The Regulatory Stew

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Four years ago in an article posted here, I wrote the following:

I don’t know yet what will happen in the association plan market or how the battle over sick kids will play out. I can only wait for HHS and the Insurance Commissioner to provide direction. While I wait and reflect on Samuel Beckett’s more famous play, Waiting for Godot, I consider my belt and its length and strength. [10/18/2010]

Since then many trade association plans closed their doors and turned away employers who had been insured through group health plans offered through the association. In the drip, drip, drip of regulatory change, inaction, misdirection, and abrupt changes in course, we continue to wait in line at the Insurance Commissioner’s Office. Following a new strategy of regulatory torpor may resolve the regulatory backlog as licensees die of acute boredom and ennui.

Clients continue to ask “are we there yet” to which I am left to reply, “don’t make me come back there!”

And to those who niggle over regulatory matters like transparency, certainty, and equal application of law, please give it a rest. Take your ticket and wait in line for your particular unique, off the record ruling like everyone else.

Here is an example of what I look at every day “Waiting for Godot” while perfectly nice people lose business and insurance producers snipe at each other. The following is just one of many pages listing the filing of association health plans with the Insurance Commissioner’s Office showing the date the insurer filed the plan and its current approval status. It must be hard to come down on both sides of an issue.

Please also note for those who keep asking, unlike most other plan filings, no the information is not available for public inspection. I am sure it will be some day.

The following can be found on the agency’s rate and form filing website here:

Download Filing Details
Imaged documents not available online.
OIC Tracker ID: 267191
Company Tracker ID: AGRIRATESPUBLIC2014
SERFF Tracker ID: PBCC-129414787
Type: Rate/Rule
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Review Pending
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Agriculture Industry Trust – Public
Imaged documents not available online.
OIC Tracker ID: 267192
Company Tracker ID: BSIHT2014EA
SERFF Tracker ID: PBCC-129412281
Type: Form
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Review Pending
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Business Services Industry Health Trust
Form # Form Description
1000000780114B1 Your Future – HSA $1,500
1000000780114B2 Your Future – HSA $2,500
1000000780114B3 Your Future – HSA $3,500
1000000780114B4 Your Choice – Sterling 250
1000000780114B5 Your Choice – Sterling 500
15 of 18 Forms   1234Show All
Imaged documents not available online.
OIC Tracker ID: 267193
Company Tracker ID: BUSSSVCRATESPUBLIC2014
SERFF Tracker ID: PBCC-129414821
Type: Rate/Rule
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Business Services Industry Trust – Public
Imaged documents not available online.
OIC Tracker ID: 267229
Company Tracker ID: AGRI2014EA
SERFF Tracker ID: PBCC-129412354
Type: Form
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Review Pending
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Agriculture Industry Health Trust
Form # Form Description
1000000770114B1 Your Future – HSA $1,500
1000000770114B2 Your Future – HSA $2,500
1000000770114B3 Your Future – HSA $3,500
1000000770114B4 Your Choice – Sterling 250
1000000770114B5 Your Choice – Sterling 500
15 of 18 Forms   1234Show All
Imaged documents not available online.
OIC Tracker ID: 267289
Company Tracker ID: TRANR2014
SERFF Tracker ID: PBCC-129412796
Type: Rate/Rule
Has Manual: No
Public: No
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Transportation Industry Health Trust – Proprietary
Imaged documents not available online.
OIC Tracker ID: 267292
Company Tracker ID: ENDLR2014
SERFF Tracker ID: PBCC-129412732
Type: Rate/Rule
Has Manual: No
Public: No
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – End-Line Manufacturing Industry Health Trust – Proprietary
Imaged documents not available online.
OIC Tracker ID: 267293
Company Tracker ID: HEAR2014
SERFF Tracker ID: PBCC-129412746
Type: Rate/Rule
Has Manual: No
Public: No
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Healthcare Industry Health Trust – Proprietary
Imaged documents not available online.
OIC Tracker ID: 267294
Company Tracker ID: HEALTHCARERATESPUBLIC2014
SERFF Tracker ID: PBCC-129414769
Type: Rate/Rule
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Healthcare Industry Trust – Public
Imaged documents not available online.
OIC Tracker ID: 267295
Company Tracker ID: MEDIARATESPUBLIC2014
SERFF Tracker ID: PBCC-129414762
Type: Rate/Rule
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Media Industry Trust – Public
Imaged documents not available online.
OIC Tracker ID: 267296
Company Tracker ID: CONSTRUCTIONRATESPUBLIC2014
SERFF Tracker ID: PBCC-129414770
Type: Rate/Rule
Has Manual: No
Public: Yes
Received Date: 2/12/2014
Effective Date:
Status: Response Received
Types Of Insurance: H16G Group Health – Major Medical
Companies: PREMERA BLUE CROSS
Description: Association or member-governed true employer group under 29 U.S.C. Section 1002(5) of ERISA – Construction Industry Trust – Public
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I’ve had a number of requests from folks who want to view the Washington Farm Bureau Healthcare Trust video produced and directed by my wife and I back in the day when starting a video production company seemed like a good idea. It wasn’t.

