On July 1st, administrative law Judge Finkle granted summary judgment to Cambia, the Master Builders Association (MBA Trust), Building Industry Association of Washington (BIAW Trust), and Northwest Marine Trade Association (NMTA Trust). The judge’s ruling permits an association qualifying as a bona fide employer health plan under ERISA to calculate and charge separate health plan rates for each participating member employer of the association. [Edit: the Judge applied the same analysis in finding against the Commissioner in a challenge by the Washington Counties Insurance Fund.]

In a total loss to the Washington Insurance Commissioner (OIC), administrative law Judge Finkle ruled against the Commissioner on every legal argument made by the Commissioner.  The Commissioner had disapproved the association health plans (AHP) because the rates were not calculated and charged based upon the association as a whole – a kind of “community rate” for the association health plan. The Commissioner had also argued that neither Cambia nor the AHPs had a right to challenge his decisions.

The judge meticulously considered every possible analysis in support of the Commissioner’s position. However, unlike the recent fiasco surrounding the previous, longstanding administrative law judge Petersen, the contracted replacement, Judge Finkle, made the following observation about his role:

In considering the present Order, which is an administrative action, I do not act as a reviewing court, but as the commissioner’s designee. I would not be properly discharging my responsibility if I entered an Order that was not well-grounded in law. [Decision at 10]

Accordingly, the judge ruled as follows:

  1. Contrary to the OIC’s assertion, the AHPs and Cambia were “aggrieved” by the Commissioner’s action.
  2. Both the AHPs and Cambia have “standing” under the insurance code and the state Administrative Procedures Act to bring an administrative challenge against the OIC plan disapprovals.
  3. “No substantial evidence was offered to support the proposition that the benefits – i.e., the advantages derived – under the AHPs are unreasonable in relation to the amount charged. To the extent that the OIC relied on RCW 48.44.020(3) as the basis of its disapprovals of the AHPs, such reliance was the result of an erroneous interpretation or application of the law.”
  4. “RCW 48.44.024(2) exempts the AHPs from the small group market community rating requirements that would otherwise apply to small Participating Employers and permits rating at the Participating Employer level.”
  5. “To the extent that the OIC relied on specified HIPAA provisions as the basis of its disapprovals, such reliance was the result of an erroneous interpretation or application of the law.”
  6. “A CMS bulletin is not an authoritative statement of federal law. But even assuming the bulletin were considered to have evidentiary value, it does not discuss the permissibility of rating at the Participating Employer level, or refer to any statute or regulation that does so.”
  7. The OIC was wrong in its analysis of Fossen v. Blue Cross Blue Shield of Montana which “did not hold that any federal law prohibits rate setting at the Participating Employer level where an association is a Section 3(5) employer.”
  8. “The OIC cites to an October 16, 2014, email from Doug Pennington of the Center for Consumer Information and Insurance Oversight (“CCIIO”), the unit within CMS that helps to implement ACA reforms and oversees implementation of private health insurance provisions. CCIIO does not have jurisdiction over the 2014 [Washington State AHP] Filings. Mr. Pennington’s email does not discuss any specific federal statute or regulation, but instead only his opinion of what is “inappropriate.” The email does not provide helpful evidence of federal requirements.”
  9. [Federal health care reform’s community rating requirements] “restricts rating in the individual and small group markets without addressing the rating of association health plans.”
  10. “Nothing in 45 CFR 154.102 or in the discussion at 76 FR 54969 prohibits rating an AHP at the Participating Employer level if this is permissible under State rate filing laws, as it is under RCW 48.44.024(2). Nor does any other cited federal authority prohibit this practice.”
  11. “In sum, to the extent that the OIC relied on specified provisions of the ACA as the basis of disapproval, such reliance was the result of an erroneous interpretation or application of the law.”

Finally, in response to the many arguments by the Commissioner about how bad things would happen in health plan markets if the Commissioner could not impose his regulatory standards upon AHPs, the judge ruled as follows:

The OIC asserts that the AHPs “cherry-pick” employers with younger, healthier workers, forcing less desirable employers and workers to enter the uncompetitive, high-premium, individual health insurance marketplace. The AHPs assert that if the OIC requires current enrollees to transfer to other plans, they face the risk of higher premiums and reduced benefits.

Whatever the merits of these competing assertions, I base this Order on my understanding of applicable law, not on an attempt to balance the equities.

The Washington State Legislature could address the OIC’s “cherry-picking” and other concerns about association health plan rating practices by repealing or amending RCW48.44.024(2). Future federal legislation or regulations could preempt that statute. However, as long as RCW 48.44.024(2) exists in its present form and is not preempted, the AHPs may be rated at the Participating Employer level.

This 4th of July, I will celebrate with renewed faith in the rule of law and a belief that the executive branch of government can be brought to heel when it fails to follow legislative enactments.

However well intended the Commissioner’s goals or the public benefits of his decisions, he was not elected to decide public policy matters. He was elected as a steward of the public’s decisions expressed through its elected legislators.