Good Grief! I don’t know how SSB 5605 managed to survive in the state Senate this far. Watching the testimony and reading the reports about the legislation reminds me of the old Abbott and Costello classic baseball comedy routine “Who’s on first?” (I already told you I was oldish.) With so much misinformation, any senator in his or her right mind would be forgiven if they just said, “What?” Of course, the misinformation game is as politically old as the Abbott and Costello comedy bit. (You can watch the roufftine here.)
The bill does just one thing – if passed, the legislation would maintain the status quo by preventing the Insurance Commissioner from taking on the federal government’s job. Here is the operative sentence of the bill:
“Until or unless the United States department of labor prohibits the treatment of a health plan issued to an association or member-governed group as a large group plan, any rate or form filed by any life and disability carrier for health benefit coverage to employers purchasing health plans through that association and member-governed group shall be deemed and may only be reviewed as a negotiated large group filing by the insurance commissioner…”
That seems pretty clear to me. Until the feds say otherwise, stay the course. Here is the existing state law:
“Employers purchasing health plans provided through associations or through member-governed groups formed specifically for the purpose of purchasing health care are not small employers and the plans are not subject to [the state small group community rating law].” (RCW 48.44.024)
Here is what the Insurance Commissioner advised about his existing powers to regulate association health plan rates in a presentation to insurers several months ago:
“Associations which do not qualify as an Employer Health and Welfare Benefit Plan under ERISA, continue to be exempt from State Community rating laws but at the plan renewal in 2014 must comply with Federal Community rating laws ‐and will be made up of individual, small and large employer groups for Federal Rating purposes.” (page 5)
“Federal Rate Review Regulations –How does It Impact Association Health Plans?
Sets forth a process for filing of rates with CCIIO if the state is deemed to not be an effective rate review state for Association Health Plan Business (Washington is not and effective rate review state for AHP business).” (page 4)
In other words, federal law governs associations both in terms of rate review and in terms of classification of an association as a single large plan under federal law. Again, here is the Commissioner’s advice to insurers and their association plan customers:
“Consider direct contact and or meetings with DOL to clarify their expectations –OIC has learned a great deal over the past year but DOL is the ultimate decision maker.” (page 16)
Pretty straightforward, right? The legislation tells the Commissioner to defer to the federal agencies. Even the Commissioner admits that the OIC does not qualify as “an effective rate review state” because of the longstanding (18 years) treatment of association plans as large group plans for rate review purposes. Seems straightforward to me – let the feds put these plans out of business. But here is a quote from the Senate staff analysis summarizing the OIC opposition to the bill:
“The federal DOL is responsible for determining whether an association is a bona fide group that will still be subject to large group rating. The federal guidance has made it clear that associations with small employers have to be rated as small groups. This language tries to create a federal pre-emption which is an important issue driving our fiscal impact estimate.”
How is a statement that the Commissioner must continue to follow state law until the federal government says otherwise an attempt to “create a federal pre-emption?” More to the point, the analysis makes no sense. State law cannot create a “federal preemption.” Federal health care reform already preempts state law. Staff explanations to the Senate Ways and Means Committee didn’t help to clarify the confusion.
Staff described the purpose of the bill as creating a state exception to federal health care reform law (You can actually watch the explanation here. I love the TVW video record label of the bill as pertaining to “Water/Fire Suppression.”)
Staff went on to explain that associations use insurers strictly as third party administrators like the Washington Education Association. Staff also explained that the state collects no premium tax from coverage provided through associations and the fiscal note reflected that fact. Namely, if more small businesses purchased coverage through associations under the bill, the state would lose more revenue.
The next day, Senate staff corrected the error noting that association health plans are subject to the premium tax. Staff also noted that the OIC assumptions about revenue loss might or might not happen and that other scenarios were possible. In other words, the “fiscal note” was just a lot of guessing by an agency with a longstanding opposition to association plans looking for a math reason for opposition.
Of course, you can’t blame Senate staff for not grasping the OIC argument. The OIC argues that It’s not that insurers fail to pay premium taxes for coverage sold to associations but rather, coverage costs less when bought from associations. If small businesses failed to pay the higher private market price for reformed coverage, there would be less premium to tax. On the other hand, reform is just as likely to create the opposite effect. Richer benefits and community rating will raise market prices and generate even more revenue.
Representatives of associations testified as well. Some of this testimony was just as wrong as the staff analysis. Federal law does not require insurers selling coverage to bona-fide associations to sell such coverage to everyone in the state. Federal law requires an insurer selling a non-grandfathered small group policy to sell it to everyone not just association plan members. An insurer selling a plan to a bona-fide association would be selling a large group plan under federal law which is not subject to that standard. But hey, let’s not be picky about the law, it’s just too hard, darn it!
What I find to be such a puzzle is the cavalier attitude about state regulatory practices that could eliminate coverage for the majority of small businesses after all the promises that they could keep the coverage they had if they liked it. Why should the state shut down an association plan if the federal government won’t?
If everyone agrees that the determination of the status of an association is a federal matter, why should the OIC be permitted to shut down plans according to the agency’s own opinion which does nothing to settle the federal question?
What’s wrong with legislation that tells the Commissioner to continue reviewing association plans as they are now until the federal government says otherwise? How can doing something exactly the same way you’re doing it now create new costs? I must be missing something and no, it’s not that I don’t understand that some policymakers want these small businesses to pay more for coverage so that others can pay less. To me, it’s a simple legal question in an era where laws have become an afterthought and regulatory authority is less important than good intentions.
In spite of the poor efforts to describe the legislation, SSB 5605 passed the Senate Ways and Means Committee by a vote of 15 in favor and 6 against.
Senators recommending for the measure:
Andy Hill, Chair (R)
Jim Honeyford (R)
Michael Baumgartner (R)
Barbara Bailey (R)
Randi Becker (R)
John Braun (R)
Bruce Dammeier (R)
James Hargrove (D)
Brian Hatfield (D)
Mike Hewitt (R)
Mike Padden (R)
Linda Evans Parlette (R)
Ann Rivers (R)
Mark Schoesler (R)
Rodney Tom (D)
Senators recommending against the measure:
Karen Fraser (D)
Bob Hasegawa (D)
Karen Keiser (D)
Jeanne Kohl-Welles (D)
Ed Murray (D)
Sharon Nelson (D)
The legislation has a long way to go and more than enough opponents along the way. Dare I hope that opponents can be honest and say, “we need the association plan money to cover costs when the high risk pool is closed under reform; so they’ve got to go.”
Why spend all the time and energy coming up with fake arguments and misinformation? It’s exhausting.