Transcript Agenda - Health care

The Affordable Care Act:
How and Where It’s Going
California Purchasers
Health Care Coalition
Mark C. Nielsen
January 15, 2015
Agenda

Update on Exchanges/Marketplaces




Enrollment Data
Implications
Employer Mandate Issues
Enforcement and Litigation Risks
2
WA
ME
MT
VT
ND
OR
NH
MN
ID
N
Y
WI
SD
MI
WY
NV
RI
CT
PA
NJ
IA
NE
CA
MA
UT
IN
IL
CO
KS
OH
WV
MO
DE
VA
MD
KY
NC
DC
TN
AZ
OK
SC
AR
NM
MS
TX
AL
G
A
LA
FL
AK
State-operated Marketplace
HI
Partnership Marketplace
Federally-operated Marketplace
Premium
Subsidy
• Employer coverage
tool
• Income verification
Medicaid
& CHIP
Direct
Purchas
e
→ Total Enrollment (Federal and State): 6.41 million
→ New Enrollments
Federal: 3.416 million
 State:
633,000
 California:
144,178
→ Plan Selection
 Bronze:
21%
 Silver:
68%
 Gold:
8%
 Platinum: 3%
→ Financial Assistance
 87% of Federal Marketplace enrollees qualify for federal subsidies
*“Enrollment” means that a plan has been selected, but does not mean
that the premium has been paid.

Source: HHS Assistant Secretary for Planning and Evaluation Issue Brief (December 30, 2014)
→ Demographics

Female: 56%
Male:
44%

Age Breakdown




24% of enrollees between 18-34 nationally
30% age 55 and over nationally
51% age 45+ nationally






0-18:
18-25:
26-34:
35-44:
45-54:
55-64:
9%
10%
14%
15%
21%
30%
• Marketplace QHPs
– AV between 60-90%
– $4656: avg. premium for
coverage similar to
employer
– Average premium lower
than employer coverage
across board at every AV
level
– Premium subsidies available
for those under 400% FPL
– Cost-sharing reductions
for those under 250% of
FPL
– Must cover all EHBs
– Narrower networks
Source: PwC’s Health Research Institute White
Paper
→ Employer-Sponsored Plans
– AV averages 85%
– $6119: avg. 2014 premium for
single coverage
– Average premiums for
employer plans higher than
Marketplace plans
– No federal premium subsidy
for ER coverage
– No cost-sharing subsidies,
but ERs may have lower OOP
costs
– Flexibility re: covered services
– More expansive networks
→ Most individuals who are eligible for employer-sponsored coverage
be eligible to receive premium assistance—unless:
• Employer offers a low value plan (less than 60% minimum value);
or
• The employer’s plan is unaffordable (employee-only contribution is
greater than 9.5% of income)
→ But, if trend of Marketplace premiums remain lower than costs of
employer-provided coverage, employers may find Marketplace plans
attractive
 But will premiums remain lower?
 Will employees accept narrower networks and higher OOP costs?
→ Special Populations
 Retirees
 Part-Time Employees
8
Employer Mandate



Employer shared responsibility is key element of ACA’s
2014 reforms together with individual mandate,
Exchanges, tax subsidies and Medicaid expansion.
Final Rules were issued under § 4980H on February 12,
2014.
Rules are complex and include additional information for
employers that do not wish to use the “look-back”
method for identifying full-time employees.
Note: any analysis of possible application of or liability
under the rule is fact-specific.
9
Employer Shared Responsibility
Employer Shared Responsibility
General Rule
“Large” employers that do not offer
qualifying health insurance coverage to fulltime employees and their dependents may
be penalized
“Large Employers”
Employers with 50 or more full-time
employees (or full-time equivalents) in the
previous calendar year
“Full-Time” Employees
Full-time employees are those who work an
average of at least 30 hours a week
Effective Date
2015 – employers with 100 or more full-time
employees must offer to at least 70% FTEs
2016 – employers with more than 50 full-time
employees must offer to 95% of FTEs
10
Shared Responsibility Applicability Chart
“Large”
employer?
No
No
Yes
Offer coverage
to employees?
No
Yes
Provide minimum value?
(60% of covered
expenses?)
Affordable? (Employees
contribution 9.5% or more
of their income?)
Did at least one fulltime employee receive
a premium tax credit
for exchange
coverage?
Yes
No
No
11
“Large” Employer

“Large” means more than 50 full-time
employees (including full-time equivalents)
on business days during the prior calendar year

