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One of the issues we studied in class last semester was the usually, customary and reasonable (UCR) exclusion. I mentioned that there was litigation pending over this as well as several investigations. Today’s Los Angeles Times reports a significant development today.

Anthem Blue Cross of California parent WellPoint Inc. colluded with database firm Ingenix to fix prices in a multistate scheme to underpay doctors for so-called out-of-network medical care, physician organizations contended in a lawsuit filed Wednesday. 

The American Medical Assn., the California Medical Assn. and other state medical organizations said in the suit filed in federal court in Los Angeles that the scheme cost physicians millions of dollars and resulted in patients paying more than they should have.

By Dominique Donaho

UnitedHealth Group is now offering a recession special:  the right to buy insurance… later.  For 20% of the regular premium rate, you can lock in your eligibility to a plan, even if you eventually become sick.

Critics of the “UnitedHealth Continuity” have a few quibbles.  For one, the individual who purchases this type of plan is “betting against health reform.”  If the Obama administration is serious about offering widespread health care, even to the sick, the Continuity plan may become irrelevant.  The real question is at what point health care would become universally accessible, and whether the individual wants to hedge against it until then.

The other big problem is the risk of adverse selection.  The Continuity plan, which accepts healthy individuals, is very attractive to people who “plan on” receiving a terrible diagnosis in the near future.  While these individuals would see their premiums increase in correlation with their higher risk of insurability, these individuals would at least find themselves eligible for coverage.

For those who see bleak employment futures, they may want to consider the more expensive COBRA instead of the Continuity plan.

It seems that UnitedHealth’s offer would most appeal to individuals who do not have access to insurance and do not plan on later gaining access but do worry about becoming uninsurably sick.

By Ian Wasser

In the United States, health insurance benefits are often included in employment compensation packages.  Thus, to be insured, one must typically have a job.  But what happens when there is racial inequality in the job market? Does this translate into minority groups essentially being denied health insurance coverage and therefore having an unnecessarily higher mortality rate?

The answer might be yes.  According the the Bureau of Labor Statistics, unemployment rates differ between majority and minority groups.  For instance, in 2003, the unemployment rate for white males was 5.0% while the unemployment rate for african-american males was 10.3%.  If health insurance is exclusively linked to employment, then clearly twice as many african-american males are being denied health insurance coverage when compared to white males.

As applied, the health insurance regime in the United States clearly violates the equal protection clause of the Fourteenth Amendment.  Specifically, the practice of linking health insurance to employment places an often already disadvantaged class of people into a position of further disadvantage.  This translates into poorer health and higher mortality.  Can it then be said that employment-linked health insurance, on the whole, is Unconstitutional?

By Ian Wasser

Is there really a clear distinction between dental health issues and “traditional” health issues?

The American Dental Association reports that evidence suggests that gum disease and periodontal disease both have negative consequences on heart health.  Heart disease is the leading cause of death in the United States.  Wouldn’t it make sense to consider all of the potential factors that contribute to heart disease, including high cholesterol, high triglycerides, high blood pressure, gum disease, and periodontal disease in the same category?  And, along this same line of reasoning, shouldn’t dental coverage be included in all general health insurance policies?

Typically, employers that offer group health insurance plans also offer separate group dental insurance plans.  While the availability, renewability, and portability of  health insurance plans are all subject to HIPAA regulation, additional “add-on” insurance coverage like dental and vision plans are excluded from HIPAA regulation.  42 U.S.C. § 300gg-21.  This has the effect of denying an employee, who elects add-on insurance coverage, a certificate of creditable coverage should his or her employer change add-on insurance plans.

What this could mean is that, with each successive change in dental insurance plans, an employee is potentially barred from coverage for pre-existing dental issues.  But, dental health deteriorates with age–isn’t every cavity necessarily a pre-existing condition? By failing to include dental benefits as an “integral part of the plan,” employers fail to encourage their employees to seek dental insurance and to see a dentist regularly.  In the long-term, this jeopardizes both the health of the employee and adds costs for the employer–certainly heart disease is more expensive to treat when compared to paying for routine dental check-ups.

