Many folks have asked for explanations and guidance on the creation or continuation of association health plans (AHPs) in Washington State. The tortured history of AHP regulation in this state defies any imposition of rational thought, let alone legal explanation. Here’s one example that you can mull over while you’re parked on the interstate.
Just two months ago, I wrote about the struggles between Moda Health and the Washington Insurance Commissioner (OIC). The OIC had disapproved Moda association health plan filings concluding that these recently formed association trusts were not bona fide under ERISA and had also failed to meet OIC rating requirements.
Moda then forced the associations into federal court as a precondition to continuing existing coverage. Moda did not want to rely upon a letter from association counsel as satisfaction of its due diligence obligations in filing a single large group plan for an association.
The Moda associations went to federal court in Oregon. The judge suggested they take the matter up with the Seattle federal judge where the same issues were pending. The association asked for summary judgment in favor of their bona fide status. The judge ruled against them saying that record before the court failed to demonstrate bona fide status.
At about the same time, an OIC administrative judge ruled against the OIC and in favor of insurers on the issue of whether associations could be forced to rate health plans in the manner demanded by the OIC. Thus, one of the primary grounds for OIC disapproval of association health plans was eliminated. The OIC subsequently approved every association health plan filing where the agency had not challenged the association’s bona fide status. The only issue left to be decided was the ERISA status of a group of associations that the OIC determined had failed the ERISA bona fide association tests.
Last month, the agency’s administrative law judge decided to press the “pause” button while waiting to see how the Seattle federal judge would decide the bona fide issue. A few weeks later, the OIC announced its settlement and the remaining cases were withdrawn.
As of October, the OIC has changed every disapproval of Moda’s 2014 association plan filings to – “Filed without further review per the Order on Motion for Summary Judgment filed on July 1, 2015.”
Here are the revised not disapproved filings:
- Alltech Information Technology Group
- Columbia Retail Industry Group
- Greater Northwest Health Industry Group
- Greater Columbia Manufacturing Trust
- Pacific Business Resource Group
I went back and re-read administrative law Judge Finkle’s July 1st, summary judgment order rejecting the OIC’s disapproval of association health plan rates and I re-read Judge Finkle’s order staying the bona fide issues.
So how does the July 1st order result in an OIC response that the filings should be accepted and not reviewed? I have no idea, and that’s my legal opinion. I simply don’t know how we get from the OIC rejecting and fighting the bona fide status of these associations to walking away without comment.
My educated guess is this: the agency read its own rules and decided not to judge the bona fide status of the association plan. Here’s the rule:
WAC 284-170-958 Transition of plans purchased by association members.
(1) An issuer must not offer or issue a plan to individuals or small groups through an association or member-governed group as a large group plan unless the association or member-governed group to whom the plan is issued constitutes an employer under 29 U.S.C. § 1002(5) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et. seq.), as amended, and the number of eligible employees is more than fifty.
(2) An issuer must make a good faith effort to ensure that any association or member-governed group to whom it issues a large group plan meets the requirements of subsection (1) of this section prior to submitting its form and rate filings to the commissioner, and prior to issuing such coverage. An issuer must maintain the documentation supporting the determination and provide it to the commissioner upon request. An issuer may reasonably rely upon an opinion from the U.S. Department of Labor as reasonable proof that the requirements of 29 U.S.C. 1002(5) are met by the association or member-governed group.
Here’s an excerpt from the OIC instructions for filing association health plans:
G. 5. Major medical plan filings must attach a PDF document titled “Evidence as an Employer” on the Supporting Documentation tab. The document must include, at a minimum, the following information:
- A copy of the association bylaws; and
- A copy of the trust agreement or other organizational document which shows the purpose of the association and who governs the association; and
- A statement of the association’s history; and
- A copy of the occupational categories/ industry classifications comprising the employers in the association; and
- An advisory opinion from the Federal Department of Labor demonstrating that the group is qualified to purchase association coverage;
- In the absence of a Federal Department of Labor opinion, an opinion from an attorney explaining how and why the association qualifies as a true employer under 29 U.S.C. § 1002(5) of the Employee Retirement Income Security Act (ERISA) of 1974.
We have literally arrived at the beginning of the OIC’s bizarre association health plan review process begun in September 2012. That process resulted in the grand announcement and formal letter that the OIC had approved the bona fide status of the Master Builders Association. As the agency initially advised – “AHPs will need to deal directly with DOL for guidance as that organization is the final determiner of status.”
After three years of enormous expenditures of time and money, the Commissioner appears to have decided not to argue over an association’s “bona fide” status. This feels like a triumph of literacy over desire; but, the cramp in my brain won’t let me enjoy it.