at an industry event earlier this month.

So armed with a progressive captive stature and a regulatory team inspired to transform Tennessee into a premiere captive insurance domicile, the stage has now been set for her to make it happen.

But let’s not get ahead of ourselves as there are certain to be pitfalls ahead as the domicile finds its footing under Ms. McPeak’s leadership in 2012. That said, the fact that leadership is on display is certainly refreshing for those vested in the growth of the ART marketplace.

This tale of two domiciles will continue.
Lynnwood auto repair shop charged with insurance fraud

Lynnwood auto repair shop charged with insurance fraud

A Snohomish County auto repair shop has been charged with insurance fraud after charging for repairs it didn't do and parts that it never installed.

Northwestern Collision, of Lynnwood, was charged Dec. 14 in Snohomish County Superior Court. Arraignment is set for Jan. 9.

In 2009, Farmers Insurance investigators inspected 11 vehicles that had been repaired by the shop between 2007 and 2009. Of the 11, 10 "had substantial and specific" deviations from the repair estimates that Farmers had agreed to.

Among the problems: parts missing and not replaced, repairs not performed, and repairing items that were supposed to be replaced.

On Dec. 8, 2010, officers from the state insurance commissioner's Special Investigations Unit, the State Patrol and the Snohomish County Sheriff's Office served a warrant at the company's Lynnwood office. They gathered up paper files on 10 of the 11 vehicles.

The records indicated that in some cases, new parts that were supposed to be installed were instead returned to the parts dealer.

The insurer was overcharged nearly $11,000, and had to buy one customer's car, which had been rendered unsafe to drive, for another $15,446.
Cease and desist order issued to TracGuard Services

Cease and desist order issued to TracGuard Services

The Washington state insurance commissioner's office has told a Florida-based vehicle service contract provider to stop selling unauthorized contracts in Washington state.

TracGuard Services LLC, Jose L. Terry and Alberto Tudela, all of North Miami, have been ordered "to immediately cease and desist from engaging in or transacting the unauthorized business of insurance" in Washington.

Neither the company nor the two men are authorized to solicit or transact insurance in the state. They have not registered as a motor vechicle service contract provider in Washington.

The three have been ordered to notify all Washington residents who have purchased a service contract from them. It also warns that, pursuant to Washington state law, unauthorized insurers "shall remain personally liable for performance of the contract."
Cease and desist order issued to Mill Creek man

Cease and desist order issued to Mill Creek man

A Mill Creek man and company have been ordered to stop selling unauthorized vehicle service contracts.

The order names Scott L. Stevens and RVProtection.net, Inc., both of Mill Creek, Wash. In August of 2010, they sold a consumer a vehicle service contract offered by Genuine Warranty Solutions, Inc.

The problem: Genuine Warranty Solutions, Inc. is not a registered vehicle service contract provider in Washington.

The Dec. 19 order took effect immediately. Stevens and the company have the right to appeal the order.
Public notices and hearings: Change of incorporation, proposed acquisition, etc.

Public notices and hearings: Change of incorporation, proposed acquisition, etc.

Notices and upcoming hearings from our public notices web page:

Proposed acquisition: Humana is proposing to become the sole owner of Arcadian Management Services and its affiliates. We've completed our review of the application for acquisition of control. No hearing's been scheduled yet, but will be soon.

Incorporation change: The Safeco Companies have requested approval to have New Hampshire be their state of incorporation. The companies, which were acquired by Boston-based Liberty Mutual in 2008, say the change would not affect any Washington policyholders, and that there would be no interruption in coverage. A hearing is scheduled for Jan. 10, 2012 at 10 a.m. in our Tumwater office, which is at 5000 Capitol Blvd. Annual reports and other documents re: the request are posted here.

Change in port of entry/redomestication: Industrial Alliance Pacific Insurance and Financial Services have filed documents to change their port of entry/redomestication to Texas. A hearing is scheduled for Feb. 1, 2012 at 1 p.m. at our Tumwater office, which is at 5000 Capitol Blvd. Documents re: the request are posted here.
Judge issues insurance fraud ruling...in the form of a poem

Judge issues insurance fraud ruling...in the form of a poem

And now for something completely different:

