In 2007, a Spokane superior court judge ruled that the Insurance Commissioner (OIC) could not ignore state law exempting association health plans (AHPs) from the Washington State community rating law. Using HIPAA as an excuse, the OIC had argued that associations could not charge employer members of the AHP different rates. Instead, the Commissioner argued that an association had to be its own little “community” with every employer rated similarly. Judge Kathleen O’Connor bluntly stated that the Legislature should decide whether the OIC could impose that rating method. The Legislature never did change the law.

Does the old case sound familiar? For the Association of Washington Business (AWB) and Associated Industries of the Inland Northwest (AIN), the current fight over AHPs did more than ring a bell. Both organizations brought and won the original 2007 action in Spokane. Now they’re back asking the Spokane court to find the Commissioner in contempt of the 2007 order and judgment. The AHPs filed their new motion on May 26th.

AWB and AIN provide declarations from their attorney Curt Hineline and from Debra Brown, the president of Forterra, a subsidiary of AWB responsible for insurance benefits. The declarations provide the documents and other materials supporting the AHP arguments. Exhibit A of both declarations note the Insurance Commissioner’s disapproval of their 2014 health plans. 

The OIC rejected the usual rating methods of the AHPs which calculated health plan prices at the member employer level. The OIC also rejected their status as bona fide associations. However, the Spokane court action challenges only the OIC disapproval of rates; since, the 2007 court order prohibited the Commissioner from imposing similar rating requirements. 

On the other hand, attorneys in the BHT federal court matter did challenge the OIC’s disapproval of both rates and bona fide status of BHT associations in a similar action against the OIC filed in Spokane on March 24th. BHT attorneys argue that the Insurance Commissioner exceeded his constitutional authority by “looking beyond the carrier’s good faith efforts and ultimate determination of [bona fide] status…and substituting his own opinion for that of the carrier.” However, the BHT action is not an effort to enforce a prior court order like the AWB action; although, BHT lawyers do reference the 2007 order.

In the BHT action (a collection of 13 new AHPs), the Commissioner’s lawyers request court dismissal for the failure of BHT to exhaust administrative remedies. That’s a very ironic argument given that the OIC argued that BHT had no right to bring an administrative action. The OIC also argues that BHT has no standing to bring the court challenge either. Unlike AWB, the BHT attorneys have a separate federal court matter to address bona fide status [see earlier articles on this site].

An indication of how the OIC has handled instances of associations splitting up into more distinct groups to satisfy “bona fide” requirements can be found in the materials submitted in exhibit A of Debra Brown’s declaration.

“As an altemative, the materials submitted posits either the AWB Trust or industry sub trusts within the AWB Trust as potential bona fide employers for the filed plan, citing Advisory Opinion 2003-13A. We note the materials state that the AWB Trust was established for the purpose of purchasing health care benefits. We acknowledge that, as demonstrated by Advisory Opinion 2003-13A, it is possible that groups exist within AWB that could qualify as a bona fide employer for purposes of filing their own employer welfare benefit plan.

However, unlike a DOL Advisory opinion which opines on general eligibility of an association to be an employer, our review Is of a specific plan filing. The 2014 plan submitted here Is structured as a single employee welfare benefit plan with AWB as the qualifying employer under ERISA 3(5). As a result, It Is not necessary to determine whether other groups could qualify as the plan employer for purposes of a different filing.” [page 6]

The OIC rejected AWB’s bona fide status but invited AWB to provide more information before the OIC’s final determination:

  • ” Factual information demonstrating sufficient nexus between AWB members to support its status as a bona fide employer.
  •  Specifically, the materials reference a Questionnaire consisting of thirty specific questions designed to solicit factual information necessary to render the submitted legal opinion. You are encouraged to provide this information of our consideration.”

I am losing count of the various actions against the OIC by association health plans. They now include a federal court case, several administrative challenges, and two Spokane Superior Court cases. Why Spokane?

Anyone who lives in Washington knows the answer to that question. Spokane is an “away game” for the OIC in more than geography.