Regulating Health Insurance

New York Times Op-Ed

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Fri, 21 Aug 2009 13:23:00 +0000

Yesterday, the New York Times published my Op-Ed discussing the need for readability standards for health insurance policies. The Op-Ed can be found here.

Making Health Insurance Forms Easier to Read-Interview by WRNI

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Sun, 02 Aug 2009 11:11:00 +0000

On July 31st, I was interviewed by WRNI reporter Megan Hall about the new readability regulations that take effect next August.

Office of the Health Insurance Commissioner Issues Show Cause Order Against HMA Direct

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 30 Jul 2009 22:20:00 +0000

The Office of the Health Insurance Commissioner has issued a Show Cause Order against HMA Direct for violations of Rhode Island's Insurance laws. View a copy of the order here: Show Cause Order-HMA Direct

Motion for sanctions against HMA Administrators

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Fri, 24 Jul 2009 23:00:00 +0000

The Rhode Island Department of Business Regulation has filed a motion for sanctions against HMA Administrators for an alleged violation of the temporary cease and desist order. The alleged violation involves the solicitation of business by HMA through and employee or agent. The temporary cease and desist order (available here) states: "HMA Administrators will not market or sell self-funded ERISA health benefit plans directly or through any affiliated entity to Rhode Island employers pending further order of the Director or Hearing Officer."

According to the motion and its attachments, a Rhode Island insurance producer, who holds himself out as an "Independent Benefits Consultant" for HMA Direct, sent an email to the East Greenwich Chamber of Commerce asking if he could "sit down and review" with the Chamber how HMA direct is "saving [its] clients significant money . . ." The producer also offers to put on a seminar for the Chamber's members.

A hearing has been requested for August 20, 2009. The Motion for Sanctions can be seen here: Motion for Sanctions.

Confidentiality and health insurance rate filings

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 23 Jul 2009 14:54:00 +0000

Rate filings data, including trend data related to price, mix and utilization of inpatient, outpatient, med/surg and Rx, are now available to the public. The insurance carriers' arguments that such information be kept confidential have been rejected.

On May 15, 2009 the Rhode Island Office of the Health Insurance Commissioner (OHIC) received annual rate filings by Rhode Island's three major health insurance carriers. The filings, made by Blue Cross & Blue Shield of Rhode Island, UnitedHealthcare of New England, and Tufts Health Plan, cover both the large employer (more than 50 employees) and small employer (50 or fewer employees) markets. Rhode Island is the only state in the nation to require annual comprehensive rate and trend filings for the entire fully insured group market by major health insurance carriers. The details of the filings can be found here.

Second, we asked whether the APRA creates a general duty of nondisclosure. This question was posed because the carriers also assert that disclosure will violate the UTSA. In order to prevail in a UTSA claim, there must be a "misappropriation" of a trade secret.* Even if we assume that the documents contain trade secrets, there must still be a misappropriation for there to be a violation of the UTSA. Since the carriers do not suggest that the documents at issue were acquired under improper means** or by accident or mistake, and since the documents were obtained directly from the carriers, there can only be a “misappropriation” through disclosure if OHIC has a duty to maintain the secrecy or limit the use of the data forms or their contents.*** We concluded that no duty is created under the state's insurance laws, so we asked if the APRA created any general duty of nondisclosure. The AG indicated that it did not.

A copy of our letter to health insurers is here. A copy of our request for an advisory opinion is here. A link of the AG's opinion is here: AG Opinion Letter.

*R.I. Gen. Laws § 6-41-2(a) (“Actual or threatened misappropriation may be enjoined.”); Read & Lundy, Inc. v. Washington Trust Co. of Westerly, 2002 WL 31867868 at *8 (R.I. Super. Dec. 13, 2002) (“The UTSA proscribes the misappropriation of trade secrets.”); see also Deluxe Pattern Corp. v. Laser Design, Inc., 1995 WL 434433 at *5 (Minn. App. July 25, 1995) (“The uniform trade secrets act requires proof of an ‘actual or threatened misappropriation’ of the trade secret.”); Tubular Threading, Inc. v. Scandaliato, 443 So.2d 712, 715 (La. App. 5th Cir. 1983) (Injunctions may be issued in trade secret cases, but only if misappropriations are actual or threatened.).

**The UTSA provides that “’[i]mproper means includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” R.I. Gen. Laws §6-41-1(1).

***R.I. Gen. Laws § 6-41-1(2)(ii)(B)(II).

Temporary Cease and Desist Order Issued--HMA Administrators

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 08 Jul 2009 13:53:00 +0000

In a post a few weeks ago, I mentioned temporary orders issued by the Rhode Island Department of Business Regulation against HMA Administrators and several of its employees and/or producers. The orders are available here and here.

Discount Health Plans/Discount Health Cards

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Mon, 29 Jun 2009 11:20:00 +0000

A while back I discussed the Universal Health Card and discount health plans in general. Today, the Providence Journal published a front page article about scam discount health cards (including the Universal Health Card).

The combination of rising health insurance costs and the increased attention to health insurance reform has created a perfect atmosphere for scam discount health plans to proliferate. While some discount plans are legitimate, many others are not. A number of states, including Texas, New York, California, and Connecticut require discount health plans to be licensed or registered. Thirty-plus states currently regulate discount plans in some fashion. Rhode Island does not. Should Rhode Island consider regulating discount health plans?