A Pennsylvania judge has issued a ruling in an insurance fraud case. What's unusual is that the judge issued his ruling in the form of a poem. From the Associated Press:
Justice J. Michael Eakin, writing for a 4-2 majority, concluded in six-line stanzas that a man's attempt to deposit a forged check appearing to be from State Farm didn't constitute insurance fraud.
"Sentenced on the other crimes, he surely won't go free, but we find he can't be guilty of this final felony," Eakin wrote. "Convictions for the forgery and theft are approbated — the sentence for insurance fraud, however, is vacated. The case must be remanded for resentencing, we find, so the trial judge may impose the result he originally had in mind."
A 3-page dissent by another judge, AP writer Marc Levy noted, did not rhyme.
GEICO fined $100,000 for overcharging customers in WA; company will also refund $7.5 million

GEICO fined $100,000 for overcharging customers in WA; company will also refund $7.5 million

A Maryland-based insurance company has been fined $100,000 after overcharging thousands of its Washington state customers.
The insurer, GEICO, is also refunding $7.5 million – plus 8 percent interest -- to the 25,267 affected auto insurance consumers by the end of the year.

“A computer database error caused the problem, which the company reported to us promptly,” said Washington State Insurance Commissioner Mike Kreidler. “GEICO has also agreed to a two-year compliance plan that includes multiple audits.”

An additional $50,000 fine was suspended, on the condition that the company abides by the terms of the compliance plan.

The refunds, many of which have already been paid, will average roughly $300. The company has been contacting active and former customers affected by the issue and expects to have all refunds paid by the end of the year.

On May 26, 2011, GEICO representatives self-reported the computer error, which resulted in 7 percent of the company’s Washington customers being overcharged for insurance between Aug. 24, 2009 and June 2011.

Fines collected by the 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.

The complete order is posted at: http://www.insurance.wa.gov/oicfiles/orders/2011orders/11-0273.pdf.
Summary Judgment - Oral Evidence

Summary Judgment - Oral Evidence

In this post, we continue our discussion of the Court of Appeal's decision in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764.

Rule 20.04(2.2) permits a judge to hear oral evidence on a summary judgment motion. The Court provided guidance on when this discretion may be exercised.

The Court held that a party that moves for summary judgment must be in a position to present a case capable of being decided on a paper record. The motions judge can decide if he or she requires viva voce evidence under r. 20.04(2.2). The purpose of the rule is not to allow a party to enhance the record it has put before the court.

An order for oral evidence will generally be appropriate where the judge concludes the exercise of powers under r. 20.04(2.1) will be facilitated by hearing oral evidence of a limited number of witnesses on one or more specific, discrete and likely determinative issues.

An order under r. 20.04(2.2) may be appropriate where:

(1) Oral evidence can be obtained from a small number of witnesses and gathered in a manageable period of time;
(2) Any issue to be dealt with by presenting oral evidence is likely to have a
significant impact on whether the summary judgment motion is granted; and
(3) Any such issue is narrow and discrete – i.e., the issue can be separately decided and is not enmeshed with other issues on the motion.

- Tara Pollitt
Social media, liability and insurance

Social media, liability and insurance

Social media and insurance? Hard to imagine those words together, but the new report by the Insurance Information Institute is pretty interesting reading.

Most of us rely on social media more and more these days - whether for work or to keep with friends and family. But we probably never think about the insurance impact (ie. liability issues).

Find out if you or your business could be at risk - here's the report.
Court of Appeal comments on the new summary judgment rule

Court of Appeal comments on the new summary judgment rule

The Court of Appeal has now released its decision regarding the new summary judgment rule. The appeal was heard before a five panel Court and pertained to five action. It is released under the name Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764.

The Court held that there are three types of cases that are amenable to summary judgment:

1. Where the parties agree it is appropriate to determine an action by way of summary judgment (para. 41);
2. Claims or defences that are shown to have no merit (para. 42); and
3. Where the trial process is not required in the interest of justice (para. 44).

It is not necessary for the judge to categorize the type of of case in question. In fact, the Court held that the latter two types of cases are not to be viewed as discrete compartments.

The test for summary judgment is the "full appreciation test". The motions judge must ask "can the full appreciation of the evidence and issues that is required to make dispositive findings be
achieved by way of summary judgment, or can this full appreciation only be achieved by
way of a trial?" (para. 50). In cases that call for multiple findings of facts emanating from a number of witnesses and found in a voluminous record, summary judgment is not a substitute for the trial process. On the other hand, the full appreciation test may be met in document-driven cases with limited testimonial evidence, cases with limited contentious factual issues or where the record can be supplemented to the requisite degree at the motion judge's direction by hearing oral evidence on discrete issues.

