Legal Update: Health Care Reform

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Legal Update Health Care Reform

• How the Presidential Election Affects Upcoming
  Legislation -
• Whats New on the Horizon?
• Adam V. Russo, Esq.
• The Phia Group, LLC
• The Law Offices of Russo Minchoff
• February 7, 2008

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The Uninsured

• Some 47 million Americans dont have health
  insurance - 15 of population
• Includes 10 million illegal immigrants who
  wouldnt be covered under proposed national care.
• Fails to take account of Medicaid as it includes
  millions who are eligible but havent applied.
• The number includes many who could buy insurance
  but haven't.
• 18 million of the uninsured have an annual income
  of more than 50,000, which puts them in the top
  half of income distribution.
• 25 of uninsured have been offered
  employer-provided insurance but declined.
• 17 million people under 65 are covered by
  individually purchased insurance, about 10 as
  many as the 164 million covered under employer
  plans.

3
Increasing Health Care Costs

• Over the last 6 years, premiums have skyrocketed
  5 times as fast as general inflation.
• Premiums are 4 times workers earnings and twice
  the growth of business income.
• Combined premium and out-of-pocket costs for an
  American family of four now average 14,500.
• Consider this number in light of the fact that
  one quarter of US workers make less than
  20,000/year, and one-third of households earn
  less than 37,000.

4
Workforce Connections

• There are numerous people whose livelihoods
  depend on the current health care system.
• According to researchers at Pricewaterhouse
  Coopers, one in eight US residents has a job
  connected to the health care system.
• It currently comprises 16 of the gross national
  product.
• What would be the impact of massive health care
  reforms on the economy?

5
Self-funded Plans

• Self-funding, stimulated by the Employee
  Retirement Income Security Act (ERISA) of 1974,
  is a product of health care inflation.
• Although the intent of ERISA was to protect
  pension benefits, it also provided pre-emption of
  state laws for self-insured plans.
• ERISA pre-emption makes it cheaper for employers
  to offer health coverage since self-insured plans
  are not required to cover all of the benefits
  state mandates require insured plans to provide,
  such as chiropractic care or alternative
  medicine.
• 53 of employers self-insure their health benefit
  programs, according to a KFF/HRET survey.

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State Mandated Changes

• For serious health care reform, keep an eye on
  the states.
• No states proposed plan for universal coverage
  is the same, although there are similar
  strategies for covering the uninsured.
• Under state mandates, innovation and consensus
  can be easier to achieve because there are fewer
  people involved. 
• However, a state-based system can be more complex
  to understand because there are so many
  differences among states. 
• Illinois has developed a program designed to
  insure all children and 27 other states such as
  CA, PA, and NY are exploring to achieve
  state-wide coverage.
• Massachusetts has been receiving much attention
  because of its efforts to achieve universal
  health coverage. 

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Maryland A New Approach

• Bill to extend coverage to 140,000 people puts
  Maryland among a number of states attempting to
  lower the number of uninsured at state level.
• By expanding Medicaid to 100,000 adults and
  subsidies to the smallest companies (2 to 9
  workers), the state focuses on those who turn up
  in emergency rooms that provide free care for
  routine catastrophic illnesses.
• Firms and their employees would get annual
  subsidies to cover the cost of health insurance.
• The new law has a provision not included in
  similar programs offered by other states workers
  must be offered plans with wellness programs.
• By signing up for free gym memberships, weight
  management, smoking cessation, and agreeing to
  control chronic conditions such as diabetes,
  workers are eligible for cash rewards or lower
  deductibles.
• Lawmakers said this bill is aimed at the very
  poor and lays the foundation for more ambitious
  moves in the future.

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Golden Gate Restaurant Association v. San
Francisco

• 9th Circuit Court of Appeals reversed District
  Court for N. District of CA, permitting San
  Franciscos new health care ordinance to go into
  effect.
• 9th Circuits reasoning does not persuasively
  implement the ERISA preemption case law of US
  Supreme Court.
• Opinion puts 9th Circuit in direct conflict with
  4th Circuit, which held Marylands Wal-Mart
  Act, a similar employer mandate, preempted by
  ERISA. 4th has the better argument as its
  opinion reflects US Supreme Court holdings.
• The law was successfully challenged in District
  Court by Golden Gate Restaurant Association,
  representing over area establishments, which
  argued that the law would violate ERISA -
  conflicting local, state and federal benefit
  plans.
• Courts attitude makes it likely that a proposed
  state health care law, which CA Assembly and Gov.
  Schwarzenegger support, will survive any legal
  challenge.
• Like SF, state measure depends in part on funding
  from employers. The Senate has yet to take up the
  bill.

