I know I promised to publish more of the bona fide association plan rate and form filings; but, I stumbled across the following “Objection Letter” from the Office of the Insurance Commissioner (OIC) to Regence for a filing made on behalf of the Northwest Fire Fighters Benefits Trust. I have been puzzling over it ever since.
I am absolutely stumped as to how the OIC reconciles its analysis with the federal regulation cited in the letter. My mystical powers have faded after reading so many filings. So let’s have a scavenger hunt. I invite you tender reader, to find me the bridge between the letter and the regulation each quoted below.
OIC Objection Letter- 02/05/2014:
This letter has been sent to you under rate filing B861-129359640 . We are restating and requiring you to respond in the public form filing. Please see the objections below and provide your response before the Response By date.
First, Health Insurance Portability and Accountability Act (HIPAA) prohibits discrimination against participants and beneficiaries based on a health status-related factor. Under 29 CFR Chapter XXV, Section 2590.702, a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for the eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual.
(i) Health status.
(ii) Medical condition (including both physical and mental illnesses).
(iii) Claims experience.
(iv) Receipt of health care.
(v) Medical history.
(vi) Genetic information
(vii) Evidence of insurability.
If an association health plan (AHP) is a true-employer large group health plan (the association is defined as an “employer” under 29 U.S.C.S. 1002(5)), a health plan offered to the association is ONE large group health plan, and the carrier and the association must comply with HIPAA (29 CFR Chapter XXV, Section 2590.702) that prohibits discrimination against participants and beneficiaries based on a health status-related factor.
An issuer may use any non-health status-related rating factors permitted by federal or state law for a particular large group health plan such as demographics, age, area, and gender. However, Under HIPAA, an issuer or association must not use health-status related data or information from a specific participant, a subgroup of participants, or a group purchaser within the association to establish rates for the participant or the group purchaser. This includes specific health status, claims experience, participation requirements, etc. As an example, for any two similarly situated individuals (the same age and gender) within the association employer, the association health plan as the group health plan or the carrier as the issuer cannot charge higher rates for one individual simply because the one individual has more medical claim history or existing medical conditions than the other individual.
– Cover Memo (Supporting Document)
Comments: As required by the Washington State SERFF Health and Disability Form Filing General Instructions, please submit a certification from a company officer that this association group health coverage as one large group meets the requirements of HIPAA under 29 CFR Chapter XXV, Section 2590.702. [Objection Letter, emphasis added]
So, according to the OIC, every employer purchasing coverage for their employees from a bona fide association must be charged a rate without regard to the loss experience of the employer. For this principle the OIC cites 29CFR Chapter XXV, Section 2590.702 which states in part:
(c) Prohibited discrimination in premiums or contributions—
…(2) Rules relating to premium rates—
(i) Group rating based on health factors not restricted under this section. Nothing in this section restricts the aggregate amount that an employer may be charged for coverage under a group health plan. But see § 2590.702-1(b) of this Part, which prohibits adjustments in group premium or contribution rates based on genetic information.
…(iii) Examples. The rules of this paragraph (c)(2) are illustrated by the following examples:
(i) Facts. An employer sponsors a group health plan and purchases coverage from a health insurance issuer. In order to determine the premium rate for the upcoming plan year, the issuer reviews the claims experience of individuals covered under the plan. The issuer finds that Individual F had significantly higher claims experience than similarly situated individuals in the plan. The issuer quotes the plan a higher per-participant rate because of F’s claims experience.
(ii) Conclusion. In this Example 1, the issuer does not violate the provisions of this paragraph (c)(2) because the issuer blends the rate so that the employer is not quoted a higher rate for F than for a similarly situated individual based on F’s claims experience. (However, if the issuer used genetic information in computing the group rate, it would violate § 2590.702-1(b) of this Part.)
In other words, the employer may be charged more but the individual employee cannot be assigned a higher rate for his or her own loss experience. Right?
The OIC analysis fits the federal regulation only if we pretend each employee of each participating employer is really an employee of the association or maybe each employer is an employee of the association and the employer member’s employees are beneficiaries or…help me out here because my law professors did not teach me pretend law.
Why does the OIC feel the need to interpret federal regulations to achieve policy objectives that the federal agencies could achieve by amending their own rules?
Seriously, if anyone can find me a federal regulation or federal guidance that requires every employer purchasing through an ERISA bona fide association plan to pay without regard to loss experience, contact me.