The National Association of Insurance Commissioners (NAIC) has never been known as an organization where the self-insurance/alternative risk transfer industry is treated fairly, but its penchant for bias became even more visible this past week. Worse yet, this bias is now being fomented by an “ivory tower” expert.
Professor Timothy Stoltzfus Jost is the designated “consumer representative” on the NAIC’s ERISA (B) Subgroup , which is tasked with developing various policy recommendations related to how states should adapt their insurance regulations to better coordinate with PPACA implementation. The esteemed professor is not shy in sharing his opinion that smaller self-insured group health plans, facilitated by stop-loss insurance, should be made extinct.
During the Workgroup’s last conference call, Professor Jost presented a formal statement entitled The Affordable Care Act and Stop-Loss Insurance. This scholarly work was quite the hit piece on self-insurance disguised with big words, extensive footnoting and misleading legal references.
His central thesis is that smaller employers should not be allowed to self-insure because they do so primarily to escape state regulation, and going forward to sidestep new PPACA regulation. He also pushes the dubious argument that self-insured plans contribute to adverse selection (see my earlier blog post on this subject).
Virtually all of Professor Jost’s points can and will be rebutted privately and publicly as this NAIC policy development process moves forward, but first let’s take some time to consider the source.
He is currently a law professor at the Washington and Lee University of Law, with multiple other academic appointments dating back to 1979. Along the way, he has written several books and academic papers on the subject of health care with titles such as The Threats Facing our Public Health Care Programs and a Rights-Based Response; and Health Care at Risk: a Critique of the Consumer-Driven Movement.
And by the way, he is a graduate of the University of California at Santa Cruz. In case you are not familiar with this school, it makes U.C. Berkley look like a bastion of conservatism.
So what about private sector experience over his 35 year career? You guessed it, zero. How about past experience as a regulator who at least could interact with the private sector? No again. What we have here is the classic liberal elite academic who looks at the world through prisms of theory and ideology.
Professor Jost holds himself out to be a patient’s rights advocate and clearly views the NAIC as a forum to present his “ivory tower” perspective. OK fine, there’s certainly room for a diversity of qualified opinions as part of the policy development process.
The problem is that while Professor Jost may well have valid perspectives to contribute on true consumer (patient) protection issues, he’s out of his league in commenting on how health care delivery should be financed.
Moreover, if he was truly concerned about the ability of individuals to receive quality, affordable health care, Professor Jost should actually be a proponent of self-insured health plans (regardless of size) because these plans generally do a better job on both counts as compared to the fully-insured marketplace.
It appears the professor is in need of some timely continuing education.
Saturday, September 10, 2011
Friday, September 9, 2011
RRG Legislation Snagged by Dodd-Frank Creation
After some initial good progress in moving federal legislation to modernize the Liability Risk Retention Act (LRRA), a new rhetorical roadblock has been raised.
The Risk Retention Modernization Act (H.R. 2126) includes a dispute resolution provision whereby RRGs who believe they are being illegally regulated in non-domiciliary states can access the equivalent of a federal arbitration process as an alternative to initiating costly legal action.
An earlier version of the legislation provided that this dispute resolution mechanism would be administered within the Treasury Department due to technical jurisdiction requirements, but left discretion Treasury to fit this function in as part their exiting organizational chart.
Fast forward to the recent passage of the Dodd-Frank financial reform legislation, which among other things created a new Federal Insurance Office (FIO) to be housed within the Treasury Department. As a result of this development, the current version of the legislation specifically designates FIO as the entity responsible to arbitrate RRG disputes with state regulators.
Supporters of the legislation have always known that there would be some push back in Congress from members concerned that such a dispute resolution would infringe on the authority of state insurance regulators. Of course, the opposite is actually true and this position has gained traction in recent months.
But just as the policy argument has largely been settled, at least one member of Congress key to the legislation’s eventual message has raised a new concern. In a meeting earlier this week to discuss the legislation, Rep. Judy Biggert (R-IL), chairwoman of the House Subcommittee of Capital Markets within the House Financial Services Committee, voiced strong concerns about this new responsibility assigned to the FIO.