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Golden Gate Restaurant Association v. San
Francisco

• The decision allows the city to require
  businesses with over 20 employees to pay a fee to
  help cover employees health care costs and will
  help about 20,000 people without insurance.
• In SF, program to provide care for 73,000
  uninsured adults.
• Estimated 200 million annual cost to be covered
  by state and local taxes and by payments from
  patients based on their income.
• The rest, less than 20, would come from fees
  paid by employers who don't offer insurance.
• About 7,350 residents were enrolled in the
  program in 2007, when eligibility was limited to
  those making less than the federal poverty level
  of 10,310.
• That left 26,000 uninsured out of the program.
  Some are among an estimated 20,000 employees in
  San Francisco whose companies provide no
  insurance.
• Ordinance provides coverage for those employees -
  some of them nonresidents - either in the city
  program or in a new health plan offered by their
  employers.

10
Presidential Election Guide

• Every front-runner has proposed reforming
  healthcare.
• The primary differences among candidates are the
  level of financial responsibility of paying for
  care and whether coverage is mandatory.
• None of the candidates want to reduce the role
  that states play in financing, regulating,
  monitoring, and administering the nations health
  care system.
• Republican candidates favor a system that relies
  more on the individual and private insurers
  rather than employers or government to
  purchase/manage care.
• Democratic candidates propose building on the
  employer-based system and expanding public
  programs. 

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Presidential Candidates and Their Health Care

• NPR's Julie Rovner decided to uncover the type of
  care the candidates had.
• Rovner stated that it was like pulling teeth to
  get info from candidates even though health care
  is one of the top issues in the race.
• Candidates in the US House and Senate are
  eligible for taxpayer-subsidized coverage through
  the Federal Employee Health Benefits Plan
  (FEHBP).
• Marilyn Moon, health director for the American
  Institutes for Research, said the FEHBP is OK,
  but not "gold-plated.

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Presidential Candidates and Their Health Care

• Most Democratic candidates offer their campaign
  workers health coverage.
• Republicans were more reluctant to talk about
  their coverage - Huckabee, and Romney wouldn't
  say.
• McCain offers health insurance to his campaign
  staff.
• Huckabee and Romney wouldn't say if they cover
  their staffs.
• McCain gets coverage in three ways - veterans'
  care (served in the military), the Senate
  health-insurance program, and his wife's
  supplementary insurance.

13
Overall Democratic Plan

• Democratic candidates call for mandates on
  individuals and/or businesses to obtain coverage
  and fund their proposals, in part by rolling back
  Bushs tax cuts for Americans earning over
  250,000.
• Democrats are competing amongst themselves over
  who has the better plan to control costs and
  approach universal coverage.
• The candidates would require insurers to
  guarantee coverage, by limiting or subsidizing
  premiums.
• The candidates would allow insurers to sell
  individual policies nationally instead of state
  by state.
• All democratic candidates support a form of
  universal healthcare.

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Hillary Rodham Clinton - Democrat

• Wants universal health-care coverage by the end
  of her second term.
• Establish the "American Health Choices Plan" to
  ensure all Americans have portable, affordable,
  quality care allowing employees to keep current
  plans.
• Give income-related tax credits to working
  families to make coverage affordable. Offer a tax
  credit to small businesses to begin or continue
  coverage.
• The choice to buy insurance as part of the FEHBP
  or a choice of private insurers offering the same
  benefits.
• Allow states to band together, if desired, to
  offer similar plans.
• Ensure that insurance companies doing business
  with the federal government cover high-priority
  preventive services.
• The plan doesnt include details on whether
  illegal immigrants will be covered.

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Barack Obama - Democrat

• Requires children to get insurance now aims for
  universal coverage by 2012.
• Plan includes affordable, comprehensive and
  portable health coverage for all, modernizing the
  system to contain costs, and improve the quality
  of care.
• Those who have insurance through their employers
  or who qualify for Medicaid or SCHIP would be
  able to keep that coverage.
• A new public insurance program would be created
  for those without coverage. You could not be
  turned away because of illness or pre-existing
  conditions.
• The federal public health insurance program would
  be similar to the health care program for federal
  employees.
• Participating insurers to offer benefits similar
  to those in the new public plan.