Massachusetts Division of Insurance Issues Order to Show Cause against HMA Direct

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Sat, 06 Jun 2009 14:09:00 +0000

The Massachusetts Division of Insurance issued an Order to Show Cause against several insurance licensees affiliated with HMA Direct. This is the third state to issue a show cause order against HMA Direct. Previously, New Hampshire and Rhode Island issued show cause orders against HMA Direct (see here and here). The Order, filed against HMA MGU, LLC, New England Custom Health Plan Administrators, LLC, Jedediah L. Brettschneider and Mark Allan Celentano, includes 33 claims of wrongdoing. The Order alleges that HMA Direct and its affiliated entities and employees marketed self-funded group health plans to Massachusetts employers and used employees’ health status to make certain high cost employees ineligible or no longer eligible for the employers’ self-funded group health plan. Employers were then allegedly forced to obtain individual health insurance policies for the ineligible employees. These actions allegedly caused the employers’ self-funded health plans to violate the anti-discrimination provisions of HIPAA (Health Insurance Portability and Accountability Act).

The Order further details allegations of misrepresentation on certain insurance license applications. The Division of Insurance is seeking revocation of the individual and business entity insurance licenses of all respondents, as well as fines. For example, the Order details how Jed Brettschneider, the president and CEO of HMA Direct, failed to disclose his prior felony criminal conviction in his application for an insurance producer license. Mr. Brettschneider's criminal record from that incident, including a record of his indictment for felony murder and his guilty plea for possession of illegal drugs is here. The full set of documents is here. More details about the incident are here.

Update: Someone leaving a comment (see the fourth comment) identified another article about the incident.

Update: The link in this post to "Jed Brettschneider, the president and CEO of HMA Direct" leads to the HMA Direct's "Our Team" page. That page used to contain Mr. Brettschneider's photo and bio. Mr. Brettschnieider's photo and bio have been taken down. However, I have no information that suggests Mr. Brettschneider is no longer with the company.

Temporary Cease and Desist Order Issued--HMA Administrators

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Fri, 05 Jun 2009 18:26:00 +0000

This is a follow-up to an earlier post about HMA Direct. Earlier today HMA Direct and some of its current and former agents agreed to a temporary Cease and Desist Order to avoid a hearing. The temporary order (which will be posted as soon as available) will remain in force until a full hearing on the merits has been held. No date for such a hearing has been set. This means that HMA Direct cannot conduct business in Rhode Island until a full hearing has been held on the HMA Direct's alleged illegal actions in Rhode Island.

At the show cause hearing this morning the Rhode Island Office of the Health Insurance Commissioner announced that it would be filing its own show cause order against HMA Direct and its affiliated entities next week.

Rhode Island issues Show Cause Order for HMA Direct

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Fri, 29 May 2009 13:15:00 +0000

The Rhode Island Department of Business Regulation has issued two Show Cause Orders for HMA Direct and its producers. Those Orders will be available when posted. The Show Cause orders seek Cease and Desist orders against HMA Direct and its producers for unlicensed activity in Rhode Island.

New Hampshire has also taken action against HMA Direct (here). The New Hampshire press release is here.

The show cause order for HMA Administrators can be seen here: Show Cause Order-HMA Administrators LLC.

Update on gender rating

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Tue, 05 May 2009 22:23:00 +0000

This afternoon, the Wall Street Journal reported that the health insurance industry said it shouldn’t charge women higher rates for health insurance coverage than it charges men. I discussed the issue of gender rating in a previous post. According to the Wall Street Journal:

"Sen. John Kerry on Tuesday introduced legislation that would prevent insurers from charging women more than men when women buy coverage on the individual insurance market. The Massachusetts Democrat cited research showing that women often face higher premiums than men when they buy identical coverage."

"During a Senate Finance Committee hearing on health-care reform, Karen Ignagni, president of America’s Health Insurance Plans, told lawmakers she doesn’t think gender should factor into women’s rates when they’re buying individual policies. Already the group has said it’s willing to stop charging Americans with health problems more money if everyone is required to have health-insurance coverage."

According to the Kansas City Star, Karen Ignagni said "We don't believe gender should be a subject of rating." Hmmm . . . That isn't what an AHIP-sponsored Milliman report said in 2007. According to an AHIP press release touting the report:

Guarantee issue requires insurers to sell an individual health insurance policy without regard to a person’s health and community rating requires that all consumers pay the same or similar premiums without regard to age or gender. According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance. This could cause premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases. If this continues, the pool or market could essentially collapse or shrink to include only the high risk population. (emphasis added)

In other words, in 2007 AHIP said that gender rating was good because it helped stave off the collapse of the individual market. In reality it helped boost profits by allowing insurers to better control the risk they were willing to accept. In 2009, however, Ignagni and AHIP say that they think gender rating is bad. Why? Because Ignagni and AHIP fear that market-reform pressures could alter the way health insurers conduct their business--and ultimately cut into insurer profits. Thus, Ignagni and AHIP alter their position on gender rating in order to appear to be more consumer-friendly and thereby reduce pressure for more sweeping market reforms.

Rhode Island proposes beefed-up coverage for smoking cessation treatments

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 22 Apr 2009 19:43:00 +0000

Rhode Island has just proposed a regulation that would mandate insurance coverage for all tobacco cessation treatments recommended by the most recent clinical practice guideline, “Treating Tobacco Use and Dependence: 2008 Update.” As far as we can tell, this is the first instance in which this clinical practice guideline has been used as a basis for an insurance coverage mandate. If adopted, this regulation would put Rhode Island at the forefront of coverage for smoking cessation.

The proposed regulation and a concise explanatory statement can be found here.

Currently, the only tobacco cessation treatment for which health insurance coverage is mandated in Rhode Island is nicotine replacement therapy combined with 8 half-hour counseling sessions. The proposed regulation expands the coverage mandate to include smoking cessation treatments recommended by the most recent clinical practice guideline published by the United States Department of Health and Human Services. The Guideline provides an evidence-based path to tobacco cessation.

