Yikes! The number of lawyers and powerful law firms arguing for association health plan clients continue to swamp the Insurance Commissioner’s Office (OIC). Legal pleadings related to association health plans pour into Olympia at a fairly quick pace now.

On May 6th, Stoel Rives, Perkins Coie, and Kutscher, Hereford, etc. filed a summary judgment motion on behalf of Cambia and the three associations insured through Regence Blueshield, a Cambia subsidiary. The OIC disapproved health plan rates for the Master Builders Association of King and Snohomish Counties (MBA), the Building Industry Association of Washington (BIAW), and the Northwest Marine Trade Association (NMTA). The OIC responded with its own motion for summary judgment.

Most of the arguments simply repeat the theories and assertions in the other pending legal challenges to the OIC disapproval of association health plan rates. Remember that these three associations and the Cambia challenge were consolidated into a single case. Declarations supporting the Cambia motion can be found here and here. Declarations supporting the OIC motion can be found here and here. However, there are a few new wrinkles in the latest pleadings. 

Lawyers get accustomed to weak arguments or throw-away arguments that can’t be taken seriously but sometimes do get attention. But here’s one that surprised me and it’s nice to occasionally be surprised by legal proceedings that can be painfully dull.

The OIC argues that Cambia has no right to challenge the OIC disapproval of the Regence Blueshield rates.

“The OIC staff believes the only entity that would have standing to contest its disapproval of the carrier’s rate filings is the carrier that submitted them, Regence, and that no meaningful evidentiary review or effective relief is available in Regence’s absence.” [OIC Summary Judgment at 3]

The OIC believes that Cambia (formerly known as the Regence Group) can’t challenge the OIC actions directly affecting its own subsidiary. We’re not talking about customers challenging a regulators decision over an insurance plan. The OIC has asserted that a parent company, which is itself subject to state insurance regulation, cannot challenge an agency decision affecting the company’s own finances – an interesting view of due process.

Here’s a counter argument from the state’s administrative procedures act that addresses a person’s right to go to court rather than simply ask for an administrative appeal. You, the reader can play lawyer and decide what this might mean:

A person has standing to obtain judicial review of agency action if that person is aggrieved or adversely affected by the agency action. A person is aggrieved or adversely affected within the meaning of this section only when all three of the following conditions are present:

(1) The agency action has prejudiced or is likely to prejudice that person;

(2) That person’s asserted interests are among those that the agency was required to consider when it engaged in the agency action challenged; and

(3) A judgment in favor of that person would substantially eliminate or redress the prejudice to that person caused or likely to be caused by the agency action. [RCW 34.05.530]

As Mitt Romney reminded us, “Person” means any individual, partnership, corporation, association, governmental subdivision or unit thereof, or public or private organization or entity of any character, and includes another agency. [RCW 34.05.010]

The second interesting aspect of the pleadings relate to Cambia’s argument that the OIC already filed a formal response to the federal government that the OIC did not regulate association health plan rates. On May 14, 2010, the Insurance Commissioner sent a letter to the Secretary of Health and Human Services in response to an HHS request for comments on federal premium rate regulation. That letter argues an entirely different view of agency power to regulate large group and association health plan rates. Here’s what the Commissioner wrote:

“We do not have authority to review large group rates, other than for disability insurers. We interpret our statutory requirements as treating association health plans as large groups. States where rates do not compare as favorably to Washington’s in the individual and small group markets typically do not have rate review authority that matches or exceeds ours. As discussed below, the Commissioner needs additional authority to review rates that includes setting a required, meaningful level of aggregation for reporting issuer administrative costs by plan, and authority to consider overall issuer financial performance as affected by the proposed rate.” [Cambia motion – attached OIC letter]

If that’s not enough to sink your battleship, how about this statement from the OIC.

“The OIC currently reviews all rate filings in the individual and small group markets. Those markets represent only a small percentage of the total number of plans and covered lives in Washington State. Consumers in all markets have been ill-served by the limits on the Commissioner’s authority to review large group and association health plan market rates in Washington.” [Emphasis added. Cambia motion – attached OIC letter]

Well, I guess the agency found the authority in the very laws that the agency claimed did not exist or maybe the rate review “limits” were just frowns waiting to be turned upside down.