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Overall Republican Plan

• Republicans focus on tax incentives to encourage
  Americans to obtain coverage and avoid new or
  expanding government programs.
• Republicans want to avoid federal regulation that
  would tell insurers whom they have to cover and
  how much they may charge.
• Their Achilles' heel is the dependence on the
  private market, which often rejects applicants
  with health problems they do not support
  univeral health care coverage.
• The self-employed and others seeking individual
  coverage would be subject to a marketplace in
  which insurers generally pick the healthiest
  applicants.
• Federal tax breaks dont solve the problem people
  in less than perfect health have finding
  coverage.

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Mitt Romney - Republican

• Wants expansion of Health Savings Accounts,
  allowing tax-free savings for medical expenses,
  if you buy a high-deductible plan to be used for
  catastrophic medical situations.
• Encourages states to develop market based health
  care programs.
• Opposed to a national version of the plan he
  supported for Massachusetts while Governor, which
  requires all to have insurance.
• Would extend coverage to all Americans through
  the power of the market, not through taxes or
  government reforms.
• Calls for tax deductions allowing individuals to
  deduct out-of-pocket expenses and costs for
  insurance not provided by an employer.
• Wants states to individually reform health care
  by expanding and deregulating their own
  marketplaces.

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Mike Huckabee - Republican

• Believes the health care system in the US is
  irrevocably broken.
• Advocates market-based health care, making
  private insurance affordable through tax
  deductions and cost control measures.
• A strong advocate of preventive care (he lost
  over 100 pounds), proposes overhaul of system
  with input from private sector, providers,
  Congress.
• Supports move to a consumer-based, not
  employer-based, system, as well as make health
  insurance more portable from one job to the next.
  
• Proposes insurance tax deductions - credits for
  low-income families.
• Use the states as labs for new market-based
  strategies and a complete reform of medical
  liability.
• Broaden HSA to include more than just accounts
  with high deductible limits.

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John McCain - Republican

• Has pledged affordable care for every American
  without a Federal mandate. Insurance policies
  would be portable, following the individual, not
  the job.
• Believes that controlling costs is the key to
  making care affordable, saving Medicare and
  Medicaid, and protecting health benefits for
  retirees.
• 3 primary goals paying only for quality care,
  offering diverse insurance choices, and restoring
  a sense of personal responsibility.
• He believes individuals should have a variety of
  plans to choose from and would offer tax credits
  and HSAs to help pay for them.
• Tax credit of 2,500 (5,000 for families) to
  anyone who buys insurance.
• Favors allowing safe prescription drugs to be
  imported and more generic drugs to be on the
  market to control drug costs.

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Issues for Health Care Improvement

• Lack of Accountability For Public Funds
• Problems of uninsured population are ill-served
  when public dollars are spent on unneeded or
  non-existent medical equipment under Medicare
  fraud.
• Largest area for fraud is the southern district
  of Florida. Feds visited companies that charged
  Medicare for prosthetics, costly AIDS drugs, air
  mattresses, etc. Only a few products were
  purchased/delivered to patients.
• Cash went into pockets of company operators - one
  purchased a Rolls Royce valued at 200,000. Many
  offices are little storage closets.
• Examples include a 2 million ankle brace for a
  patient whose foot had been amputated and payment
  of bills for a new hospital style bed, at the
  rate of one per month, for a single patient.
• Officials say that its easy to win a provider
  billing number from Medicare.
• Companies continued to bill 400,000 even after
  Health and Human Services inspector general
  determined that the businesses did not exist.

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Outpatient Treatment Centers and Physician
Self-Referrals

• According to McKinsey Global Institute, a
  significant cost driver in health care system is
  found in the emergence of out-patient treatment
  centers.
• The treatments include ambulatory surgery
  centers, diagnostic imaging centers, drug rehab
  clinics, mental health clinics and non-physician
  offices.
• US spends 37 more than other countries - The
  practice of referring patients to facilities in
  which physicians have a financial interest has
  provided a significant loophole.
• Additional procedures are driven by financial
  incentives both to support the lease, purchase
  and operation of equipment and by the
  profitability of the procedures, the use of which
  depends on subjective clinical judgment.
• Using 2004 data from a CA insurer billed for
  advanced imaging, 33 of providers who submitted
  MRI bills and 22 who submitted CT scan bills
  were classified as self-referral.
• Among them, 61 who billed for MRI and 64 who
  billed for CT were involved in lease or
  payment-per-scan referral arrangements.