By Gary Saunders

The Bush-sponsored bailouts of major financial institutions extends beyond the lending sector.  While it is not as dramatic a crisis, the Massachusetts state-sponsored health plan has had its own financial woes, requiring more and more funds from Medicaid and other sources to keep it afloat.

The original article outlining the Federal increase in funding was reported in the Boston Globe on October 1, 2008, and can be referenced here:

http://www.boston.com/news/local/massachusetts/articles/2008/10/01/mass_gets_106b_for_healthcare_insurance/

To sum it up, Massachusetts will be expanding its healthcare law thanks to a federal promise of $10.6 billion dollars over the next three years.  The deal will give Massachusetts $2.1 billion dollars more than it received from the federal government for the past three years for its Medicaid waiver package.  The purpose of the waiver is to allow Massachusetts to provide subsidized health insurance to people who would normally not qualify under the Medicaid income standards.

This approval of additional funding is atypical.  Many other states have been unsuccessful to secure more funding for programs which provide health insurance to peoples whose incomes traditionally have not qualified them for Medicaid.

Since Massachusetts has begun its health insurance program two years ago, it has added about 440,000 people to the insurance roles, approximately half of those through employer-sponsored programs.  As of several months ago, the state reported a $130 million gap in paying for these newly insured, requiring hospitals and insurance companies to contribute more.  The state also boosted premiums for people receiving subsidized coverage.

All these figures beg the question:  Is the Massachusetts plan working, or is the extra federal money merely a bandage for a failing system?

A recent blog post from the Galen Institute sees the extra federal money as nothing more than another federal bailout of a shaky “business.”  The blog post can be found at:

http://www.galen.org/component,8/action,show_content/id,68/category_id,0/blog_id,1092/type,33/

The blog post also comments that the Massachusetts health plan has already plugged a $200 million hole for this fiscal year with a $1.00 per pack increase in the tobacco tax.  They also cite growing concern about wait times for primary care visits increasing for those under the subsidized insurance, at times stretching to 100 days.  http://www.boston.com/news/health/articles/2008/09/22/across_mass_wait_to_see_doctors_grows/

All these figures tend to paint a bleak picture of the Massachusetts healthcare plan, but should the analysis of a program’s success be measure only by whether its “bottom line” financial statement runs in the black or the red?  It is my view that the Massachusetts plan is a much-needed experiment into alternative delivery methods for healthcare in the United States.  Further, I contend that it is proper for the federal government to increase funds for the Massachusetts program to see if it can succeed, and eventually stabilize financially.

While increased federal spending to keep the program alive is concerning, it is also appropriate to look at the expanded opportunities the Massachusetts plan has given to people who would otherwise not be covered by insurance.  What the blog articles and the Boston Globe piece do not illucidate is, while wait times may have increased for primary care visits and subsidized premiums have gone up, people who might not have gone to see a doctor in the past because of worries over the expense will now be able to better afford treatment they may need.

Not many people would argue that federal spending on some of its programs is unnecessary and wasteful.  In my view, however, funding for the innovative Massachusetts plan is money well spent.  Futhermore, the Massachusetts plan, if proven successful over the next several years, could serve as a model for country-wide implementation of health care reform.

By Ian Wasser

Professor Korobkin presents interesting ideas in his discussion of the re-insurance loopholes in ERISA.  A potential solution is direct state regulation of stop-loss insurers.  The problem, of course, is that the targeting of stop-loss insurers and the self-insured employers that use these schemes could be seen as a direct action by a state legislature to “overcome” ERISA.

The schemes that I am talking about are low attachment points for stop-loss insurance.  Under ERISA, the so-called deemer clause prevents a self-insured employer from being “deemed” an insurance provider.  Self-insured employers are essentially immune from being required to provide state-mandated minimum health care benefits to their employees.  The advantages to businesses are obvious–they can choose which benefits to give to their employees and at the same time reduce costs associated from those now displaced benefits.

Most self-insured employers use stop-loss insurance, or re-insurance, to cover claims that go beyond a certain threshold per employee.  But, here’s the catch: nothing controls the attachment point for re-insurance.  For instance, a self-insured employer could maintain this status under the deemer clause and attach re-insurance at an arbitrarily low point, for instance $100.  Thus, the claims would effectively be paid by a traditional insurance company and the benefits could be individually chosen by the employer.  With too low an attachment point for stop-loss insurance, a self-insured employer is effectively no longer self-insured.