The work was fun and we enjoyed the opportunity to learn about real farmers who work harder than I do. We created this video ourselves and yes, of course, real video professionals could do a much better job. Frankly, we could do a better job now too; but, well…you had to be there…



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I know I promised to publish more of the bona fide association plan rate and form filings; but, I stumbled across the following “Objection Letter” from the Office of the Insurance Commissioner (OIC) to Regence for a filing made on behalf of the Northwest Fire Fighters Benefits Trust. I have been puzzling over it ever since.

I am absolutely stumped as to how the OIC reconciles its analysis with the federal regulation cited in the letter. My mystical powers have faded after reading so many filings. So let’s have a scavenger hunt. I invite you tender reader, to find me the bridge between the letter and the  regulation each quoted below.

OIC Objection Letter-  02/05/2014:

Introduction:
This letter has been sent to you under rate filing B861-129359640 . We are restating and requiring you to respond in the public form filing. Please see the objections below and provide your response before the Response By date.
First, Health Insurance Portability and Accountability Act (HIPAA) prohibits discrimination against participants and beneficiaries based on a health status-related factor. Under 29 CFR Chapter XXV, Section 2590.702, a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for the eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual.
(i) Health status.
(ii) Medical condition (including both physical and mental illnesses).
(iii) Claims experience.
(iv) Receipt of health care.
(v) Medical history.
(vi) Genetic information
(vii) Evidence of insurability.
(viii) Disability.

If an association health plan (AHP) is a true-employer large group health plan (the association is defined as an “employer” under 29 U.S.C.S. 1002(5)), a health plan offered to the association is ONE large group health plan, and the carrier and the association must comply with HIPAA (29 CFR Chapter XXV, Section 2590.702) that prohibits discrimination against participants and beneficiaries based on a health status-related factor.

An issuer may use any non-health status-related rating factors permitted by federal or state law for a particular large group health plan such as demographics, age, area, and gender. However, Under HIPAA, an issuer or association must not use health-status related data or information from a specific participant, a subgroup of participants, or a group purchaser within the association to establish rates for the participant or the group purchaser. This includes specific health status, claims experience, participation requirements, etc. As an example, for any two similarly situated individuals (the same age and gender) within the association employer, the association health plan as the group health plan or the carrier as the issuer cannot charge higher rates for one individual simply because the one individual has more medical claim history or existing medical conditions than the other individual.

…Objection 2
- Cover Memo (Supporting Document)
Comments: As required by the Washington State SERFF Health and Disability Form Filing General Instructions, please submit a certification from a company officer that this association group health coverage as one large group meets the requirements of HIPAA under 29 CFR Chapter XXV, Section 2590.702. [Objection Letter, emphasis added]

So, according to the OIC, every employer purchasing coverage for their employees from a bona fide association must be charged a rate without regard to the loss experience of the employer. For this principle the OIC cites 29CFR Chapter XXV, Section 2590.702 which states in part:

(c) Prohibited discrimination in premiums or contributions
(2) Rules relating to premium rates
(i) Group rating based on health factors not restricted under this section. Nothing in this section restricts the aggregate amount that an employer may be charged for coverage under a group health plan. But see § 2590.702-1(b) of this Part, which prohibits adjustments in group premium or contribution rates based on genetic information.

…(iii) Examples. The rules of this paragraph (c)(2) are illustrated by the following examples:
Example 1.

(i) Facts. An employer sponsors a group health plan and purchases coverage from a health insurance issuer. In order to determine the premium rate for the upcoming plan year, the issuer reviews the claims experience of individuals covered under the plan. The issuer finds that Individual F had significantly higher claims experience than similarly situated individuals in the plan. The issuer quotes the plan a higher per-participant rate because of F’s claims experience.

(ii) Conclusion. In this Example 1, the issuer does not violate the provisions of this paragraph (c)(2) because the issuer blends the rate so that the employer is not quoted a higher rate for F than for a similarly situated individual based on F’s claims experience. (However, if the issuer used genetic information in computing the group rate, it would violate § 2590.702-1(b) of this Part.)

In other words, the employer may be charged more but the individual employee cannot be assigned a higher rate for his or her own loss experience. Right?