It remains to be seen how this will impact summary judgment motions going forward. Are judges going to be more reluctant to grant summary judgment?

- Tara Pollitt
Number of uninsured in WA hits 1 million

Number of uninsured in WA hits 1 million

We posted a report this morning detailing our estimates of the number of Washingtonians with no health insurance, the amount of uncompensated care, and how those numbers are trending.

The upshot: We calculate that:
  • The number of uninsured has reached 1 million, or 14.5 percent of the state's population.
  • Uncompensated care (bad debt and charity care at hospitals, clinics, etc.) is nearly $1 billion.
  • And that both numbers are likely to continue to rise until 2014, when the major provisions of federal health care reform are slated to take effect.
  • The percentage of residents without health coverage worsened in 31 of 39 counties.
  • In several counties, more than 1 in 5 residents has no health coverage.
“This is a grim milestone for the state, and we believe the situation will remain bleak for two more years,” said Kreidler. “But it’s important for people to know that there is hope is on the horizon.”

Counties with a particularly high percentage of uninsured residents include: Adams, Grant, Okanogan, Franklin and Yakima. But the problem also worsened in King, Pierce, Snohomish and Spokane counties.

The good news: Assuming that federal health care reform takes effect as planned, more than 800,000 uninsured Washingtonians will be eligible in 2014 for expanded Medicaid eligibility or subsidies to help low- and middle-income families pay for health coverage.

This is the third report on the uninsured our office has put out since 2006.
A $200,000 patio cover? Spokane man charged with insurance fraud

A $200,000 patio cover? Spokane man charged with insurance fraud

A Spokane man has been charged with insurance fraud and attempted theft after a snow-damaged patio cover worth about $4,000 mushroomed into a nearly $200,000 claim.

Keith R. Scribner, 47, was arraigned Monday in Spokane County Superior Court on one count of insurance fraud and one count of attempted theft.

In late July 2009, Scribner's mother, Marilyn Warsinske, filed a claim with Liberty Mutual insurance. She said a patio roof at a home she'd purchased had collapsed due to the weight of snow some 6 months earlier. The policy covered "like kind and quality" replacement. Her son, she told the company, would handle the claim.

Scribner told the insurance company that patio cover was an extensive structure, spanning the entire length of the patio and wrapping around the home's chimney. Claims officials, inspecting the site, wondered why was there no flashing or holes in the masonry. Scribner said that house painters must have made repairs.

He sent the insurance company three bids to replace the cover based on his description. The bids ranged from $195,586 to $213,815.

Claims officials asked Scribner for any photos of the roof prior to the damage or after it collapsed. Perhaps some were taken during a home appraisal prior to the purchase, they suggested. Scribner said there were no photos and was no appraisal.

But a claims handler discovered an aerial photo of the home on a real estate website. It showed a much smaller patio cover than Scribner claimed.

The company launched a fraud investigation and notified Insurance Commissioner Mike Kreidler's anti-fraud Special Investigations Unit.

As it turned out, there had been a home appraisal, the investigators discovered. In fact, Keith Scribner met with the appraiser. And the appraisal included photos of the patio cover. A real estate agent interviewed by investigators described the cover as being "small and nothing special or significant."

The home's previous owner also provided photographs of the structure. It was originally canvas. When that because troublesome to remove each year, the homeowner bought a polycarbonate cover. Cost: About $300.

An architect told a state fraud investigator that he'd met with Scribner in 2008 -- months before the snow collapse -- to discuss plans to replace the deck cover with new, larger one.

A local company, provided with measurements and photographs of the original structure, drew up replacement bids at the request of a state fraud investigator. The bids: $3,913 and $4,782.
Insurance problem? We can help

Insurance problem? We can help

We're the state agency that regulates insurance in Washington state. If you're a Washingtonian, we're happy to help answer insurance questions and help try to solve problems with insurers/agents/etc.

What can you expect? If you file a complaint, for example, we will:

■ Contact the insurance company regarding your concerns, review their response, and share the results of our review with you.


■ Research and complete your complaint within 60 days.

■ Suggest steps you might take to resolve your issue.

■ Make your complaint a part of the company's public record.

■ Require the company to address your concerns and follow Washington state insurance laws and regulations.

And we get results. We get millions of dollars a year in delayed or denied claims paid to Washington consumers.

For a complete list of our customer service standards -- as well as links to easily file a complaint online -- please see our complaint help web page. You can also call our Insurance Consumer Hotline toll-free at 1-800-562-6900.