Updated most recently in 2008, the Guideline recommends the use of seven medications to treat tobacco use, including five nicotine-replacement-therapies (NRTs) and two other medications, bupropion (also known as Zyban) and varenicline (also known as Chantix). The Guideline also recommends three types of intensive cessation counseling: (1) individual (defined as face-to-face) counseling, (2) group counseling and (3) telephone counseling. Each type of counseling can be provided by any suitably trained clinician and is often provided by tobacco cessation specialists. While the Guideline states that either cessation medications or counseling therapies are effective on their own, treatments are even more effective when used in combination.

CMS has updated its COBRA webpage

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Mon, 30 Mar 2009 19:06:00 +0000

The Centers for Medicare & Medicaid Services (CMS) has updated its COBRA Continuation of Coverage webpage to include information on the American Recovery and Reinvestment Act of 2009. The Department of Labor's webpage on the same issue is here.

Rhode Island proposes the highest health insurance readability standards in the nation

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 26 Mar 2009 16:32:00 +0000

Rhode Island has proposed a new rule that would require all health insurance policies to be readable at the eighth-grade level.

Scholarship suggests that health care-related information is among the least comprehensible type of information and that this lack of comprehension can lead to poor overall health, less use of preventative care, and inflated health care costs.

No doubt, health insurance forms contribute to this problem. Although health insurance forms contain critical consumer information, they contain complex and highly technical language. This creates a barrier to comprehension by consumers with low literacy skills and can often be incomprehensible to high-level readers. For example, can YOU understand the following passage from an approved Rhode Island policy?

The following rules determine which is the “primary” program:
a) If the other program is not primarily a dental program, this program is primary.
b) If the other program is a dental program, the following rules are applied:
1. The program covering the patient as an employee or group member is primary over a program covering the patient as a dependent.
2. The plan covering the patient as a dependent child of a person whose date of birth occurs earlier in the calendar year shall be primary over the plan covering the patient as a dependent of a person whose date of birth occurs later in the calendar year provided. However, in the case of a dependent child of legally separated or divorced parents, the plan covering the patient as a dependent of the parent with legal custody, or as a dependent of the custodial parent’s spouse (i.e. step-parent) shall be primary over the plan covering the patient as a dependent of the parent without legal custody. If there is a court decree which would otherwise establish financial responsibility for the health care expenses with respect to the child, the benefits of a plan which covers the child as a dependent of the parent with such financial responsibility shall be determined before the benefits of any other policy which covers the child as a dependent child.
c) If neither (a) nor (b) applies, the program that has covered the patient longer is primary, except that a plan covering the patient as a laid-off or retired employee or the dependent of a laid-off or retired employee shall be determined after those of a plan covering the patient as an employee or the dependent of an employee. However, if the other plan does not have a provision similar to this provision, then this exception shall not apply.

According to the Flesch-Kincaid readability formula, this provision is written at the 20th grade level. 20TH GRADE!!!

Another contributing factor is the problem of low adult literacy rate. According to the Providence Journal, forty-seven percent of Rhode Island’s adult population reads at the sixth-grade level or below.

The purpose of this regulation is to protect the interests and improve the health of health insurance consumers by making health insurance policies easier to read and understand.

Recommendations for readability standards for health-related legal documents generally range from fourth to eighth grade levels.* A readability standard of the seventh- to eighth-grade level to certain health coverage-related documents has already been required in other jurisdictions.** Balancing the high level of adult illiteracy in Rhode Island and the burden of implementing a readability standard, the Office of the Health Insurance Commissioner has chosen to require a readability standard no higher than the eight-grade level for all health insurance policies.

The hearing on the proposed regulation is scheduled for April 30, 2009.
__________________________
*See, e.g., Michael K. Paasche-Orlow, Holly A. Tayor & Frederick L. Brancati, Readability Standards for Informed-Consent Forms as Compared with Actual Readability, 348 NEW ENG. J. MED. 721, 725 (2003) (suggesting that a fourth- to sixth-grade reading level is a suitable target for consent forms for institutional review boards); Sharona Hoffman, Symposium on Bioethics: Thinking About Biomedical Advances: The Role of Ethics & Law: Regulating Clinical Research: Informed Consent, Privacy, and IRBs, 31 CAP. U.L. REV. 71, 89 (2003) (recommending that informed consent documents be written at an eighth grade reading level); State Children’s Health Insurance Program (SCHIP) Renewal Process, U.S. Dep’t Health & Human Servs., Office of Inspector General, Rep. No. OEI-06-01-00370, at 3 (Sept. 2002) (noting that “[m]aterials written at the 7th to 8th grade reading level are the standard for what is readable by and suitable for the general public.”); Martha Williams-Deane & Linda S. Potter, Current Analysis of Oral Contraceptive Use Instructions: An Analysis of Patient Package Inserts, 24 FAM. PLAN. PERSP. 111, 114 (1992) (concluding that patient labeling should be drafted at the fifth or sixth grade level); T. M. Grundner, On the Readability of Surgical Consent Forms, 302 NEW ENG. J. MED. 900, 901 (1980) (suggesting that adult consent forms should be at a maximum of a seventh or eight grade level).