To calculate the number of FTEs for purposes of
determining whether an employer is “large,” add the
total number of hours of service for that month for
part-time employees (but not more than 120 hours
of service for any employee) divided by 120.
Fractions are taken into account.
12
Possible Employer Shared Responsibility Penalties
Employer Does Not
Offer Coverage
Coverage offered is
“unaffordable” or does not
provide “minimum value”
the lesser
of
Penalty = $2,000
x (number of fulltime employees 30)
Penalty = $2,000
x (number of fulltime employees 30)
Penalty = $3,000
x (number of fulltime employees
receiving
premium
subsidies)
13
4980H(a): “The Big Penalty”
•
If employer does not offer coverage to
substantially all full-time employees (and their
dependents) and at least one full-time
employee receives assistance under
Exchange:


Must pay annual fee of $2,000 for each full-time
employee minus first 30 employees.
For example, if employer has 100 full-time
employees and one is eligible for premium
assistance under the Exchange, employer must pay
$2,000 times 70 or $140,000.
14
4980H(b): “The Lesser
Penalty”

If employer does offer “minimum essential coverage” to
full-time employees (and their dependents) and a fulltime employee receives assistance under Exchange,
employer must pay fee if either test is not met:


Employer coverage not affordable – cost of self-only
coverage is more than 9.5% of household income

Plan does not provide 60% actuarial value of benefits.

For up to 5% of full-time employees not offered coverage
Annual fee is the lesser of: $3,000 for each full-time
employee receiving premium assistance; or $2,000 for
each full-time employee, minus first 30 employees.
15
Full-Time Employee Status



“Employee” means common law definition of employee
“Full-Time” means an average of at least 30 hours of
service/week or 130 hours of service/calendar month
and includes:
 Each hour for which an employee is paid, or entitled
to payment, for performance of duties for any
member of employer’s controlled group
 Paid leave for vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty
or leave of absence – no limit to hours in these
categories
Hours of service generally will not include hours of
service worked outside of the U.S.
16
Monthly Measurement Method




NEW in the final rules
Adds new monthly measurement method for employers
not using look-back method
FT status determined on monthly basis – Count hours
during a particular month
Special rule for employee first eligible for coverage


3 month rule – No penalty if offers coverage by 1st day of 4th full
calendar month after employee otherwise eligible
“Weekly rule” to accommodate payroll periods


4-week period: FT if 120 hours of service
5-week period: FT if 150 hours of service
17
Optional Safe Harbor For
Determining “Full-Time”


Ongoing Employees
 Standard Measurement Period (3-12 months)
 Standard Stability Period (same as standard
measurement period but at least 6 months if fulltime during measurement period)
 Optional Administrative Period (90 days)
New Employees
 Full-Time Employees (coverage within 3 months)
 Variable Hour/Seasonal Employees



Initial Measurement Period (3-12 months/Can start on 1st
of month following hire date)
Initial Stability Period
Optional Administrative Period (90 days)
18
Look-Back Method

NEW! Specifies factors to determine if variable hour
employee




NEW! Defines seasonal employee


(1) Is employee replacing FT employee or non-FT employee?
(2) Have ongoing employees in same/comparable position varied
above/below average of 30 hours of service per week?
(3) Was job advertised, communicated, or documented as
requiring hours of service that would average 30 or more/less?
Employee in position for which customary annual employment is
6 months or less (and begins in same part of year, e.g. winter or
summer).
NEW! New category of part-time employee


New employee who is reasonably expected at his/her start date
to not be full-time and not variable hour or seasonal
Rules that apply to variable hour and seasonal apply
19
Ongoing variable hour/seasonal employees
Standard Measurement
Period
•Look-back at hours worked by
variable hour employee to
determine eligibility for
coverage
•Employer choose length from
3 to 12 months
Standard
Administrative
Period
Standard Stability
Period
•Count hours,
offer & enroll in
coverage
•Coverage remains available
regardless of hours worked
during stability period
•Maximum length
of 90 days
• Full time employees
• Cannot reduce
or lengthen the
measurement or
stability period
• Overlaps with
prior stability
period
• Cannot be shorter than the
standard measurement
period
• Must be at least 6 months
•Non full time employees
• Stability period cannot be
longer than the standard
measurement period
Measurement Methods

NEW! Must use same method for all
employees in same category






Salaried v. hourly
Employees working in different states
Collectively bargained v. not
Each group of collectively bargained covered by
separate CBA
Cannot use look-back method for variable
hour/seasonal v. monthly measurement for
employees with more predictable hours
NEW! Rules for transferring between types of
measurement methods
21
Litigation Risks