We'll try our best to help.
Occupier’s Liability S.4(4)(f): Recreational Trail

Occupier’s Liability S.4(4)(f): Recreational Trail

In Turner v. Kitchener (City) [2011] O.J. No. 4803, the plaintiff was riding his bike along a recreational trail in Kitchener. It was his regular route and time of travel which put him on the trail at 5:15 am.

Earlier that day vandals had set fire to a bridge along the trail and after investigating, the police and fire personnel had blocked off the bridge with a wooden barricade and yellow caution tape.

The plaintiff was biking at a relatively high speed for the time of morning, was wearing a helmet but did not have any light affixed to his bike. As the plaintiff approached the barricade, he was not able to see it, and when he did notice it is was too late to stop safely. The plaintiff applied his brakes so hard that he flipped over the bike and suffered injuries.

In this case, the plaintiff must establish that the defendant acted with “reckless disregard” towards him.

The trail is a “recreational trail”, so that s.4(4)(f) of the Occupier’s Liability Act (“Act”) was triggered. Section 4(3)(c) of the Act is also triggered and the plaintiff is deemed to have willingly assumed all risks when he rode his bike on the trail that day.

The deputy trial judge cited Cormack v. Mara (Township) (1989), 68 O.R. (2d) 716 (C.A.) which defined “reckless disregard” as doing or omitting to do something which the occupier “should recognize as likely to cause damage or injury to [the person] present on his or her premises, not caring whether such damage or injury results”.

After the fire, police and fire personnel attended the scene the city dispatched a crew to erect an orange barrier with several lines of yellow caution tape blocking off bridge access. The bridge was blocked off in order to arrange an inspection to determine if the bridge was structurally safe.

The plaintiff’s expert report concluded that the city ought to have used either a reflective warning sign and/or a flashing beacon.

The city offered evidence that the recreational trails are closed between 11pm and 6am. There are signs posted which state this and there is a by-law which specifically prohibits presence in the park, including on the trails between those hours.

The deputy judge accepted the city’s evidence, although it only showed that the plaintiff was in violation of a city by-law. He held that the city did not act with “reckless disregard” for the plaintiff. The deputy judge further explained that,“it could not be deemed likely, from the city’s perspective, that a bicyclist riding a trail while it was closed, and more importantly, while it was almost completely dark, without a headlight, would fail to see the barricade until it was too late to stop safely. Nor do I find that the city did not care whether injury resulted from its erection of the barricade.”

The deputy judge also stated that a flashing light on the barricade would have increased the possibility of the plaintiff seeing the barrier, but that a light on his bike and riding at a slower speed in the dark would have done the same thing.

If the deputy judge had found for the plaintiff on liability, he would have reduced the damages by a factor of 70%.

Also see Kennedy v. London (City) (2009), 58 M.P.L.R. (4th) 244 (Ont S.C.J.) and Schneider v. St. Clair Region Conservation Authority (2009), 97 O.R. (3d) 81 (C.A.) on the issue of recreational trails.

- Alison McBurney
Medicare drug and Advantage plan enrollment ends Dec. 7

Medicare drug and Advantage plan enrollment ends Dec. 7

Medicare's open enrollment for prescription drug plans (Part D) and Medicare Advantage plans ends Dec. 7.

This year's enrollment period was moved and expanded, thanks to the Affordable Care Act, giving people additional time to consider their choices.

Still need to make a decision and need some help? Our Statewide Health Insurance Benefit Advisors (SHIBA) program can answer questions and help you evaluate plans. Call our Insurance Consumer Hotline at 1-800-562-6900 and ask to make an appointment with a SHIBA volunteer in your area.

Before you make your decision, consider these tips:


  • Plan costs and coverage can change every year, so carefully review all letters and notices from your current plan.

  • Make a list of all current prescription drugs you take, the doses, and how often. Then, use the Plan Finder at www.medicare.gov to compare Part D plans.

  • Review the 2012 Medicare & You handbook. You should have received it in September.
    If you have questions, call 1-800- MEDICARE (1-800-633-4227) before you sign up.

  • If you have limited income and need help paying for prescription drugs, check out Medicare’s “Extra Help” program. To see if you qualify, contact the Social Security Administration at 1-800-772-1213 or go to www.socialsecurity.gov and click on Medicare.
But most importantly, don't wait! Remember, open enrollment ends Dec. 7. Here's a list of prescription drug plans and Medicare Advantage plans