Here is the first in a series of updates on the litigation between theBusiness Health Trust(BHT) and the Washington Insurance Commissioner (OIC). You can track progress on both the administrative hearing within the OIC and the federal court litigation here and here.

On January 9th, Assistant Attorney General Mart U. Deleon filed an answer on behalf of the OIC to the BHT litigation. OIC makes the following counter arguments to BHT’s request for a temporary restraining order (TRO):

  1. The OIC asks the court to “take a pass” and not decide the case. The OIC raises the “Younger abstention doctrine,” recently refined by the U.S. Supreme Court in Sprint Communications v Jacobs (12/10/2013), to argue that the federal court should “abstain” from hearing the case in deference to state court. In that case, the Supreme Court stressed that “abstention” should be “exceptional” noting that federal courts may abstain from hearing a matter in only three categories of cases – “state criminal proceedings, civil enforcement proceedings, and civil proceedings involving certain orders that are uniquely in furtherance of the state courts’ ability to perform their judicial functions.”
  2. Alternatively, OIC argues the “Pullman abstention doctrine” that permits state court resolution of state law issues that would avoid federal court determinations of constitutional issues.
  3. The OIC argues that BHT has failed to state a controversy with the OIC, that BHT cannot challenge the OIC rate and form review process, and in any case, BHT needs to exhaust administrative remedies.
  4. BHT has no right to sue on behalf of all the associations.
  5. BHT has not right to challenge a rate and form decision concerning Premera.

In support of its action, BHT filed four declarations from Keith Vanderzanden, Maud Doudon, Emmy Jordan and Sarai Childs. These declarations provide interesting insight into the business of association health plans and the rate and form review process in Washington.

According to Mr. Vanderzanden, Senior Vice President at Wells Fargo Insurance Services, which provides plan administration services to the “Trusts,” no one is covered by the 2014 insurance policy that’s subject to the OIC action. He states that the Trusts are selling “2015 coverage” with a rate filing not due from Premera to the OIC until February 12, 2015. He states that if the small groups had to buy ACA plans, rates would increase from 5% to 20% based upon Premera estimates. [Declaration at 2]

Maud Doudin, the Trustee for BHT, the TPA and named fiduciary for 13 “industry-specific Health Benefit Trusts,” states that each of the Industry Groups “have a history of organized activities, including economic activities, to support the mission of the industry group, including providing educational opportunities, industry training, business promotion, networking and business development, and public affairs and business advocacy.” [Declaration at 3]

Sarai Childs and Emmy Jordan also act as BHT administrators and make the same declarations as Ms. Doudin.

According to BHT this is the chronology of events leading to the federal lawsuit:

  •   → March of 2013, the Washington State Office of the Insurance Commissioner indicated that the approach taken by the Health Benefit Plans would be sufficient to constitute an “Employer” within the meaning of ERISA Section 3(5).
  •   → February 2014, Premera Blue Cross submitted rate filing applications to the Washington State Office of the Insurance Commissioner for each of the Health Benefit Trusts for large-group coverage.
  •   → April 2, 2014, the Washington State Office of the Insurance Commissioner sent to each of the Health Benefit Trusts, except the Agriculture Industry Health Trust, an objection letter indicating that it was suspending its review of the Health Benefit Trusts’ rate filing applications pending further documentation establishing that the corresponding Associations qualified as ERISA Section 3(5) Employers.
  •   → May 8, 2014, Premera responded to the OIC.
  •   → September 8, 2014, the Washington State Office of the Insurance Commissioner sent to each of the Health Benefit Trusts an objection letter indicating that additional documentation establishing that the Associations qualified as 29 U.S.C. § 1002(5), ERISA Section 3(5) Employers was required for continued review of the rate filing applications for the Health Benefit Trusts.
  •   → October 7, 2014, BHT sent OIC the requested documentation.
  •   → December 15, 2014, the OIC threatened to deny “a pending application for the Health Benefit Trusts regarding their qualification for large-group coverage under Washington State law on the basis of their failure to qualify as an “Employer” within the meaning of 29 U.S.C. § 1002(5), ERISA Section 3(5).”

According to the OIC, this is what happened:

  •   → OIC denies that the Health Benefit Trusts met with the Insurance Commissioner; but admits having discussions with the Seattle Metropolitan Chamber of Commerce. [Answer at 4]
  •   → OIC admits “a staff member” sent letters to the Aerospace Industry Health Trust and the Agriculture Industry Health Trust stating they “could be considered an ‘employer’ under the definition found in ERISA.” [Answer at 5]
  •   → OIC notes that staff contacted the Chamber of Commerce with “serious concerns about the proliferation of multiple new subtrusts promoted as associations, that seemed to be created solely for the purpose of providing health insurance.” [Answer at 5]
  •   → OIC did not send requests for information to the associations nor did OIC ever receive responses containing the requested information. [Answer at 7]
  •   → OIC denies that it made a decision about the bona fide status of the associations. [Answer at 8]

Here’s the bottom line question – will the court permit Premera’s customers to obtain a TRO that prevents OIC from denying Premera’s rate filing because OIC does not believe Premera can sell BHT small employers a large group plan or use its planned method of establishing member plan prices?