States could attempt to directly regulate stop-loss insurers, although the legislative history would certainly need to steer-clear of any mention of ERISA.  The so-called savings clause in ERISA allows states to directly regulate insurance.  A state would need to cleverly draft a statute that only regulates stop-loss insurance companies (which would be “saved” from ERISA) but that does not, in any way, regulate self-insured employers (which can not be “deemed” to be insurers by a state under ERISA).   Additionally, the new state law, as applied, must only be used to regulate the stop-loss insurer and not the self-insured employer.  This is the tricky part: if there is any hint that a state is effectively regulating a self-insured employer, the state law could immediately be preempted by ERISA.

Is state regulation of stop-loss insurance attachment points really desirable? That is hard to say.  The drafters of ERISA certainly did not intend a self-insured employer to abuse the re-insurance process, simply to maintain their self-insured employer status and avoid giving their employees state-mandated minimum benefits.  But would regulation of stop-loss attachment cause more employees to lose their benefits altogether?  For instance, requiring a high attachment point for re-insurance might be a great disincentive for an employer to self-insure or even offer any health benefits at all.  At the same time, would we rather have a “lesser” package of benefits offered, as opposed to having no package of benefits offered at all?  Self-insured employers would also face other financial difficulties if attachment points were set high–they would risk insolvency.  Forcing a self-insured employer to maintain a large cash reserve with which to pay employee benefit claims could also disincentivise an employer from being self-insured.

Maybe the most equitable solution, to both the employer and the employee, is to set stop-loss attachment points to a reasonable level.  But what does reasonable mean? Can we continue to put a dollar value on the health of a person?

By Nicholas Ostrow

I found the reading for the subrogation section of the course to be fairly straightforward even though I did not necessarily agree with everything the courts held. I think that the Supreme Court did a decent job in Sereboff. I understand and agree with the court’s comparison of the facts to Knudson. I think Sereboff is distinguishable based on the fact that the Knudson plaintiff could not trace the particular funds in dispute. I also agree with the court’s reasoning that the particular funds in dispute did not have to exist at the time the plan was written into agreement. I do have a somewhat related question concerning our in-class discussion, however.

In class, Professor Chandler mentioned that when deciding an equity issue, the Court will look to precedent from the “days of the divided bench”. Here, the Court supported in reasoning with Barnes. While I don’t disagree with the court’s reasoning, I wonder at its methods. Does the Supreme Court always look for an old equity case when deciding an equity issue? In other words, does there have to be at least a somewhat analogous older equity case for the Court to even consider a contemporary equity claim? Saying that the Court would be more comfortable deciding an contemporary equity case when an older equity case is readily available to support its decision is much different than saying the Court won’t consider an contemporary equity case without at least some sort of analogous older case.

I was a little less enthused by the District of Columbia’s opinion in Moore. In particular, I don’t understand why the Court chose to invoke Firestone in its discussion of the make-whole doctrine. It seems to me that the Court could have simply relied on Sereboff and left it at that. For one, I don’t necessarily agree with giving plan administrators “a deferential standard of review” in the first place. Secondly, I don’t like the idea that Firestone gives administrators a deferential standard of review with respect to any plan dispute; an idea that the Moore holding seems to enforce. Of course, the make-whole doctrine and its applicability to subrogation claims here still seems somewhat up in the air. Perhaps the Moore opinion represents a tentative first step on behalf of the District of Columbia to decide the issue without guidance more guidance from the Supreme Court. The Moore approach certainly seems tenable. I don’t necessarily agree with it and I suppose only time will tell whether or not the Supreme Court feels the same way.

By David McClard

The cover article in this week’s Houston Press illustrated an interesting battle going on between a Texas workers’ compensation insurance carrier and its unfortunate policyholders. Texas Mutual Insurance has recently appealed to the 14th Appeals Court a bad-faith judgment in which it was found to have caused undue suffering by wrongfully denying a claim. The insured in this case had a back injury which worsened over several years and TMI had denied paying medical bills for years. This was the second bad faith claim that TMI had lost, the first being a case where an adjuster had added a word to the insured’s doctor’s notes.

