On February 2nd, the Washington Insurance Commissioner’s office (OIC) responded to the Business Health Trust (BHT) request for an injunction against the OIC.  BHT and the other association plans represented are trying to prevent the OIC from disapproving large group health plans for the associations. The response consists of the agency’s arguments and supporting declarations from the agency’s manager for the Policy Division, Jim C. Keogh; the Deputy Commissioner for Rates and Forms, Molly Nolette; and the Deputy Commissioner for Legal Affairs, AnnaLisa Gellermann.

The OIC response and declarations do not contain any surprising arguments.  The front end of the response consists of reasons why the Legislature’s adoption of the exemption from small group community rating rules for association plans was a bad thing. After federal health care reform superseded the state exemption, the OIC helped the industry transition to the new “regime.” The agency argues that the trusts can’t show actual irreparable harm, won’t prevail on the merits, and the agency should be permitted to complete its work. The pleadings also provide a few insights into the agency’s views and into the agency’s version of history.

I must note here that I felt somewhat slighted after reading the agency’s response. I did not know the DOL had been advising insurance companies and associations that the creation of separate new trusts from older more diverse industry trusts would not meet ERISA requirements.

“It is the Commissioner’s understanding that DOL also took exception to this approach and shared that information with carriers and associations.” [response at 6]

My conversations with the DOL inevitably and always ended with the classic “we cannot say whether the approach satisfies ERISA because an answer depends upon a review of the facts and circumstances in each case that can only be determined at the time of review.” 

The OIC asserts that Premera neglected to provide information necessary for OIC to determine that the trusts were “bona fide” large group plans.

“To date, the Commissioner has not received any objective information supporting Plaintiffs claims that each association is in fact an employer.” [Response at 20]

In fact, the OIC largely trashes the effort of the trusts to establish bona fide status.

“The only documentation Plaintiffs submit in support of this motion and the complaint, indicates the associations, and the heath trusts were created, effective January 1, 2014, by the representatives of the Seattle Metropolitan Chamber of Commerce.

“The timing of this documentation also indicates that when these groups were created, they were created for the purpose of establishing the trusts that sell large group health plans to their small group members, that the so called associations would otherwise be prohibited from selling.

“Even the conclusory allegations contained in the motion do not come from the employer members of the associations, but rather, from the “fiduciaries” of the trusts that appear to have been formed on the same day, by the same parties, for the same purpose.

“Plaintiffs failed to supply such basic objective information as association meeting dates, minutes of those meetings, agendas for trainings, or the name of a single member other than the trustees when requested by the Commissioner or in support of this motion.” [Response at 21]

One of the more interesting revelations consists of a series of Emails between Jason Froggatt of the Davis Wright firm representing the Seattle Chamber of Commerce (the precursor organization to the trusts) and former Deputy Commissioner for Legal Affairs, Carol Sureau. Clearly, Froggatt had been engaged in conversations with the Department of Labor (DOL) trying to get some idea of how the DOL would respond to the firm’s effort to revise association plans to satisfy both the OIC and DOL.

Mr. Froggatt summarized his discussion with Susan Rees (Chief, Division of Coverage, Reporting and Disclosure for DOL) in an Email to Carol Sureau who then contacted Ms. Rees for confirmation. What’s missing is any summary of the conversation between Ms. Sureau and Ms. Rees. Here are the highlights:

Froggatt to Reese (10/19/2012)

We work with a business chamber. The chamber has a group insurance trust. Because of various changes under the ACA, the group insurance trust will essentially be going away in 2014.

However, there are one or more small industry groups that are part of the chamber (e.g. employers in the aerospace industry, or the commercial construction industry) that may, with the help of the chamber, establish separate medical programs for their employer members.

It appears from the DOL guidance that the assessment of whether an industry group is an “employer” for the purposes of ERISA is made by looking at the membership of the industry group. And that if the industry group is a “group or association of employers” according to the criteria set out by the DOL (e.g. Advisory Opinion 2001704A) then the medical· program offered to the industry group would be an employee welfare benefit plan under ERISA.

If more than one industry group is a “group or association of employers” then each of those medical programs would be separate employee welfare benefit plans under ERISA.

Is that correct?”


Froggatt to Sureau (11/19/2012)

“As you predicted, Ms. Rees did not provide a written yes or no response. But her response did provide the basis for you (the OIC) to move forward with determining whether each separate trust established by the industry groups satisfies the ERISA employer definition.

