By Harris Meyer
August 7, 2018 - Modern Healthcare
State insurance regulators have expressed confusion and
worry over the Trump administration's new rule expanding association health plans,
with some issuing emergency rules and guidances limiting the operation of such
plans.
They also are upset that the U.S. Department of Labor abruptly
discontinued its weekly conference calls with them to discuss how to harmonize
the federal AHP rule with state laws after 12 Democratic attorneys general sued the federal government on July 26 to
block the rule.
At the National Association of Insurance Commissioners
conference in Boston last weekend, a Labor Department representative declined to
answer specific questions about states' regulatory authority over AHPs, saying
his legal counsel was not present, according to Washington State Insurance
Commissioner Mike Kreidler.
On Aug. 2, Pennsylvania Insurance
Commissioner Jessica Altman sent a letter to Labor Department Secretary Alex
Acosta and HHS Secretary Alex Azar stating that, contrary to the federal rule
finalized in June, associations cannot form for the primary purpose of selling
health insurance. That favors well-established business associations and is
considered an important protection against fraudulent or inexperienced plan
sponsors.
The letter, citing existing Pennsylvania law, also stated that
association plans must comply with state laws and Affordable Care Act provisions
governing individual and small group plans, and that self-employed individuals
cannot join association plans. Both those provisions conflict with key parts of
the federal rule, which is intended to make cheaper, leaner, non-ACA compliant
coverage available to small employers and self-employed people, similar to
coverage available to large employers.
Altman and other state regulators
warn that expanding access to association health plans poses a greater threat to the stability of their markets
than expanding the availability of short-term plans, another recent Trump
administration move. That's because they believe AHPs have the potential to draw
far more people out of the Affordable Care Act-regulated market. They also point
to the danger of fraud and insolvencies tied to lightly
regulated association plans.
Some states have taken action or are
considering action to limit or bar short-term plans.
To
guard against the risks of association plans, state regulators say AHP sponsors
and carriers will have to comply with state and federal requirements on
essential benefits, protections for people with pre-existing conditions,
out-of-pocket limits, medical loss ratios and other rules. Such requirements
would make it difficult or impossible for AHPs to offer premiums lower than ACA
plans. Many of the states taking this position are plaintiffs in the lawsuit
seeking to block the AHP rule.
But business groups seeking to launch AHPs
are threatening to legally challenge state moves to restrict AHPs.
On
Aug. 1, Michael Pieciak, commissioner of the Vermont Department of Financial
Regulation, issued an emergency rule stating that federal rule
does not preempt his state's ability to regulate its insurance market and
protect consumers against poorly run or fraudulent association plans. The rule
said association plans must offer the ACA's essential health benefits and other
consumer protections and cannot discriminate against any applicants based on
pre-existing medical conditions.
Insurance regulators in California, Massachusetts and New York also have issued bulletins
announcing that AHPs will have to comply with existing state and ACA
rules.
In the AHP final rule, which President Donald Trump last fall
ordered agencies to draft, the Labor Department said that state authority to
regulate AHPs is not modified or limited by the rule. It takes effect this year
for new fully insured AHPs and in 2019 for new self-insured association
plans.
But given the looming sales of AHPs, state regulators want to know
as soon as possible what restrictions they can place on the plans. They fear the
Trump administration may argue that state regulation is preempted by the federal
Employee Retirement Income Security Act, which governs self-insured employer
health plans.
"I wrote the letter because the new rule has created more
questions than answers and there's not currently a venue for regulators to get
answers from the Labor Department," Pennsylvania's Altman said in an interview.
"I said this is what we're going to do, tell me if we're off-base. Depending on
what they say, we'll decide whether to go forward."
Vermont's Pieciak
said he issued the emergency rule because he wants to protect the stability of
his state's individual and small-group markets. Blue Cross and Blue Shield of
Vermont asked for an additional 2.9% premium increase due to the likelihood that
association plans will siphon healthier individuals and groups out of the
ACA-regulated market.
"We're saying AHPs have to compete on the same
level playing field as ACA plans," Pieciak said. "There's the possibility for
AHPs to disrupt our ACA market, and we want to mitigate that."
California
will not allow any new association plans to form, though the five existing
multiple employer welfare arrangements can sell plans to new employers in the
same line of business, according to Janice Rocco, deputy commissioner at the
California Department of Insurance.
The Massachusetts Division of
Insurance will require any association plans to offer all essential benefits
required under state law, which are similar to ACA essential benefits. Consumers
buying plans without essential benefits would be subject to a tax penalty under
the state's requirement that everyone have insurance.
The Labor
Department and the CMS did not respond to requests for comment.
But
Christopher Condeluci, a Republican healthcare lobbyist who is working with
business groups to launch AHPs, said his clients will lobby state insurance
departments and state lawmakers in Pennsylvania and elsewhere to allow
association plans to move forward. Those business groups include the National
Restaurant Association and the National Association of Realtors.
If state
regulators stand by rules making it difficult or impossible for AHPs to operate,
he warned that his clients will sue, alleging the such rules violate ERISA. Such
lawsuits likely would come after resolution of the federal lawsuit filed in
Washington by Democratic attorneys general.
"The position those states
are taking is ripe for an ERISA preemption challenge by private parties,"
Condeluci said.
The states that so far have issued new rules or policy
statements limiting AHPs are Democratic-led states. But insurance regulators in
both red and blue states are nervous about an expansion of AHPs given the long
history of fraud and insolvencies involving these types of plans.
Mississippi Insurance Commissioner Mike Chaney, a Republican, said he's
seeking clarification from the Labor Department about the rules governing AHPs,
and that he'll require such plans to receive state licensing.
The Trump
administration, however, wants associations to be able to readily sell health
plans across state lines to small employers that are in the same general line of
business. That prospect particularly alarms state regulators.
The U.S.
Government Accountability Office identified 144 "unauthorized or bogus" plans
from 2000 to 2002, covering at least 15,000 employers and more than 200,000
policyholders, leaving $252 million in unpaid medical claims. Some were run as
pyramid schemes, while others charged too little for premiums and became
insolvent.
Citing ERISA, abusive AHP operators often have taken
advantage of unclear lines of regulatory authority between the states and the
federal government. Patients have had to file for bankruptcy to escape
providers' claims for large unpaid bills.
Experts warn that under the new
federal rule, small employers and self-employed individuals desperate to find
cheaper premiums as ACA marketplace rates rise will be particularly vulnerable
to plan operators promising rates that are too good to be true. In addition, the
new rule will allow groups to form that lack the close professional bonds of
true industry associations.
"The long history of corruption and ineptness
has left a strong odor among many regulators who are concerned whether they'll
be returning to more of the same" under the new rule," said Jim Quiggle,
spokesman for the Coalition Against Insurance Fraud, which includes the Blue
Cross and Blue Shield Association, the National Association of Insurance
Commissioners and Families USA.
In Washington, Insurance Commissioner
Mike Kreidler, a Democrat, wants clarification from the Labor Department on
whether and how he can regulate association plans sold by out-of-state insurance
carriers. He said association plans in his state already are hurting the
individual and small-group markets by using medical underwriting to raise
premiums for firms with sicker workers, forcing them to switch to ACA plans and
driving up overall rates.
But he doesn't expect the Trump administration
to clarify the scope of state regulatory authority until after the November
elections.
"I'm not opposed to AHPs," Kreidler said. "I just want them to
play by the rules."