Overview of ACA Enforcement Structure



Causes of Action



Existing Federal and State claims
ACA created claims
Areas of Particular Exposure




Federal vs. State
Public vs. Private
Workforce Realignment/Section 510 Claims
Whistleblower Claims
Provider Nondiscrimination
Defenses
22
ACA’s Enforcement Scheme


Public Enforcement (Federal and State)
 State Insurance regulators (against insurers)
 HHS (against insurers and non-federal governmental
plans)
 DOL (against group health plans)
 IRS (against group health plans and church plans)
Private Litigation
 Class actions by individual and group policyholder
subscribers
 Individual lawsuits by individual and group policyholders
(including employers as plan fiduciaries)
 Associations of providers and advocacy groups (see
MHPAEA cases)
23
State - Insurance Department/AG
Individual and Group Market


States may enforce the ACA’s market reforms against
insurers if the state has adopted the reforms as state
law.
Enforcement mechanism:





Imposing fines for non-compliance with state law
Suing to enforce compliance with state law
Conducting market conduct exams (with exposure to
civil or criminal penalties)
States generally cannot enforce federal laws not
adopted as state law. But states could take other action
to indirectly enforce, such as threatening to not approve - or to revoke – a policy form offered in the state, or
pursuing a market conduct exam.
States certify, decertify and may have civil penalty
authority for State Exchanges
24
Federal - HHS
Individual, Group and Exchange





HHS enforces insurance market reforms against insurers if
it finds that a state has failed to substantially enforce
(Alabama, Missouri, Oklahoma, Texas and Wyoming)
HHS enforces against non-federal governmental plans
Enforcement mechanism:
 May impose civil monetary penalties of up to $100 per
day, per violation, per affected individual.
 Penalty assessments subject to administrative and
judicial review.
HHS’s enforcement strategy is currently voluntary
compliance driven
 HHS will be focusing initial enforcement efforts on
large, multi-state carriers
HHS certifies, decertifies and can levy civil penalties for
Federally-facilitated Exchange
25
Federal – DOL and IRS
Group Market Only



ACA’s insurance market reforms incorporated by reference into
ERISA and the Internal Revenue Code (“Code”).
DOL enforces the insurance market reforms against ERISA-covered
group health plans
 Enforcement mechanism:
 Investigations (broad subpoena authority under ERISA § 504)
or litigation against plan fiduciaries.
 DOL cannot assess monetary penalties against group health
plans or insurers
 But note: DOL investigates both the plan and its insurer
IRS has authority to enforce ACA’s reforms against group health
plans (including church plans).
 Enforcement mechanism:
 Excise tax of $100 per day of noncompliance/per affected
individual.
 Group health and church plans must self-report noncompliance to IRS, on Form 8928
26
Private Litigation:
Group Market


Suits to enforce group market rules are likely to be ERISA cases that
are brought in federal court
 Actions could be brought as either individual or class actions,
depending on alleged violation
 Proper defendants are typically “plans” and “fiduciaries” (not
always issuers)
 TPAs as defendants? See NYS Psychiatric Association v. United
Health Group, 980 F. Supp.2d 527 (SDNY 2013), on appeal to
Second Circuit
ERISA Remedies:
 Injunction to compel compliance with federal insurance market
reforms
 Obtain benefits due under ERISA § 502(a)(1)(B)
 Attorney fees and court costs under ERISA § 502(g)
 Restore plan losses, if any, under ERISA § 502(a)(2)
 Award of “other equitable relief” under ERISA § 502(a)(3)—which
the Supreme Court now interprets broadly
State suits preempted (except for governmental and church plans)
27
Private Litigation:
Individual Market





Individual policyholders may sue issuers in state court to enforce
insurance market reforms.
Actions could be brought as either individual or class actions
Suits may arise under insurance contract, tort, or statutory
provisions. Remedies:
 Compel compliance with state law (e.g., payment of benefit)
 State law may authorize additional penalties for insurer noncompliance
 Potential contract remedies (e.g., consequential damages) or tort
remedies (e.g., punitive damages)
If state has not adopted the ACA’s market reforms, individual or class
may not be able to enforce under state law.
 But a court could order reformation of the insurance contract, to
“read in” the federal ACA requirements.
No mechanism under primary federal law (PHSA) for individual to
enforce ACA market reforms, but some new remedies
28
Wellness Programs and the
Americans with Disabilities Act


Prohibits an employer from requiring medical
examinations and making disability-related inquiries
unless the examination is job-related and
consistent with business necessity. 42 U.S.C.
§12112(d)(4)(A).
Exception for voluntary medical examinations,
including voluntary medical histories, which are part
of an employee health program available to
employees at that work site. 42 U.S.C.
§12112(d)(4)(B).
29
Equal Employment Opportunity
Commission v. Flambeau, Inc.