Her objection was not really specific to RRG regulation, but rather reflects a broader view held by many Republicans that the FIO is being given too much authority. In hindsight, this objection was not particularly surprising.
While PPACA has garnered the lion share of public attention for those critical of government expanding its regulatory reach, the distaste for Dodd-Frank is significant among most Republican members of Congress. As a result, any manifestation of this law, such as the FIO, can spark a reflexive push back as demonstrated by Rep. Biggert’s comments.
It is important to note that this new wrinkle does not mean that H.R. 2126 cannot pass. The lobbying process on Capitol Hill is inherently complicated and this is just the latest example.
In the end, if the case can be made that the practical advantages this legislation offers to small and mid-sized companies trump more abstract political concerns, the LRRA will be successfully modernized.
Stay tuned for additional inside reports on how this legislation is progressing on Capitol Hill.
The Risk Retention Modernization Act (H.R. 2126) includes a dispute resolution provision whereby RRGs who believe they are being illegally regulated in non-domiciliary states can access the equivalent of a federal arbitration process as an alternative to initiating costly legal action.
An earlier version of the legislation provided that this dispute resolution mechanism would be administered within the Treasury Department due to technical jurisdiction requirements, but left discretion Treasury to fit this function in as part their exiting organizational chart.
Fast forward to the recent passage of the Dodd-Frank financial reform legislation, which among other things created a new Federal Insurance Office (FIO) to be housed within the Treasury Department. As a result of this development, the current version of the legislation specifically designates FIO as the entity responsible to arbitrate RRG disputes with state regulators.
Supporters of the legislation have always known that there would be some push back in Congress from members concerned that such a dispute resolution would infringe on the authority of state insurance regulators. Of course, the opposite is actually true and this position has gained traction in recent months.
But just as the policy argument has largely been settled, at least one member of Congress key to the legislation’s eventual message has raised a new concern. In a meeting earlier this week to discuss the legislation, Rep. Judy Biggert (R-IL), chairwoman of the House Subcommittee of Capital Markets within the House Financial Services Committee, voiced strong concerns about this new responsibility assigned to the FIO.
Her objection was not really specific to RRG regulation, but rather reflects a broader view held by many Republicans that the FIO is being given too much authority. In hindsight, this objection was not particularly surprising.
While PPACA has garnered the lion share of public attention for those critical of government expanding its regulatory reach, the distaste for Dodd-Frank is significant among most Republican members of Congress. As a result, any manifestation of this law, such as the FIO, can spark a reflexive push back as demonstrated by Rep. Biggert’s comments.
It is important to note that this new wrinkle does not mean that H.R. 2126 cannot pass. The lobbying process on Capitol Hill is inherently complicated and this is just the latest example.
In the end, if the case can be made that the practical advantages this legislation offers to small and mid-sized companies trump more abstract political concerns, the LRRA will be successfully modernized.
Stay tuned for additional inside reports on how this legislation is progressing on Capitol Hill.
Regulatory Overreach Compromises Workplace Safety Initiatives
In case you had any doubt that the current public debate over the scope of federal regulation is more about political ideology rather than practical reality, look no further than OSHA’s ramped up oversight of workplace safety issues.
Now on the surface, this may sound like a laudable focus because almost everyone agrees that there is a role for government in making sure that sensible workplace safety standards are established and adhered to. But of course, in this current political climate Obama regulators just don’t know when to say when.
Specifically, OSHA has recently started to subpoena workplace safety audits prepared by workers’ compensation self-insurers and insurance carriers. Keep in mind that that these audits are prepared on voluntary basis so that employers/insurers are better able to proactively address any safety deficiencies that may exist. Such audits are particularly important tools for workers’ compensation self-insurers because they “own” every dollar saved on payments to injured workers.
Historically, OSHA has not attempted to access such audits because everyone understood that employers would likely stop preparing these risk management tools if they could be used against them in regulatory enforcement and/or legal proceedings.