Her comments: 

– Ms. Rees primarily stressed that the determination of whether a group or association of employers is an “Employer” for the purposes of ERlSA is a facts and circumstances test. In making the determination all facts and circumstances can be taken into consideration. 

– Ms. Rees said: she could not say that she wouldn’t issue a favorable opinion letter based on the information that I provided. 

– Ms. Rees confirmed that there was no requirement that there be a formal association. 

– Ms. Rees did not know of any formal guidance of the DOL contrary to Credit Managers Association of Southern California v. Kennesaw Life and Accident Insurance Co., 809 F.2d 617 (9th Cir. 1987).

Together, her comments could be summarized as: it depends on the facts and circumstances and prior membership in the Chamber benefits program is one fact or circumstance that could be taken into consideration. That is undoubtedly right and although I was more interested in the process of legal analysis, I understand why Ms. Rees was hesitant to provide any guidance to me that could be construed as commenting on the facts and circumstances without us having submitted to her all of the additional facts and circumstances. In general, prior membership in the Chamber benefits program does not seem particularly relevant. Ms. Rees seemed concerned that my description of the “help of the Chamber” may mean that the Chamber controlled the benefit program, not the industry group members. As you know based on our prior request, we would address the control issue the same way that Master Builders and other industry groups have. Satisfying the control aspect will not be an issue; the Chamber will not retain any control of the benefit program.

In the end, Ms. Rees’s comment (although expressed in the double negative) that it may be possible to get a favorable opinion letter based on what we discussed is the green light that you need: prior membership in the Chamber benefits program does not somehow in itself disqualify the structure we discussed. There is no reason to treat our structure differently. As you have with each industry group, you can look at the facts and circumstances and make a determination whether the ERISA definition is satisfied.

I do not think that there is any daylight between the DOL and the OIC in moving forward with this approach.


 Sureau to Rees (11/20/2012)

“I just received the below email from an attorney representing several AHP organizations in Washington.

The concept he describes is a critical one for us and we have refused to accept any plans to reorganize chamber-type AHPs under this structure (separate trusts for separate industries, with the chamber as the umbrella organization) until we got some indication from DOL that this was an acceptable way to organize in order to qualify as an employer under ERISA. If this is a viable way to proceed, we would very much appreciate knowing, as we have several AHPs wanting to go down this road.

What do you think?”


Rees to Sureau (11/22/2012)

“Hi Carol- Thanks for forwarding.

Mr. Froggatt mischaracterizes our conversation in a number of significant ways.

Happy to discuss each of his points with you after the holiday.”

Naturally, nothing in the record presented to the court captures the conversation that was promised after the holiday. So we don’t know what Mr. Froggatt “mischaracterized.” We only know that DOL did not weigh in with written advice and that OIC went on to issue a few approving letters to Mr. Froggatt in 2013. 

Following all of this interaction, it came as a complete surprise that Premera would subsequently file new large group plans with the OIC for the newly formed trusts. According to Ms. Gellermann:

“It was not until February 2014, when Premera filed the 13 association health plans at issue in this case, that my office was aware that the Chamber had persisted with their multiple association and trust arrangement.

I became aware of this fact when reviewing the health plan filings submitted by Premera. The thirteen association health plan filings were nearly identical.

Based on my review of the documentation submitted by Premera, in the rate and form filing process, it appears that Premera, and each of the 13 Plaintiff Associations, are relying on the history of the Chamber to demonstrate that these associations existed prior to 2014.” [at 3]

Less surprising is how this will all turn out if the trusts lose. If the court does not grant the injunction, the agency will disapprove the Premera plans and the employers will be scrambling to find new coverage.

“At this time, the Commissioner’s review of Premera’ s 13 filings is technically still pending. My staff had prepared and loaded its disapproval notices for Premera’s health plan filings. However, due to a question of the impact of the requested administrative proceeding, we have not yet issued decisions in SERFF to Premera.

Currently the OIC anticipates two separate grounds for disapproval of Premera’ s plan filings: one ground, the documentation submitted to date fails to demonstrate that the 13 associations are true associations under the ERISA definition incorporated into the Affordable Care Act; and two, Premera’ s rating methodology and rates are inconsistent with a single large group employer filing.

The disapprovals, when issued, will instruct Premera to stop selling the plans that have been disapproved to new purchasers, and to provide the OIC with a transition plan for moving current enrollees to compliant plans.

I anticipate that employers will have at least 60 days from the date Premera issues notices to its employers that the plans are being discontinued, until employers are forced to transition to a different plan.” [Nollette Declaration at 5]

All this scuffling reminds me of an old meme – “Don’t tase me bro!”