**See, e.g., Minn. R. 9506.0400 (MinnesotaCare) (“A health plan shall provide each enrollee a certificate of coverage approved by the commissioner, a health plan identification card, a list of participating providers, and a description of the health plan complaint and appeal procedure. All written information provided enrollees must be understandable to a person reading at the seventh grade level . . . .”); Tenn. Comp. R. & Regs. R. 1200-13-1-.10 (requiring sixth-grade reading level notifications to Medicaid nursing facility residents); Centers for Medicare & Medicaid Services, Medicare Program; Criteria and Standards for Evaluating Intermediary, Carrier, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Regional Carrier Performance During Fiscal Year 2004, 68 FR 74613, 74615 (Dec. 24, 2003) (noting that letters, decisions, or correspondence that go to Medicare beneficiaries from a Medicare contractor should be written below the 8th grade reading level “unless it is obvious that an incoming request from the beneficiary contains language written at a higher level”); Minn. Stat. § 144.056 (“To the extent reasonable and consistent with the goals of providing easily understandable and readable materials and complying with federal and state laws governing the program, all written materials relating to determinations of eligibility for or amounts of benefits that will be given to applicants for or recipients of assistance under a program administered or supervised by the commissioner of health must be understandable to a person who reads at the seventh-grade level . . . .”). See also section 2.05.14.01 of the RIte Care contract, which specifies that the RIte Care member handbook must be written at no higher than a sixth-grade level.

Can a state Cafeteria Plan mandate work? Only with some help from the Feds

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 25 Mar 2009 21:19:00 +0000

The Rhode Island Office of the Health Insurance Commissioner (OHIC) just issued notice that it intends to adopt a regulation that interprets and applies Rhode Island’s so-called “cafeteria plan” mandate. There is a problem, however. In the course of developing the regulations, OHIC has concluded that implementation of HITI may conflict with certain federal statutes, including the Employee Retirement and Income Security Act of 1974 (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA).

What is a cafeteria plan?

A cafeteria plan is a tax-qualified plan under Section 125 of the Internal Revenue Code that allows employers to give their employees the opportunity to pay for benefits, such as health insurance, on a pretax basis. Pretax benefits lower payroll-related taxes for both the employer and employees. Reportedly, its name comes from the fact that it allows employees to choose between different types of benefits, similar to the choices available in a cafeteria.

Why does Rhode Island have a cafeteria plan mandate?

Employees who participate in group health plans through their employer already enjoy the tax benefits of a Section 125 plan. However, employees whose employer does not offer a group health plan, or employees who are not eligible for their employer’s group health plan, must purchase their health insurance in the individual market. Health insurance purchased by these employees in the individual market does not qualify for any tax subsidy. Thus, in 2007, the Rhode Island General Assembly established R.I. Gen Laws § 27-70-1 et seq., the Health Insurance Tax Incentive statute (HITI) to try to give these employees the opportunity to enjoy the same tax subsidy for their health insurance as those employees who participate in group health plans.

HITI requires employers with more than 25 employees to adopt and maintain a cafeteria plan through which employees and their dependents may purchase health insurance in the individual market. While HITI requires certain employers to establish a cafeteria plan, it neither requires employers to pay for or otherwise contribute to the cost of any health insurance purchased through the cafeteria plan, nor requires employers to set up or maintain a group health plan or take any action that affects an existing group health plan. The HITI implementation deadline for Rhode Island employers is July 1, 2009.

What is the problem with HITI?

In the course of developing its regulations, OHIC has concluded that implementation of HITI may conflict with several federal statutes. For example, HITI may be viewed as preempted by ERISA either because it creates an “employee welfare benefit plan” within the meaning of ERISA or because it “relates to” employers’ ERISA employee welfare benefit plans within the meaning of ERISA. Section 514(a) of ERISA states that ERISA preempts “any and all State laws insofar as they . . . relate to any employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). If applicable, the ERISA preemption would render HITI unenforceable. While some researchers have opined that ERISA preemption is not likely, preemption remains an open question because the U.S. Department of Labor has not provided any direct and formal guidance or opinion as to whether a state law that mandates a cafeteria plan would be subject to ERISA preemption and no court has directly addressed the issue.

Also, COBRA may be an issue. COBRA requires employers with 20 or more employees offering health coverage to allow employees and their dependents who experience a “qualifying event” (e.g., job termination, employee death, dependent child aging out of group eligibility) to continue in the group health plan for 18 to 36 months by paying the full premium (plus up to 2 percent for administrative costs). The IRS definition of “group health plan” under COBRA is much broader than the common understanding of group health insurance and likely includes cafeteria plans, even cafeteria plans that only provide employees the opportunity to fully pay for individually purchased health insurance with pre-tax dollars and involve no employer subsidy of the health insurance premium (See Treas. Reg. 26 C.F.R. §54.4980B-2 (Q&A-1), (Q&A-8)(a)). This may mean that an employer that sets up a cafeteria plan for its employees so that they can purchase health insurance in the individual market may be subject to COBRA’s requirements for its employees’ health insurance, even thought the employee did not get its health insurance through the employer.

HIPAA also may cause problems. HIPAA shares COBRA’s definition of a group health plan. Thus, Title I of HIPAA, which among other things includes restrictions on preexisting condition limitations and prohibits premium differentials within a group based on health status, could also apply to individual insurance purchased through a cafeteria plan. Such restrictions and limitations would make the purchase of individual insurance through a cafeteria plan unworkable.

Other states, like Missouri, have expressed similar concerns. As a result of these potential problems, OHIC was forced to take a “wait and see” approach with respect to implementing HITI. OHIC has construed the requirements of HITI very narrowly so as to minimize the possibility of conflicts with federal law and has proposed a regulation consistent with its narrow construction. This means that the mandate does not apply to self-funded plans or plans that do not already have an employee benefit plan. This interpretation effectively guts the intent of the law--to make health insurance available on a pre-tax basis to those who must buy in the individual market. Unfortunately, OHIC had little choice. If it interpreted the law as broadly as possible, employers might have been forced to choose between violating the state law or possibly violating a federal law.