The OIC analysis fits the federal regulation only if we pretend each employee of each participating employer is really an employee of the association or maybe each employer is an employee of the association and the employer member’s employees are beneficiaries or…help me out here because my law professors did not teach me pretend law.

Why does the OIC feel the need to interpret federal regulations to achieve policy objectives that the federal agencies could achieve by amending their own rules?

Seriously, if anyone can find me a federal regulation or federal guidance that requires every employer purchasing through an ERISA bona fide association plan to pay without regard to loss experience, contact me.

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As a private attorney, former legislative counsel and former Deputy Insurance Commissioner for the Washington Office of the Insurance Commissioner (OIC), I have played a variety of roles in creating, enforcing, applying, and living with insurance regulation. Whatever role you play in the insurance regulatory system, sooner or later, you will find yourself in disagreeable circumstances. The disagreements between those who make and those who live with insurance rules can become heated and the arguments can be quite obtuse.

Nevertheless, when the arguments have been resolved, whether you win or lose, you move on. We accept our fate because we have a fundamental faith in our system of government and recognize that the majority rules and we might be that majority today or tomorrow. We attorneys also fundamentally believe in our system of justice with its guarantee of due process – the opportunity to make our best argument, to be heard and fairly judged.

For those regulated by the OIC, disputes may lead to an administrative hearing which in turn, often leads to the agency’s longtime chief hearing officer, Judge Patricia Petersen. She has presided over insurance regulatory disputes of every type for decades. In my many years both in and out of government, I have never had reason to question her integrity. I still do not question her integrity.

The sad events unfolding over the past few days will “leave a mark” on the insurance regulatory system in Washington State. Judge Petersen’s revelations about undue influence and ex parte communication by OIC staff in a pending case will take time to investigate and resolve. Whatever the outcome, especially for those of us who have toiled as regulators, something vital has been lost. For me personally, I send Patricia Petersen my condolences.

For those who don’t know what the hell I’m talking about, these two links will explain:

Judge Petersen’s Notice of Receipt of Ex Parte Communications

Listen beginning at seven minutes into the following - Audio Recording of Hearing Proceedings May 14, 2014 before Judge Petersen

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I keep odd and varied company and sometimes need the Urban dictionary to answer questions like: “what’s realer -  the guvmint tellin’ you what’s up or your own damn lyin’ eyes?”

I’ll go with my lying eyes. So I asked to see the bona fide association documents for myself.

Insurance producers and employers have asked in vain about the legality of various association health plans offering large group coverage to small employers. I thought these issues would be sorted out months ago; but, the Insurance Commissioner continues to carefully reflect upon these difficult questions when not shotgunning rules and hosting PowerPoints.

To recap, Washington State exempted small employer health plans purchased through trade associations from Washington’s small group reforms over a decade ago. The exemptions still exist. Along came federal health care reform and the Insurance Commissioner (OIC) decided to enforce ERISA’s definition of “employer plan” that allows an association of employers to be treated as a single large group plan only if it’s “bona fide.” The trouble with the OIC’s effort has been its strange and inconsistent application of its own view of federal law and its slow drifting silence as the employer health plan market adjusts to change you can’t believe.

Luckily, that’s why our founding fathers gave us the Public Disclosure Act – self-help. Last week, I finally received documents in response to my Public Disclosure Request of April 15, 2013:

“Please provide me with the documents submitted by carriers during the period of April 15, 2013 to April 15, 2014 in support of an association’s treatment as a “bona fide” single, large group under ERISA.

The OIC currently describes these documents submitted in support of a large group filing on behalf of an “association health plan” as follows:

3. Must submit one pdf document titled “Evidence as an Employer” and file it under the Supporting Documentation Tab. The document must include, at a minimum, the following information:

a. A copy of the association bylaws;

b. A copy of the trust agreement or other organizational document which shows the purpose of the association and who governs the association;

c. A statement of the association’s history;

d. A copy of the occupational categories/ industry classifications comprising the employers in the association;

e. An advisory opinion from the Federal Department of Labor demonstrating the group is qualified to purchase association coverage.

f. In absence of a Federal Department of Labor opinion, an opinion from an attorney explaining how and why the association qualifies as a true employer under 29 U.S.C. § 1002(5) of the Employee Retirement Income Security Act (ERISA) of 1974“

[Washington State SERFF Health and Disability Form Filing General Instructions - Page 11 of 17 Ed.16 4/8/2014]

I am requesting documents meeting the description listed above whether or not these documents were filed purusant to the latest version of the OIC filing requirements or latest rules however these documents are denominated by the carriers when submitted to the OIC.”