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Cost-Shifting To Health Plans

• When a WC carrier denies payment of claims, the
  injured partys health insurance is responsible
  for payment.
• One of the worst ways that health care costs are
  elevated for plans takes place when WC carriers
  refuse to pay legitimate claims and direct the
  claimants to their health plans.
• If suit is filed, and the WC carrier settles, the
  carriers never inform the health plan and leave
  those funds unrecoverable.
• When a potentially liable third party, say
  WalMart, refuses to pay a claim by a customer
  claiming injury on the premises, who picks up the
  bill?  Again, its the customers health
  insurance.
• As long as health insurance is viewed as the
  default payer of claims for every accident, the
  cost of health care will always be inflated.

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What Can Be Done? Plenty!

• Review Revise plan language specifically COB,
  exclusions and subrogation/reimbursement.
• Be aggressive with recoveries from WC, auto
  carriers and responsible parties.
• Better identify recovery/exclusion opportunities
  through focused claim review. What claims are
  you reviewing? Diag codes, dollar amounts?
• Understand State and Federal laws relating to
  Plan rights.
• Update your procedures and investigations ask
  the right questions and obtain the correct info.
• Just because a liable third party denies
  responsibility, doesnt mean you have to close
  your file and pay you have rights.

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New DOL Proposed Rules on Disclosing TPA
Compensation

• Broker Fees Must Be Disclosed Separately From TPA
  Fees Upfront.
• TPAs who attended the SPBA 2007 Spring Meeting
  conveying concerns about hidden broker fees in
  the TPA's compensation to the DOL gave rise to a
  proposed rule from the DOL requiring broker
  commissions to be disclosed separately from TPA
  fees. 
• If a broker requests the TPA to include their fee
  in the TPA fee and not list their portion
  independently, you can say that DOL regulations
  require the broker commission to be disclosed as
  a unique item. 
• This provision is a part of a much broader rule
  on plan service provider fee disclosure to plan
  sponsors and was not designed to specifically
  target brokers of TPAs.   
• The broker issue is buried in an exception to
  reporting aggregate plan service provider fees. 
  The exception can be found at
  2550.408b-2(c)(1)(iii)(A)(3).

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New DOL Proposed Rules on Disclosing TPA
Compensation

• The DOL's Employee Benefits Security
  Administration (EBSA) proposed rule requires plan
  service providers (TPAs) to disclose compensation
  they will receive and any conflicts of interest
  in connection with services to the Plan. 
• The new rule sets forth the items that must be in
  writing and disclosed to the Plan Fiduciary
  (i.e., plan sponsor) before the contract begins.
• Some TPAs already disclose compensation
  arrangements in contracts but others are not as
  explicit in disclosure as will be required under
  proposal. 
• Any contracts that are based solely on a
  handshake or meeting of the minds will no longer
  be allowed.
• While this rule is proposed, the rule is
  clarifying an already existing regulation and
  courts may apply this proposal to existing
  contracts.        

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New DOL Proposed Rules on Disclosing TPA
Compensation

• Motivation for the Proposal - DOL recognizes that
  the increasing complexity in the way service
  providers are compensated makes it challenging
  for plan sponsors to understand what the plan
  actually pays for specific services and whether
  compensation arrangements pose any potential
  conflicts of interest. 
• The goal of the proposal is to provide
  comprehensive and useful information to plan
  sponsors when entering service contracts. 
• This is not a new concept or change of policy. 
  This was the intent of ERISA from the start. 
• This issue will be discussed further at the SPBA
  Spring Meeting in April 2008.

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Contact Info Adam V. Russo, Esq.

• The Phia Group
• arusso_at_phiagroup.com
• Phone [phone]
• The Law Offices of Russo Minchoff
• adam_at_russominchofflaw.com
• Phone [phone]
• Visit my blog at www.passionforsubro.com for
  articles, news, and current issues affecting the
  self-insured industry.