Joining the litigation fest, on January 13th, the Association of Washington Business (AWB) demanded a hearing to prevent the Washington Insurance Commissioner (OIC) from disapproving health plans that its insurer Premera Blue Cross had not yet even filed for review. Essentially, AWB demands a hearing just in case the OIC disapproves the AWB HealthChoice plans:

“lf denial occurs, this letter constitutes AWB’s demand for a hearing and for an automatic stay of OIC’s disapproval of AWB’s plan, including a stay of any action by OIC preventing or interfering [sic] continuation of issued coverage and marketing of the AWB association health plan, pursuant to RCW 48.04.020.”

To date, Premera has neither requested a hearing nor joined as a party in any of the association plan legal actions against the OIC. The invisibility of Premera presents a weird circumstance where the regulated entity sits on the sidelines while the customer tries to force the regulator to approve the licensee’s product.

I think I’ll sue the Commissioner because he should not have approved the increase in my auto insurance rates. Come to think of it, I’ll sue now so he can’t do it again.

Naturally, the legal and practical implications of these actions are not lost on the agency. In a January 22nd request to the hearing officer in the Business Health Trust action, the Commissioner seeks a ruling by the administrative law judge (ALJ) that an issuer’s customer cannot demand a hearing for an action the Commissioner hasn’t taken. Apart from legal “standing” issues, the Commissioner argues that he has to actually approve or disapprove a health plan before anyone can challenge the agency. The agency argues that permitting preemptive actions for routine rate and form reviews would subvert the insurance regulatory process.

[C]onsumers may be completely unaware that they are purchasing a plan that does not comply with the law, if the Commissioner is prevented from issuing his final determination. The predictable result is that anyone could stay every regulatory review by the Commissioner that might result in a negative outcome, even if they know that a health plan filing contains provisions that violate the law. Particularly for large group plans, carriers could file plans they know are deficient, request a stay because the Commissioner has “threatened” to review and issue a determination concerning their plans, and continue to sell that product, free of any regulation, and in blatant violation of the law.” [Emphasis added]

The Commissioner makes a good point. Many employers and insurance producers are already frustrated [the new politically correct term for “pissed off”] by competition from plans that enjoy price or benefit advantages as a consequence of illegal design. But, the OIC has fostered this situation through bungling, contradictory policies and puzzling enforcement. While the questions concerning the agency’s legal authority and its interpretation of law remain, the marketplace cannot function under circumstances where some issuers conform to the agency’s rules and others roll along defying the rules hoping for a future legal victory.

AWB makes the case long argued here that large group plans structured as ERISA bona fide associations are not required to pretend that member employers are “employees” of the association when it comes to pricing and designing benefits. AWB correctly notes that the Washington Legislature has not repealed the association health plan rating law and that the issue has been successfully litigated by AWB before. In addition, AWB argues against the strange related OIC requirement that association member employers permit its employees to buy anything the association is selling without regard to employer choice of plan.

In a clear admission that the association plans are not just chasing shadows, the OIC admits in its request to the ALJ handling the Business Health Trust matter that:

There is no question, at this point, that the Commissioner’s decision will be to disapprove Premera’ s filings. The Commissioner has now completed his review, and on December 19, 2014, uploaded his decision into the electronic system used by the Commissioner to review rate and form filings. It has not been issued, pending this tribunal’s decision concerning this matter. Until that decision is issued through the Commissioner’s electronic form filing system, the Commissioner’s statutory obligation to review Premera’s filings is not complete. And if this tribunal determines that the automatic stay is allowed to apply before the Commissioner’s review of a health pan filing is complete, Premera may never receive the Commissioner’s determination that its plans violate the law.

Therefore Premera, BHT, and any other third party who wants to gut the Commissioner’s regulation of large group health plans, can easily do so, by simply requesting a hearing whenever a health plan filing is submitted. This is not merely a speculative parade of horribles. There is another pending third party hearing request before this tribunal, from the Association of Washington Businesses (AWB), demanding a stay of the Commissioner final decision, for a large group health plan filing that was not even submitted at the time the hearing demand was issued. Similarly, BHT seems to be asking for the stay in this matter to extend to Premera’s 2015 large group health plan filings which will not be submitted until February.” [Emphasis added]

Folks, we have gone down the rabbit hole. Customers are challenging the potential decision of the Insurance Commissioner to disapprove a health plan that has yet to be even filed by the issuer. That’s why some insurance producers argue that they can continue to sell health plans that violate state insurance regulations. Indeed, the health plans have not been disapproved; they haven’t even been filed yet.

Let me repeat myself. How is any of this craziness good for small employers?

Small employers can buy the AWB or BHT plans knowing that the OIC wants to disapprove the plans or employers can buy an approved plan leaving AWB and BHT without customers. Do any of these contracts or legal actions include provisions to hold small employers harmless when troubles arise from their sponsorship of illegal health plans?

At what point does an insurance producer have a responsibility to warn the employer – before or after the litigation has been resolved?