Delay is the deadliest form of denial.

Cyril Northcote Parkinson famously developed a mathematical formula demonstrating little or no relationship between a regulatory task and the size of the staff assigned to accomplish the task. “Parkinson’s Law” has morphed into the well known adage that “work expands to fill the time available for its completion.” Parkinson’s observation about bureaucratic delay and twaddle proves itself in Washington’s small group health insurance market.

Five years after enactment of federal health care reform, the Washington Office of the Insurance Commissioner (OIC), continues to struggle over the place of association health plans in the health care reform ecology. Last month, I optimistically believed that we would finally know which Washington associations have been declared “bona fide” and which of the bona fide associations had health plans satisfying state and federal law. For those keeping track – I was wrong.

On April Fools day, the former president of Regence Blue Shield, leading a new organization named “The Coalition of Qualified Association Health Plans,” (AHPs) sent a letter to Washington State legislators denouncing the state Insurance Commissioner. Mr. Hensley wrote that “Commissioner Mike Kreidler has gone back on his word and his campaign to eliminate qualified AHPs continues.” The letter coincided with full page newspaper advertisements demanding that the Commissioner “stop trying to take away our health care.”

The coalition apparently consists of the Master Builders Association, the Building Industry Association, and the Northwest Marine Trade Association, all of whom had their 2014 health plans disapproved by the Commissioner. Shannon Affholter, executive director of the Master Builders Association, explained the purpose of this “educational campaign is to make sure the OIC understands our concerns and to continue the discussion over the fate of qualified association health plans.” Right? Because the Commissioner doesn’t know and we need more meetings.

Within days of the appearance of the advertisement, Cambia Health Solutions and the Northwest Financial Association became the latest challengers to the OIC, joining a parade of lawyers bringing actions on behalf of the Washington Counties Insurance Fund (WCIF),  Moda Health Plan, the Master Builders Association of King and Snohomish Counties (MBA), the Northwest Marine Trade Association (NMTA), the Building Industry Association of Washington, (BIAW) and Associated Industries Management Services. Given the similarity of challenges and the need to manage the flood of legal papers, Judge Finkle, the presiding hearing officer, consolidated the cases involving Cambia, MBA, NMTA, and BIAW.

Justice does not run, it crawls…at…a…snails…pace. Here is the Judge’s order for considering the consolidated case: 

“By May 6, 2015, the parties shall serve and file dispositive Motions. By May 26, 2015, the
parties shall serve and file Responses to such Motions. By June 3, 2015, the parties shall serve
and file Replies to such Responses. In-person oral argument will begin at 10 AM June 11, 2015.”

Bear in mind, the federal litigation brought by the Business Health Trust stretches out even farther into the Fall. Mercifully, the WCIF has demanded summary judgment which coincidentally was also filed on April Fools Day.

These cases break out into two branches – those brought by associations like the administrative challenge first brought by the Business Health Trust and those brought by insurers who filed the 2014 health plans that were disapproved. Judge Finkle has ruled in the Business Health Trust case that BHT “is not entitled to a hearing or to an automatic stay under RCW 48.04.020(1).” It remains unclear whether “customers” of health insurance companies will be permitted to challenge the OIC denial of health plan rates. On the other hand, insurers like Cambia and Moda face no similar risk that the insurers lack “standing” to challenge the disapproved filings. Interestingly, neither Premera nor Group Health have independently challenged the OIC disapprovals.

The WCIF demand for summary judgment essentially captures the arguments of all the various organizations challenging the OIC disapproval of association health plans. The OIC has “granted” WCIF status as a bona fide association for treatment as a single large plan under ERISA. [See WCIF Demand Exhibit 13] Therefore, the issues raised by WCIF and most of the other associations (assuming bona fide status) go to the OIC requirement that these associations “pretend” that employers are like employees entitled to the same rate regardless of risk classification. [You can read several articles covering this issue as far back as December 2013]

As described in Exhibit 13 of the WCIF Demand, Jon Kaino, WCIF executive director, wrote to Commissioner Kreidler in October of last year admitting that every person covered by the WCIF does not pay the same price for coverage and challenging the Commissioner to reveal the statutory basis for requiring what amounts to a “community rate” for employers covered by the association:

In April of this year, both Premera and Group Health received an objection letter on their WCIF filing submission. Their responses to the questions clearly illustrate that our rates do not violate the HIPAA nondiscrimination provisions as no health related factors are used to determine individual or group rates. We do not ask for any health related data and do not consider It In any way when providing rates to our members.

It appears your office has a concern that employees of the same age working for different member employers may not be afforded identical rates. That is in fact accurate. Member groups are rated based on non-health status-related rating factors with the resulting rates applied to all employees within that member employer group, regardless of the employee’s age. Your office, in a variety of forums, has asserted that our current rating model is a violation of 29 CFR Chapter XXV, Section2590.702, in that “the rates for two similarly situated individuals (that belong to two participating group purchasers) are likely to be different”.

I have thoroughly and completely reviewed Section 2590.702 and while I am admittedly not a legal expert, I can find nothing in that section that supports the position your office has taken on this issue. In fact, my reading of 2590.702 only confirms that our rating model complies with the law.

Section 2590.702 expressly allows participants to “be treated as two or more distinct groups of similarly situated individuals” based on any factor, PROVIDED the factor is not health related. The Section also specifically allows these differences in premiums PROVIDED they are not based on “any health factor that relates to the individual or a dependent of the individual”.

After a thorough review, we can find no law or regulation, other than the HIPAA non-discrimination rules, which WCIF complies with as noted above, that prohibits separately rating individual employers in an association plan based on non-discriminatory criteria, or that otherwise requires all employers in that association plan to be rated in one pool. It is our position that federal law permits non-discriminatory rating at the employer level, without regard to whether association coverage is involved.

In conclusion, I must admit that I am somewhat puzzled over the intent and motivation behind the current position and interpretations of your office on this issue. It seems that If carried out, disenfranchising thousands of public employees and their dependents from benefit plans they have enjoyed for decades does nothing to further the stated goals of health care reform that we support.

Jon Kaino may not be a “legal expert” but he sure nailed it. The only reason these bona fide association rating models have been disapproved is because the OIC adopted a rule that says they’re not allowed. So the real dispute remains a challenge to the rule itself. 

These legal issues should have been resolved a long time ago. It is April, 2015 and the emergency rule that spurred these health plan disapprovals was adopted in October, 2013. For small employers simply trying to make informed choices for the best health plan at the best price for employees – Delay is the deadliest form of denial.