What can be done?

Only the federal government can fix this problem by either (1) telling the states formally that state cafeteria plan mandates will not conflict with ERISA, COBRA and HIPAA or (2) passing a law that expressly allows for the purchase of health insurance in the individual market with cafeteria plan dollars, with an express ERISA, COBRA and HIPAA exemption. This would be an excellent way for the Obama administration to start its push for health insurance reform.

Health Law Job posting with HHS

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Tue, 24 Feb 2009 11:21:00 +0000

I came across this job post on the AHLA's website. As a former HHS attorney, I highly recommend working for the HHS Office of the General Counsel.

Posting:

The U.S. Department of Health and Human Services, Office of the General Counsel, is seeking a highly qualified attorney to join the staff of the NIH Branch. The attorney will handle a variety of legal matters applicable to the NIH. Salary from $60,989 - $133,543 (GS Grade 11-14). To apply, please submit a resume, 1-2 writing samples, and an optional written statement addressing significant experience in providing legal advice on health-related matters, to Ms. Karen Nemes, ogcvacancy@mail.nih.gov. All qualified candidates will receive consideration without regard to race, color, age, religion, sex, national origin, political affiliation, sexual orientation, marital status, disability, or membership or non-membership in an employee organization. Electronic applications only. Application deadline is March 20, 2009.

Rate Increase for Blue Cross & Blue Shield of Rhode Island Denied

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 19 Feb 2009 20:09:00 +0000

In a decision issued today, Rhode Island's Health Insurance Commissioner denied a rate increase requested by Blue Cross & Blue Shield of Rhode Island for its Direct Pay subscribers. Direct Pay is Blue Cross' health insurance product for the individual market.

The requested rate increase, averaging 5.9%, would have been effective for all new and renewal coverage beginning April 1, 2009. In his ruling, the Commissioner cited two reasons for the denial. First, the Commissioner determined that Blue Cross should not be asking Direct Pay subscribers to make a contribution to Blue Cross' surplus, which now stands at $444 million. Second, the Commissioner found that favorable enrollment trends among healthy subscribers have driven down the costs of Direct Pay, thereby negating the need for a rate increase.

Local media coverage can be found in the Providence Journal and the Providence Business News.

This decision comes at a time when rates in the individual health insurance market seems to be going up everywhere else. According to USA Today:

Among this year's large rate increases on the individual market:

• Anthem Blue Cross in California has notified about 80% of its 800,000 individual policyholders of double-digit increases, many above 30%. Spokesman Ben Singer says rising medical costs are prompting the increases.

• Blue Cross of Michigan is seeking state approval for a 56% increase in individual premiums. Spokesman Andy Hetzel says the company needs to offset losses stemming from state rules making it the sole insurer required to take all applicants.

• Regence Blue Cross Blue Shield of Oregon will raise rates for approximately 10,000 Washington state customers by 27.1% on March 1.

Another Washington insurer, LifeWise, raised rates 17.6% on Jan. 1, according to the Office of the Insurance Commissioner in Washington state.

Small business owners continue to struggle to keep health insurance benefits for their employees

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 29 Jan 2009 12:42:00 +0000

A recent poll by Discover Small Business Watch, compiled each month by Rasmussen Reports, LLC, an independent research firm, found that more and more small businesses are dropping health insurance benefits for their employees. The survey, based on national telephone interviews and survey responses from approximately 1,000 small business owners and 4,000 potential users of small business products and services, found that:

85% of small business owners say they do not offer health insurance to their employees. This is up from 77% a year ago and 74% in January 2007.
Among small business owners who do offer health insurance, 36% say they have considered discontinuing coverage because of high costs.
1/3 of small business owners say healthcare costs have a major impact on their ability to grow their business.
69% of small business owners say that obtaining affordable healthcare for themselves and their employees is "very" or “"somewhat" difficult. This is unchanged from last year.
When asked whether any of their employees go without any health insurance, 28% of owners said yes, 49% said no and 23% weren’t sure.
25% of small business owners are uninsured, which is unchanged from a year ago and up from 18% in January 2007. For the remaining 75% of owners, 11% get insurance through a company plan, 29% obtain insurance through a family member's plan and 32% purchase it separately.
Among consumers, healthcare benefits were a selling point for 68% of them in their decisions to accept their current jobs.
In the Watch’s survey of 4,000 consumers, 43% say healthcare benefits were "very important" when accepting their current job, 25% say they were "somewhat important," 18% answered "not very important," 9% said "not at all important" and 5% weren’t sure.

In Rhode Island, the coverage trend in the small employer market has been downward for several years now. For example, from 2003 to 2005, coverage in RI's small employer market shrank by nearly 15%.

With a slowing economy and rising unemployment, we can expect the downward coverage trend to continue in 2009. This means higher rates of uninsured individuals and families, which in turn places a greater strain on social services, community health centers and hospitals--all of which will all be forced to pick up the slack. We can also expect a greater number of health care-related personal bankruptcies in 2009.

Gender rating lawsuit: California sued over alleged discrimination in health insurance against women

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 28 Jan 2009 12:28:00 +0000

According to the LA Times, the city of San Francisco filed a lawsuit filed yesterday against California Insurance Commissioner Steve Poizner and Cindy Ehnes, director of the Department of Managed Health Care, the regulators who govern state's health insurance companies. The suit alleges that California allows health insurance companies to impose "gender rating" when pricing individual health policies, resulting in women paying as much as 39% more for coverage then men. The practice of gender rating is not unique to California. A 2008 National Women's Law Center Report found "huge and arbitrary variations in each state and across the country in the difference in premiums charged to women and men.” The report found that only ten states ban the practice.