Of course, I would have received the documents much sooner if I had been clearer in my original request from March 25th which I learned had been confusing:

Dear Mr. Conniff,

We interpret your request as asking “For all large group plans offered by associations that the OIC approves to be filed, give me the evidence submitted by carriers that the OIC relied on to determine that the association is a bona fide employer under ERISA for purposes of offering large group coverage to employee member.”

At this time we have not approved any to be filed and would therefore not have any responsive documents to your request.  [Emphasis especially added here]

If this is not correct please identify further the documents you are looking for.

[Note to dear, tender readers: this is why lawyers are picky, verbose, pedantic, and did I say verbose?]

Since this article is already too long, I will make this part 1 of a series of articles sharing these documents. Here I will focus on the largest group of filings, those reviewed by the Davis Wright Tremaine law firm (DWT) on behalf of their association clients.

Of all of the associations, DWT was the most successful measured by the number of approval letters received from OIC counsel. They were also the most prolific in providing opinions as to the bona fide status of association health plans. The OIC counsel letters were to be filed along with rate and form filings. OIC later discontinued the practice of issuing opinion letters. Many other associations were told to “buzz off” after the initial burst of OIC letters. Here are some of the groups on whose behalf DWT obtained OIC counsel letters:

Aerospace Industry Health Trust – OIC letter March 26, 2013

Associated Industries Trust – OIC letter March 26, 2013

Agriculture Industry Health Trust – OIC letter May 7, 2013

Washington Clean Technology Alliance – OIC letter March 26, 2013

Here are the opinion letters by DWT on behalf of associations filing as bona fide association plans:

Aerospace Industry Trust DWT opinion letter

Agriculture Industry Trust DWT opinion letter

Community Service Organization Industry Trust DWT opinion letter

Business Services Industry Health Trust DWT opinion letter

Health Care Industry Trust DWT opinion letter

Media Industry Trust DWT opinion letter

Construction Industry Trust DWT opinion letter

End-Line Manufacturing Industry Trust DWT opinion letter

Transportation Industry Trust DWT opinion letter

Columbia Retail Benefits Trust DWT opinion letter

Clean Technology Trust DWT opinion letter

O.K,, o.k., o.k., I’ll give you a break and continue in another article; but, you get the picture. All of the DWT opinion letters are conditioned upon the certification of the plan administrator. These certifications to DWT are listed and linked below. What’s more fascinating is the diversity of each Trust. The employer groups eligible to participate in each of these trusts is also listed and linked below.

But, before you look at these lists and certifications, consider the standard expressed by the United States Department of Labor (DOL) in an opinion rejecting the Bend, Oregon chamber of commerce health plan as a “bona fide” association. You might understand why those associations who couldn’t get letters from the OIC might be a little bit confused right now.

“Bend Chamber’s structure is not the type of connection between employer members that the Department requires for a group or association of employers to sponsor a single “multiple employer” plan. Rather, the Department would view the employers that use the Bend Chamber’s arrangement as each having established separate employee benefit plans for their employees. Although we do not question the Bend Chamber’s status as a genuine regional chamber of commerce with legitimate business and associational purposes, the primary economic nexus between the member employers is a commitment to private business development in a common geographic area. This would appear to open membership in the Bend Chamber, and in turn participation in the proposed health insurance arrangement, to virtually any employer in the region.” [DOL Advisory Opinion 2008-07A]

In the DOL’s opinion, the process for arriving at this type of decision requires an analysis of the facts and circumstances in each case.

“A determination whether there is a bona fide employer group or association for this ERISA purpose must be made on the basis of all the facts and circumstances involved. Among the factors considered are the following: how members are solicited; who is entitled to participate and who actually participates in the association; the process by which the association was formed, the purposes for which it was formed, and what, if any, were the preexisting relationships of its members; the powers, rights, and privileges of employer members that exist by reason of their status as employers; and who actually controls and directs the activities and operations of the benefit program. The employers that participate in a benefit program must, either directly or indirectly, exercise control over the program, both in form and in substance, in order to act as a bona fide employer group or association with respect to the program.” [id.]

Here are the lists and links of Trust certifications followed by employer groups eligible for each “bona fide” trust.

Aerospace  / Eligible Groups

Agriculture / Eligible Groups

Community Service / Eligible Groups

Business Services / Eligible Groups

Health Care / Eligible Groups

Media / Eligible Groups

Construction / Eligible Groups

End-Line Manufacturing / Eligible Groups

Transportation / Eligible Groups

Columbia Retail Benefits / Eligible Groups

Clean Technology / Eligible Groups

That’s the end of Part 1. Now it’s time for me to revisit the association plans that I advised could never make it as a bona fide association.

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