Complaint filed Sept. 30, 2014 in the Western District of Wisconsin
Facts
The company's wellness program required employees to (1) complete biometric testing
and (2) a health risk assessment (HRA). The biometric testing involved blood work and
measurements and the HRA required that employees self-disclose their medical history.

Employee was unable to complete the biometric testing and HRA on the day appointed
by the employer because he was on medical leave.

After returning from medical leave, he tried to complete the biometric testing and HRA
and his requests were denied.

Company then informed employee that his coverage was being terminated because he
had not completed the company’s requirements, including the biometric testing and
HRA.

He was told he could apply for COBRA (and pay the COBRA premium).
EEOC Allegation - Wellness Program Not Voluntary
 EEOC asserts program is not voluntary because employee was subjected to
termination of his health insurance and a financial penalty of having to pay the
entire premium cost under COBRA to obtain reinstated coverage.
 Employee was told that participation in the program was “mandatory” to be on
the company’s health insurance.
 Employees were told that they would be subject to disciplinary action for failing to
attend the testing.


30
Equal Employment Opportunity
Commission v. Orion Energy Systems,
Inc.


Complaint filed Aug. 20, 2014 in the Eastern District of Wisconsin
Facts





As a part of a wellness program employees were required to (1) complete a HRA; (2)
use a Range of Motion Machine in the company’s physical fitness room; and (3)
undergo blood work and complete a medical history form.
Company covered 100% of the cost of coverage for employees who participate in the
wellness program.
Employees who decline to participate must pay entire premium cost for coverage plus a
$50 penalty.
Employee refused to participate and questioned whether the HRA was voluntary and
whether medical information was going to remain confidential.
EEOC allegations



Wellness Program Not Voluntary:
 Employee was fired for refusing to participate in the wellness program and alleges
the program was not voluntary.
 Points to the fact that she was subjected to a financial penalty and subsequently
fired for not participating.
Retaliation against employee because of her good faith objection and decision not to
participate in the wellness program.
Interference, coercion and intimidation against employee for exercising her rights
under the ADA not to be subject to unlawful, disability-related inquiries and medical
exams.
31
EEOC v. Honeywell



Complaint filed 10/27/2014 in D. Minn., seeking TRO and PI.
Facts:

Honeywell tests plan participants and spouses for blood pressure, HDL and
total cholesterol, glucose, and BMI

$2500 (max) “surcharge” on premiums assessed for those refusing testing.
Honeywell also withholds $1500 in annual HSA contributions.
EEOC Allegations

Wellness Program Not Voluntary
 Penalties so large that participants do not have ability to refuse testing
 Asks court to disregard Seff v. Broward County, 691 F.3d 1221 (11th
Cir. 2012) (holding that plan’s wellness program fell w/in ADA safe
harbor)

Wellness Program Violates Genetic Information Nondiscrimination Act
(GINA)
 GINA prohibits financial incentives to obtain medical histories in
connection with wellness programs.
 The HSA contributions and the avoidance of the surcharges are
impermissible financial incentives.
32
Managing The Workforce


Popular press reporting on employers that are taking steps to
avoid the penalty

Cutting hours

Terminating employees
ERISA 510 – employers may not “discharge, fine, suspend,
expel, discipline or discriminate against a participant or
beneficiary ... for the purpose of interfering with the
attainment of any right to which such participant may
become entitled under the plan ...”

Also other ACA provisions prohibiting discrimination (e.g.,
Code 105(h)/PHSA 2716; PHSA 2705; ACA 1557)
33
ERISA 510

ERISA section 510 prohibits an employer from



discharging, suspending, expelling, disciplining or discriminating
against a participant or beneficiary
"for the purpose of interfering with the attainment of any right to
which such participant may become entitled under the plan."
To win a section 510 claim, the plaintiff must


(1) prove an adverse workplace action of the type covered by the
statute, and
(2) prove that the employer took that adverse workplace action
"for the purpose of interfering" with the plaintiff's benefit rights.
34
ERISA 510


“Adverse employment actions” include discharging,
suspending, expelling, disciplining or discriminating against a
participant or beneficiary
However, in general, courts have found ERISA section 510
should be interpreted broadly to include adverse employment
actions that are not included in the statute