Rhode Island also allows this practice. For example, in the Rhode Island individual market (see current rate sheet), rates for women are can be up to 39% more than for men (e.g., the "preferred" monthly rate for a $400 deductible plan for men and women under 25). Insurance companies and actuaries will tell you that health insurance premiums reflect the underlying cost of health care, and at younger ages women tend to use more health care services than men. San Francisco counters that such pricing discriminates against women seeking health insurance by pricing them out of the market and forcing them to seek health care from city hospitals and clinics.

Insurance is all about spreading risk. In many cases, where that risk is--and is not--spread is an arbitrary decision. Is rating costlier risk at a higher premium always a bad thing? In the case of life insurance, we see the opposite of what happens in health insurance. Younger men are rated as a much higher risk than young women and, therefore, are charged a higher rate for life insurance. Some might argue that this life insurance example shows that everything balances out in the end and that we should accept gender-based rating in insurance. This argument, however, assumes that health insurance is simply equivalent to any other type of insurance. It is not. Health insurance finances the provision of health care in this country. While health insurance does share many of the characteristics of other types of insurance, and does provide a hedge against loss, health insurance is fundamentally different from all other types of insurance precisely because it operates (along with Medicare and Medicaid) as the main financing mechanism for the entire health care industry. No other type of insurance does this. For this reason alone, comparing health insurance to other types of insurance, such as life or automobile insurance, is misleading.

Shouldn't the nation's mechanism for financing health care try to be a bit more equitable? Is it time we start thinking about changing the practice of gender rating in Rhode Island?

Update: A brief NPR stor y that discusses gender rating in the individual market.

UnitedHealthcare offers an option to buy an individual health policy in the future

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Thu, 04 Dec 2008 14:06:00 +0000

Apparently UnitedHealthcare now sells an insurance product that gives someone the right to buy an individual health policy at some point in the future even if he or she becomes sick. The NY Times article describing the product is here.

This "right" costs 20% of the currently premium, payable monthly.

So, if (1) you are not now in the individual market, (2) you can pass a medical screen now, (3) you think that you might need to purchase health insurance in the individual market at some point in the future, (4) you plan to reside in a state where United will (hopefully) be selling in
the individual market when your need for individual insurance arises, (5) you anticipate that you will NOT pass the medical screen when you anticipate needing the insurance, (6) there will be no other viable insurance options available to you when anticipate needing the insurance in the future, and (7) have enough spare cash to pay 20% of the current premium for an individual policy every month (which will be subject to annual increases based on trend, age, etc., depending on the state you reside in) for an indefinite period of time, then this looks to be a really good deal for you.

Once they sell a bunch of these options, maybe UnitedHealthcare could package them into some kind of elaborately structured investment instrument, just like the collateralized debt obligations (the ones made up of all those crappy mortgages) that AIG, in turn, sold all those credit default swaps for!

Universal Health Card-consumers should beware

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Sun, 23 Nov 2008 13:50:00 +0000

Have you seen this advertisement in your local paper? It has started popping up around the country and is getting a fair amount of attention from consumers, consumer groups and the media. Why? Because the so-called "Universal Health Card" does not appear to deliver what it promises.

Here is a sample of what others have to say:

Universal Health Card: Real or Scam? (WFAA, Hunstville, AL)

'Free health card' ad is confusing (The New & Observer, Raleigh, NC)

BBB Says Discount Card May Not Offer Consumers Many Savings (WAAY, Huntsville, AL)

Alarmist health card ad (The New & Observer, Raleigh, NC)

Universal Health Card--Money for Nothing (Consumer Blog)

Don't Get Duped (NY Better Business Bureau)

The RI Office of the Health Insurance Commissioner issued a consumer alert after this advertisement appeared in last Thursday's Providence Journal.

Why did we issue the alert?

1. The ad is misleading because it appears to be an article, but is not.

2. The ad is misleading because it suggests that the card is "free", but there is an $18 "registration" fee.

3. The ad is misleading because it attempts to veil the fact that the card costs $49 per month. The amount "$49" is never printed out, but is spelled out ("forty nine dollars") and is hard to find in this lengthy advertisement.

4. The card does not explain what the discounts are.

5. The advertisement alleges that thousands of health care providers accept the card, but several people who have looked into this have found that this is simply not the case. The card's website provided a list of local RI doctors and hospitals that allegedly accepted the card. I personally called a half dozen doctors and three hospitals. None had ever heard of the card and none accepted it. Someone from one hospital, Roger Williams, told me that they have contacted the Universal Health Card and have demanded to be taken off the company's list of providers.

The bottom line: The buyer should beware.

Cavalcade of Risk #63:The WABAC edition

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 22 Oct 2008 04:01:00 +0000

When trying to figure out what to include in this edition of the Cavalcade of Risk, I was overwhelmed by the many, many submissions, ranging from astrology tips (the risk of planets in de-alignment?) to make-up advice (the risk of bad eye shadow?)--and the submissions from (it seems) nearly everyone with a blog offering advice (from the very wise to the truly bizarre) on how to invest money in these bad times.

So, I thought I'd enter Mr. Peabody's WABAC machine and take a trip back to Hank Stern's very first CoR entry. My purpose was to try discern, applying an originalist interpretation (as this guy would surely do if he were hosting this edition of CoR), the original purpose of the CoR. Hank's first entry on June 5, 2006 read:

Monday, June 05, 2006

Cavalcade of Risk - Defined

Because, well, “Carnival” has been done.