The lead counsel for TMI and senior vice president, Mary Nichols, has an interesting proposition in her appeal. She wants the higher courts to eliminate bad faith damages from workers’ compensation suits. In her words: “We’re going to be paying for [the insured’s] injury. We pay for unlimited lifetime medical. So if we delay your shoulder surgery and your shoulder gets worse, that’s still our nickel… That’s not a separate and independent injury. That is the comp claim that we are taking care of. That’s the shoulder that we bought.”

Mrs. Nichols could probably work on her choice of words, but more importantly, maybe reconsider the public policy issue at hand. Insureds who fight a workers’ comp claim must go through the internal complaint system, which is a series of mediations and hearings that can last for years, or hire a lawyer and haul the case through potentially multiple courts. If TMI has it their way, workers’ comp carriers could delay and deny payments through any manner of fraudulent means, and ultimately be subjected to nothing more than compensatory damages. All the while, they could drag the insured through a punishing internal review and civil court/appeals process without any worry of being punished for misrepresentation or fraud.

It remains to be seen if Texas Mutual will prevail in changing Texas law on the matter, but for the sake of policyholders who have the misfortune of being injured on the job, one would hope that it does not.

By David McClard

recent article in the New York Times financial section described a horror story involving an insurer whose protracted financial meltdown caused the loss of $4.5 billion to its policyholders, including over a million dollars for a little girl with a hospital visit-caused brain injury.  The author made the assurance that such financial fiascos are rare with insurers because of the strict guidance and watchfulness of state insurance regulators. (But this assurance contains no consideration of the limited ability of insureds to collect more than remedial sums in ERISA-governed plans, thanks to O’Connor’s dicta in Pilot Life v. Dedeaux.)

The economic situation is now roundly considered precarious in almost every sector, and life and health  insurance companies do not seem to be the exception. For anyone who is convinced that their insurer is on the brink of a collapse, they are forced into the unenviable position of having to chose whether or not to pull out of a policy prematurely. It’s usually not something an insured ever wants to do (because of tax issues, penalties, paperwork, et al), but if it has to be done, there are some tips on making the next step a safer one:

1)When choosing a new insurer, consult with more than one agency rating. Each have their own criteria for rating insurance companies, so results may vary. The major raters A.M. Best, Fitch Ratings, Moody’s and Standard & Poor’s. 2) When shopping among the top-rated companies, be wary of terms which seem too good to be true, and exotic riders to policies. 3) Be extremely careful of gaps in coverage when switching policies. 4) Spread coverage over two (or three!) policies to hedge against an insurer financially tanking.

This advice is understandably disheartening, since it implies that the life and health insurance industry is now more than ever full of dangerous pitfalls.

By Dominique Donaho

Senate Finance Committee Chairman Max Baucus (D-Mont.) just released a somewhat official health reform plan for 2009.  For all its 98 daunting pages, it is a rather nonspecific glimpse into the future of what may be done on the national scale.  About 25 of those pages (the introduction and the last chapter) list problem areas in health care and its overbearing costs with very vague proposals for reform.  And for the most part, it is also conveniently plagiaristic of the Obama Health Care Plan.

As chairman of the Senate Committee on Finance, Baucus will likely have an influential role in national health care reform if it is to happen at all; that particular committee has jurisdiction over Medicare and Medicaid.  Under the Call to Action, Medicare would be made available to those over 55 (10 years earlier than the current requirement) and Medicaid to all beneath the poverty baseline.

For everyone between, the Call to Action sets up a Health Insurance Exchange, which appears similar to the current Massachusetts plan.  Participating employers are required to enroll in exchange for compliance with oversight by an Indpendent Health Coverage Council.  Additionally, a public health plan similar to Medicare would be set up.  Baucus claims the Exchange would become a self-sustaining entity “within a few years.”

Perhaps the most glaring divergence from the Obama Health Plan is Baucus’ proposal for a universal mandate for all individuals.  Whether this is acceptable might depend on the effectiveness of these expanded programs (Medicare and Medicaid, but also SCHIP to all children below 250% of the poverty level) reaching those who would not be able to afford insurance in the first place.

Overall, I would characterize Baucus’ Call to Action as a call to awareness.  The proposals made are largely recycled or vague, but it is at least a small, semi-formal step in a new direction.

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