“Although an adverse employment action is generally one that affects the
terms, privileges, duration or conditions of a plaintiff’s employment,
reprisals less flagrant than a job termination or reduced wages can
constitute adverse employment actions that warrant statutory protection.”
Kreinik v. Showbran Photo, Inc., 2003 WL 22339268 at *6 (SDNY Oct. 14,
2003)
For example, “reclassifying” employees may also be the basis
of a 510 action. Seaman v. Arvida Realty Sales, 985 F.2d
543 (11th Cir. 1993).
ERISA 510



"For the purpose of interfering" means that a plaintiff must
prove that the employer had the "specific intent" to interfere
with his or her ERISA plan rights. See, e.g., Dister v.
Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir. 1988).
"Specific intent“: interference with ERISA plan rights was a
"motivating factor" – but not necessarily the only factor – in
the employer's decision. See, e.g., Dewitt v. Penn-Del
Directory Corp., 106 F.3d 514, 523 (3d Cir. 1997).
"Motivating factor“: a factor which had "a determinative
influence on the outcome" of an employer's decision. See,
e.g., Koons v. Aventis Pharmaceuticals, Inc., 367 F.3d 768,
777 (8th Cir. 2004).
36
ERISA 510



Most ERISA section 510 cases employ a burden-shifting framework developed
by the courts. Dewitt, 106 F.3d at 523.
At the prima facie stage, plaintiff must present sufficient evidence from which
an employer's specific intent to interfere with benefits can be inferred, although
courts have characterized "[t]he nature of the plaintiff's burden of proof at the
prima facie stage [as] de minimis." Dister, 859 F.2d at 1114.
Under some court analyses, the adverse action must have been individual or
personal, rather than a general policy. See, e.g., Andes v. Ford Motor Co., 70
F3d 1332, 1337-38 (D.C. Cir. 1995) (reasoning that the prohibitions in ERISA
section 510 "typically refer[] to an action targeted at an individual employee "
not "basic organizational decisions" like closing down an operation).

But see, e.g., Pickering v. USX Corp., 809 F. Supp. 1501 (D. Utah 1992)
(employees established prima facie case of discrimination when company
considered pension expenses in decision to idle plant).
37
ERISA 510



If the plaintiff establishes a prima facie case, a presumption arises
that the employer engaged in unlawful discrimination, and
burden then shifts to employer to articulate (but not prove) a
legitimate and nondiscriminatory reason – i.e., one unrelated to
plaintiff's entitlement to benefits – for its action toward plaintiff. See,
e.g., Barbour v. Dynamics Research Corp., 63 F.3d 32, 38 (1st Cir.
1995).
Legitimate, nondiscriminatory reasons for terminating or reclassifying
an employee approved in the case law include, but are not limited to,

individual performance issues,

company-wide reductions in force,

changes in corporate business models, and

other corporate reorganizations.
38
ERISA 510



If the employer articulates a legitimate, nondiscriminatory reason for
its action,
the presumption of unlawful discrimination disappears, and the
burden then shifts back to the plaintiff to prove, by a preponderance
of the evidence, that the employer's proffered reason for taking the
challenged employment action was a pretext for unlawful
discrimination. See, e.g., Thygeson v. U.S. Bancorp, 2004 WL
2066746 (D. Or. Sept. 15, 2004).
A plaintiff may prove pretext either


directly by persuading the court that a discriminatory reason more
likely motivated the employer or
indirectly by showing that the employer's proffered explanation is
unworthy of credence.
39
ACA “Whistleblower”/AntiRetaliation Claims


ACA section 1558 amends the FLSA to prohibit
employer retaliation against an employee who:
 Receives a tax credit or subsidy through an
Exchange;
 Provides information to an employer or government
agency regarding an ACA violation;
 Testifies about an ACA violation;
 Assists or participates in a proceeding about an ACA
violation
 Objects to, or refuses to participate in, an activity
reasonably believed to be in violation of the ACA
Regulations issued at 29 CFR Part 1984 (78 Fed. Reg.
13222 (Feb. 27, 2013)
40
Causes of Action “Whistleblower”