The purpose of the C of R is to offer insights into the world of risk management; generally, this will be insurance-related, but that’s not a requirement. Our goal is to help folks understand what risk is, and how to manage it. It's about business and finance, of course, but it's also about risks in our everyday lives and personal relationships.

The purpose of the C of R is NOT to provide a forum for folks to simply advertise their services, or bash their competitors, or tout any one concept as a panacea.

Ideally, posts will help:

a) Others in the field to learn a new, or different, or perhaps better way of doing something;

and/or

b) Folks not in the field to learn a bit more about how insurance and other risk management schemes work.

I’d like to model this on the new and fascinating Health Wonk Review, which means that the C of R will:

a) Be published bi-weekly

b) Be limited to posts directly relating to risk management (not just insurance in general)

c) At least initially, all posts which do not violate item b will be included.

The first C of R is (tentatively) scheduled for Wednesday, June 7.

So, applying Hank's original understanding of the CoR, as I see it, here are this edition's posts:

Henry Stern, LUTCF, CBC at InsureBlog brings good news for wine drinkers who want to cut their risk of heart disease, but prefer white to red. Apparently, white wine can also help reduce your risk of a heart problem.

David Williams presents Getting past physicians biases to the correct diagnosis posted at Health Business Blog, saying, "If you're a woman --or old or obese-- there's a risk that your physician's unconscious bias will cause your diagnosis to be missed."

Jason Shafrin, everyone's favorite graduate student, at the Healthcare Economist notes that China is aiming for universal health coverage by 2020, with the even more amazing goal of covering 90% of the population within 2 years.

Matthew Paulson presents Insurance You Can (and should) Live Without posted at American Consumer News.

Lawrance G. Lux offers a contrarian's take on the current financial crisis, arguing that lack of regulation has inherent risks.

How come we don't get paid a half million dollars to blog on risk? John Gapper of the Financial Times blogs on a risk management "conference" hosted by AIG, at our expense.

It had to happen: the blogger at Advocate’s Studio, a Boston area attorney, has news about the latest insurance "niche:" policies specifically for bloggers. Pay heed!

And apparently some bloggers need insurance. The Blog Herald reports on the risks of blogging: getting beaten up for something written on a blog.

At The Behavioral Medicine Report, clinical psychologist Christopher Fisher explains that women who smoke increase their risk of depression.

"I can't hear you!" The OSYS News Weblog reports on a recent study which found that those iPods (and other personal music gear) can increase one's risk of going deaf.

Sun presents Money-Market Funds May not Be As Safe As You Think posted at The Sun’s Financial Diary.

Wenchypoo presents Frugality as a Recession Fighter and Depression Killer (L-O-N-G) posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "How to avoid FINANCIAL risk."

nickel discusses increases in government coverage of deposits in FDIC Insurance Limits Increased to $250k posted at fivecentnickel.com.

Floyd Norris at the NYT’s Notions of High and Low Finance explains how Oklahoma State University didn’t see the risk when it thought it had a sure bet with $202 million and a hedge fund managed by T. Boone Pickens.

Even an employer’s wellness program is not without its risks, according to HR Benefits Alert. Employers with their own private gyms risk employee deaths and expensive lawsuits if they do not have lifesaving equipment on the premises or do not have personnel properly trained to use it.

In Business 101 for Joe the Plumber, Louise at Colorado Health Insurance Insider discusses the risks and benefits of the of the Obama and McCain tax plans and how those plans would affect the purchase of health insurance.

That's all for now. Look for the next CoR at My Wealth Builder.

Excessive compensaton: Maryland Insurance Commissioner cuts severance package for CareFirst's ex-CEO

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Tue, 15 Jul 2008 21:30:00 +0000

I've previously written about why I think board members of nonprofit insurers should not be compensated. Today I ran across a story from yesterday's Baltimore Sun which further evidences the large salaries and severance packages paid to top executives at some nonprofit health insurers. For example, it was recently revealed that the president and CEO of Blue Cross Blue Shield of Massachusetts ended 2007 with total compensation of more than $3.6 million. This followed the company's disclosure that its outgoing CEO was paid more than $16 million as part of his overall retirement package in 2006 (see article in Boston Business Journal).

In this case, Maryland's insurance commissioner cut the $18 million severance package paid to former CareFirst BlueCross BlueShield chief executive William L. Jews by $9 million, saying the CareFirst board failed to restrain his compensation and the company "strayed significantly from its nonprofit mission." Nevertheless, Mr. Jews will still receive $9 million.

In 65-page order, Insurance Commissioner Ralph S. Tyler said the retirement package violated a 2003 state law that limits compensation at CareFirst to "fair and reasonable" pay. In a press release, the Commissioner explained his reasons for finding CareFirst’s proposed payment of nearly $18 million to its ex-CEO was unlawful and why a payment half that amount was permissible. The reasons reveal a disconnect between the former CEO and the so-called nonprofit mission of CareFirst. The Commissioner's reasons included:

• the public purpose mission of CareFirst;
• the inconsistency between the company’s statutory nonprofit mission and its proposal to pay its departing CEO $18 million;
• the fact that, under its departing CEO’s leadership, the company strayed significantly from its nonprofit mission;
• the failure of the CareFirst board to act to restrain the former CEO’s compensation;
• the fact that $18 million is almost seven times the former CEO's total annual gross compensation;
• the substantial compensation received by the former CEO (more than $16.5 million in his last six years as CEO, plus another $1.6 million in deferred payments);
• the former CEO’s mixed record of achievement, prominently including the failed transaction
which he championed to convert the company to a for-profit entity and have it acquired;
• the fact that some of the compensation that CareFirst proposed to pay is contrary to the practice at entities similar to CareFirst;
• the fact that CareFirst proposed to continue to pay the former CEO his base salary (approximately $1 million) for one year beyond the expiration of the non-compete provision in his employment contract;
• the fact that the former CEO held the position for 13 years; and
• the fact that more than $2.4 million of the $9 million is for previously deferred payments.

