In a loss deeply felt by grown-ups, the “Greatest Show on Earth” from Ringling Bros. and Barnum & Bailey will close forever in May. The Show featured a three-ring circus that overwhelmed and forced us to choose which of the simultaneous acts to watch. In choosing, we often missed something more exciting in another ring. Today, “three-ring circus” has become synonymous with confusing, public spectacles. The circus may be dead; but, we still have Congress. We still have health care reform acts.
Ringmaster Paul Ryan dazzled us with an act to “repeal and replace” Obamacare. Simultaneously, the House was adopting legislation to repeal the McCarren-Ferguson Act anti-trust exemption for health insurers and authorizing nationwide association health plans. Both measures received support from the White House (here and here).
On March 22nd at 1:52 P.M., the House passed the Competitive Health Insurance Reform Act (H.R. 372) by a vote of 416 – 7. A little later, at 3:39 P.M., the House passed the Competitive Small Business Fairness Act (H.R. 1101) by a vote of 236 – 175. Two days later, Ryan closed down the main act. You may have missed the action in the other rings while you were fuming over Obamacare reform.
H.R. 372 amends the McCarran-Ferguson Act that exempts the business of insurance from federal anti-trust and trade practices laws. The McCarran-Ferguson Act essentially preserved state insurance commissioner regulation of insurance and ensured that competing insurers could share price and cost data for rate-making. H.R. 372 removes the anti-trust exemption for dental and health insurers. Other insurers and types of insurance remain unaffected.
H.R. 372 permits cost and loss data sharing among dental and health insurers. The legislation also removes any remaining ambiguity as to FTC authority over non-profit health plans and insurers declaring that “Federal Trade Commission Act…shall apply with respect to the business of health insurance without regard to whether such business is carried on for profit, notwithstanding the definition of “Corporation” contained in section 4 of the [Act].”
H.R. 1101 amends ERISA by explicitly permitting interstate, “mixed grill” association health plans and coverage of self-employed individuals as “employers.” To qualify and become “certified” by the Department of Labor, an association must demonstrate that it:
(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and providing for periodic meetings on at least an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona fide business association, including a corporation or similar organization that operates on a cooperative basis (within the meaning of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes other than that of obtaining or providing medical care;
(2) is established as a permanent entity which receives the active support of its members and requires for membership payment on a periodic basis of dues or payments necessary to maintain eligibility for membership in the sponsor; and
(3) does not condition membership, such dues or payments, or coverage under the plan on the basis of health status-related factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group health plan participation. [Emphasis Added, §801]
In new definitions under the Act, individuals who are self-employed qualify as employers eligible to participate in association health plans although no mention is made of the fact that most association health plans set minimum employee participation requirements.
(8) PARTICIPATING EMPLOYER.—The term ‘participating employer’ means, in connection with an association health plan, any employer, if any individual who is an employee of such employer, a partner in such employer, or a self-employed individual who is such employer (or any dependent, as defined under the terms of the plan, of such individual) is or was covered under such plan in connection with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan. [Emphasis added, §812]
The association plan rules include some oddities and potential for confusion. For example, while state insurance regulations are preempted in large part to permit multi-state operation, the legislation preserves some aspects of both state law and the old HIPAA non-discrimination language.
(f)(1) Except as provided in subsection (b)(4), the provisions of this title shall supersede any and all State laws insofar as they may now or hereafter preclude, or have the effect of precluding, a health insurance issuer from offering health insurance coverage in connection with an association health plan which is certified under part 8.
(2) Except as provided in paragraphs (4) and (5) of subsection (b) of this section— (A) In any case in which health insurance coverage of any policy type is offered under an association health plan certified under part 8 to a participating employer operating in such State, the provisions of this title shall supersede any and all laws of such State insofar as they may preclude a health insurance issuer from offering health insurance coverage of the same policy type to other employers operating in the State which are eligible for coverage under such association health plan, whether or not such other employers are participating employers in such plan.
(B) In any case in which health insurance coverage of any policy type is offered in a State under an association health plan certified under part 8 and the filing, with the applicable State authority (as defined in section 812(a)(9)), of the policy form in connection with such policy type is approved by such State authority, the provisions of this title shall supersede any and all laws of any other State in which health insurance coverage of such type is offered, insofar as they may preclude, upon the filing in the same form and manner of such policy form with the applicable State authority in such other State, the approval of the filing in such other State.
(3) Nothing in subsection (b)(6)(E) or the preceding provisions of this subsection shall be construed, with respect to health insurance issuers or health insurance coverage, to supersede or impair the law of any State—
(A) providing solvency standards or similar standards regarding the adequacy of insurer capital, surplus, reserves, or contributions, or
(B) relating to prompt payment of claims. [Emphasis added, §801]
Despite these exemptions, association health plans must establish premium rates for participating employers in conformance with state laws governing small group rating. Moreover, the health plan rating standard drags in the HIPAA definition of bona fide association suggesting that the associations that the House contemplates with H.R. 1101 are those which have been around a long time.
(2) CONTRIBUTION RATES MUST BE NONDISCRIMINATORY.—
(A) The contribution rates for any participating small employer do not vary on the basis of any health status-related factor in relation to employees of such employer or their beneficiaries and do not vary on the basis of the type of business or industry in which such employer is engaged.
(B) Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from—
(i) setting contribution rates based on the claims experience of the plan; or
(ii) varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act) [HIPAA], subject to the requirements of section 702(b) relating to contribution rates. [Emphasis added §805]
Contrast the HIPAA bona fide association reference with other provisions of H.R. 1101:
Here’s the HIPAA definition –
(3) Bona fide association
The term “bona fide association” means, with respect to health insurance coverage offered in a State, an association which—
(A) has been actively in existence for at least 5 years;
(B) has been formed and maintained in good faith for purposes other than obtaining insurance;
(C) does not condition membership in the association on any health status-related factor relating to an individual (including an employee of an employer or a dependent of an employee);
(D) makes health insurance coverage offered through the association available to all members regardless of any health status-related factor relating to such members (or individuals eligible for coverage through a member);
(E) does not make health insurance coverage offered through the association available other than in connection with a member of the association; and
(F) meets such additional requirements as may be imposed under State law. [42 U.S. Code § 300gg–91]
Here’s H.R. 1101:
Applicants must demonstrate the sponsor of the AHP has been in existence for a continuous period of at least three years for substantial purposes other than providing coverage under a group health plan. AHPs must be operated, pursuant to a trust agreement, by a board of trustees, which serves as the plan sponsor and is the fiduciary of the plan. The board of trustees must have complete fiscal control and be responsible for all operations of the plan. The board of trustees must consist of individuals who are owners, officers, directors or employees of the employers who participate in the plan. [§803]
Now ask yourself what these references mean in the context of the standard for an eligible association as a “bona fide…trade association, a bona fide industry association, …a bona fide professional association, or a bona fide chamber of commerce.” [Emphasis added, §801] Throw in these standards with existing ERISA opinions on “bona fide” and HIPAA implementing regulations and opinions addressing “bona fide” status. Can’t someone come up with a new phrase? Please?
Unlike Barnum and Bailey, Congress won’t be closing down the show in May. So remember to keep an eye on the acts outside the center ring. There’s more to come in the House and the Senate has just begun.
Also, can we send more grown-ups to Washington, D.C.?