Taking adverse employment action against an employee who
receives a tax credit or subsidy may lead to claims that the action
was prohibited retaliation
 Expansive definition of “prohibited acts”—includes termination of
employment, “disciplining,” and “threats” to terms and conditions
of employment (29 CFR § 1984.102)
Query: Could the ACA’s whistleblower provision be used in cases
where an employer reduces hours in anticipation of a worker
receiving a subsidy?
Governed by OSHA - Complaints by employees must first be filed
with OSHA within 180 days from when the retaliatory decision was
both made and communicated to the employee
OSHA procedure
Employee may also proceed directly to U.S. District Court if OSHA
does not issue a decision on complaint within 210 days of its filing.
District court has authority to award “compensation for any special
damages sustained as a result of the discharge or discrimination”
41
Causes of Action Nondiscrimination

ACA section 1557
 prohibits discrimination based on race, color, national origin, sex,
age, or disability under “any health program or activity, any part
of which is receiving Federal financial assistance … or under any
program or activity that is administered by an Executive agency
or any entity established under [Title I of the ACA].”
 Insurers receipt of premium tax credits and cost-sharing
subsidies for Exchange products broad enough to subject
issuers to potential liability




No regulations yet. Appears to allow private rights of action and
complaints with HHS’s Office of Civil Rights (“OCR”)
Example - complaint filed May 29, 2014 with OCR against
Coventry and others in Florida regarding the copayments and
coinsurance for HIV/AIDS medications
National Women's Law Center complaints against employers re:
denial of pregnancy coverage for dependent children
OCR guidance re: transgendered benefits, and impact on state
insurance law
42
Areas of Potential Exposure:
Provider Nondiscrimination / Network Adequacy




Section 2706 of the PHSA prohibits discrimination against a provider
acting within the scope of his license or certification
 Guidance says “to the extent an item or service is a covered
benefit under the plan or coverage, and consistent with
reasonable medical management techniques … a plan or issuer
shall not discriminate based on a provider’s license or certification
…”
Vehicle to require plans contract with certain providers?
 E.g., Boeing class action (C.S. v. The Boeing Company Master
Welfare Plan, et al) – brought under ERISA, alleging that the Plan
covers applied behavioral therapy, but excludes from network all
providers that offer ABA therapy
Vehicle to require equal reimbursement of different types of providers
performing same service?
Suits by providers (such as chiropractors and hospitals) likely
 E.g., Seattle Children’s Hospital action against DOI (In re: Seattle
Children’s Hospital Appeal of OIC’s Approvals of HBE Plan Filings)caused change in network adequacy standards
43
Areas of Potential Exposure:
Associations / PEOs





Key issue: is an association or PEO a single group health plan – and
thus likely a large group plan?
 Or does it comprise a number of plans that may be small group
or individual plans, to which “look thru” rules for rate review,
MLR, etc. apply?
If look thru applies, plan subject to:
 Community rating
 Premium rate review
 80 percent MLR standard
 EHB package
 Single risk pool
DOL and states have increased scrutiny of association plans (Oregon
and New Hampshire)
Private claims by employers or individuals who were underwritten or
did not get ACA benefits. See, e.g., Fossen v. BCBS of Montana, 774
F. Supp. 2d 1096 (D. Mont. 2010), aff’d 660 F.3d 1102 (9th Cir.
2011)
New criminal penalties relating to MEWAs
44
Areas of Potential Exposure:
Medical Loss Ratio





Complex calculation process opens door to enforcement actions or
private litigation (potentially ERISA or state law). Current HHS
priority.
Susceptible to claims that insurer:
 Manipulated methodology to avoid rebates
 Failed to timely pay rebates
 Failed to properly allocate rebates between employer and
employees (or is vicariously liable for employer’s failure to do so)
 Avoided payment of rebates by manipulating surplus
Violations will often cut across similar groups of contract holders,
suggesting possible class action litigation
Remedies could be significant: amount of unpaid rebates plus
interest and attorney fees, and exposure to double payment
 Potential administrative penalties by HHS or state
Potential criminal liability due to required attestations?
 DOJ has prosecuted health insurance company executives for
falsifying MLR data in context of Medicaid program (US v. Fahra)
45
Some Thoughts on Private Litigation
Defenses





Standard ERISA defenses continue to apply for group health plans:
preemption, exhaustion, standing, failure to sue the right party, no
monetary relief under ERISA
PHSA has no private enforcement scheme, no implied right of action
Failure to adopt federal requirements under state law could be an
effective defense to claims under state law (by insurance
departments or individuals) seeking to enforce ACA requirement
Generally no preemption of state law for individual insurance (ACA
preserves state regulation for insurance)
 Possible conflicts preemption?
Typical state law defenses to state law claims
46
Questions?

Mark C. Nielsen, Groom Law Goup


[email protected]
202.861.5429
47