Do inflated compensation packages directly result in higher premiums? Not really. Blue Cross of Massachusetts' CEO's compensation in 2007 was only a minuscule amount compared to the company's total premium dollars in that year. In 2007, Blue Cross of Massachusetts reported $6.7 billion in premiums. So, its CEO's compensation amounted to .054% of those premium dollars. Thus, someone could argue that the direct effect of the CEO's compensation on an individual subscriber's premium that year was negligible--and they would be right.

But the real problem with excessive executive compensation may stem from the indirect effects generated by sky-high salaries and bonus. Nonprofit executives who are paid exorbitant salaries and bonuses may have little (or no) incentive to operate the company in a way other than as a profit-making machine. They may also have little (or no) incentive to engage in meaningful innovation, since the present system is the one that rewards them ever so handsomely. The real damage done by these exorbitant salaries may well be the skewed incentives they create for the executives who run our nonprofit health care sector.

Cavalcade of Risk #48 is up!

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 26 Mar 2008 14:04:00 +0000

Jim Strebing hosts this week's edition of the Cavalcade, available now at Insurance Yak.

RHI Health Blog of the Week

jacoganjr@gmail.com (John Aloysius Cogan Jr.) — Wed, 26 Mar 2008 13:40:00 +0000

The RHI Health Blog of the Week is awarded to an exceptional health-related post appearing during the previous week (Wednesday to Tuesday).

This week's award goes to Midwife With A Knife's post "It's not your fault, except when it is," which discusses what should be said to patients in those small percentage of stillbirth cases (about 10%) that are due to the actions or inactions of the patient, such as uncontrolled diabetes or patients who did not comply with recommendations for regular fetal monitoring. I quote extensively from this post because to do otherwise would not do justice to this fine piece. The post reflects both a physician's concern for her neediest patients as well as her frustrations with those patients:

Most diabetic stillbirths, in fact, occur in patients who are non-compliant with their blood sugars, insulin, and their fetal monitoring regimens. During pregnancy, I give them my "You need to do these things, otherwise your baby could be seriously damaged or die" talk (dead baby talk for short). And despite the dead baby talk, a subset of our patients will not follow our recommendations. Now, I know most of our patients are very poor, but they all get free care through us. We have a baby van that tracks them down and brings them to their appointments. We make sure that they have the appropriate emergency Medicaid so that they can get their insulin. And in fact, few of them have jobs, which makes it easier for them to make their appointments. And we never ask them not to bring their 12 screaming children into the waiting room. We just want them to come however they can, with or without screaming children. Without hospitalizing them for their entire pregnancy and administering their insulin to them (and sometimes we do that, but it's not practical to keep people hospitalized for 9 months of pregnancy because they're non-compliant), we could not do more to make them able to comply. And, rather than telling us they're not taking their insulin, etc. they bring in fake blood sugars. I think it is a case of denial...they don't believe it will happen to them. That combined with the fact that many diabetics don't feel bad until they're really really sick.

So, these noncompliant patients get dead baby talk after dead baby talk. And they have a much higher rate of fetal death than the compliant patients (whose rate of stillbirth is still higher than the general population, but not by a lot). So, when these women come in with their stillbirths, although part of me wants to say (just to be compassionate), "This is not your fault", the other part of me keeps me from saying those words, because they're not true.

I don't know that it really helps the patient to hear "This is not your fault" when it is kind of is their fault. In some ways, these women are suffering a consequence of their lack of personal responsibility (I know it sounds pretty harsh to put it like that). If these women choose to get pregnant again, they deserve to know that they increased their risk of having a stillborn child by their bad behavior. Because if they behave the same with the next pregnancy, they may very well get the same result. And the only thing that's worse for a mom than a single stillborn baby is recurrent stillbirths.

In fact, when women come in for their postpartum visit, and I get to the part of the visit where we talk about the pathology/autopsy results and talk about what caused the stillbirth, I will tell women, "We know that diabetics are at a high risk for stillbirth. And we know that taking your insulin regularly and showing up to have your ultrasounds and have your baby monitored decreases that risk. I see here that your blood sugars weren't well controlled and that you didn't come in for your monitoring visits. My recommendation to you, so that you don't have to go through this again, would be that you avoid pregnancy until you're able to do the things we recommend you do to decrease the risk of stillbirth. If you want to have a safe pregnancy as a diabetic, you have to do these things." At which point I launch into my contraceptive spiel and make sure they have an internist who takes care of their diabetes between pregnancies. We can never get diabetic stillbirths down to 0, but we could get them pretty low, if we had the assistance of the patients.

The thing is, this feels very much like telling the patients that their dead baby is their fault. And in many ways, it is. Telling them that seems unkind. Not telling them that seems unkind. I just worry that laying it out like that does more damage than it prevents. At the same time, I worry that not laying it out like that will do more damage. For now, I'll continue to tell them that they may have been able to prevent the stillbirth, simply because it seems like maybe the best thing for me to do is to empower them to avoid having a repeat stillbirth.

The award is presented every Wednesday. If you would like to nominate a post for the RHI Health Blog of the Week, please contact me.