This precedence has been overturned by a recent federal district court ruling stating that OSHA does have the right to subpoena safety audits and related documentation. Specifically, the ruling in the case of Solis v. Grinnell Mutual Reinsurance Company concluded that audit subpoena are generally enforceable if:
1) They reasonably relate to an investigation within OSHA’s authority;
2) The requested documents are relevant to OSHA’s investigation;
3) The request is not too vague
4) Proper administrative procedures have been followed; and
5) The subpoena does not demand information for an “illegitimate purpose”
According to OSHA’s internal policy regarding voluntary self-audits, the agency will not “routinely” request such audits at the beginning of an inspection, or use the audits to identify hazards to inspect.
But now with a favorable court ruling in their back pocket, it’s very reasonable to expect that OSHA regulators will, in fact, make safety audit subpoenas a routine part of their investigative process.
Of course, and ironically, the real victims are the workers as many employers are likely to curtail such formal audits in response to OSHA’s invasive zeal. Another classic example of “no good deed goes unpunished” apparently embraced by this administration.
Now on the surface, this may sound like a laudable focus because almost everyone agrees that there is a role for government in making sure that sensible workplace safety standards are established and adhered to. But of course, in this current political climate Obama regulators just don’t know when to say when.
Specifically, OSHA has recently started to subpoena workplace safety audits prepared by workers’ compensation self-insurers and insurance carriers. Keep in mind that that these audits are prepared on voluntary basis so that employers/insurers are better able to proactively address any safety deficiencies that may exist. Such audits are particularly important tools for workers’ compensation self-insurers because they “own” every dollar saved on payments to injured workers.
Historically, OSHA has not attempted to access such audits because everyone understood that employers would likely stop preparing these risk management tools if they could be used against them in regulatory enforcement and/or legal proceedings.
This precedence has been overturned by a recent federal district court ruling stating that OSHA does have the right to subpoena safety audits and related documentation. Specifically, the ruling in the case of Solis v. Grinnell Mutual Reinsurance Company concluded that audit subpoena are generally enforceable if:
1) They reasonably relate to an investigation within OSHA’s authority;
2) The requested documents are relevant to OSHA’s investigation;
3) The request is not too vague
4) Proper administrative procedures have been followed; and
5) The subpoena does not demand information for an “illegitimate purpose”
According to OSHA’s internal policy regarding voluntary self-audits, the agency will not “routinely” request such audits at the beginning of an inspection, or use the audits to identify hazards to inspect.
But now with a favorable court ruling in their back pocket, it’s very reasonable to expect that OSHA regulators will, in fact, make safety audit subpoenas a routine part of their investigative process.
Of course, and ironically, the real victims are the workers as many employers are likely to curtail such formal audits in response to OSHA’s invasive zeal. Another classic example of “no good deed goes unpunished” apparently embraced by this administration.
Thursday, September 8, 2011
Inside Politics in Michigan Demonstrate That Self-Insurance Priorities Are Too Easiliy Dealt Away
Michigan Governor Rick Snyder is poised to sign legislation that would impose a one percent tax on medical claims paid by health plans, including self-insured group health plans. This is big news and is certainly a disturbing development for those concerned about the erosion of ERISA preemption. But there is a more interesting story behind the headlines that is instructive for self-insured employers in other states as well.
In anticipation of this legislative development, I spoke with senior representatives from a leading Michigan employer organization to explore possible response options, including litigation coordination if necessary. When asked specifically what their appetite was for legal action assuming the legislation is signed into law, their answer was pretty clear – “zero.”
Given that this association represents many self-insured employers such strong push back was surprising to say the least. Then the “off the record” discussion began.
It turns out that there had been some significant wheeling and dealing between the Legislature, the governor and the business community in order to craft various budget reform initiatives designed to head off a projected deficit.
My contacts confided in me that their organization is privately opposed to the health plan tax proposal but will not go on record to say so, much less getting involved in possible litigation. They cite two reasons for this seemingly contradictory stance.
First, their membership includes health insurance companies in addition to self-insured employers and they believe an outspoken defense of self-insurers would alienate this other membership constituency. The other rationale is if the boat was rocked on this issue, then some of the other “deals” presumed to be favorable to the employer community could fall apart.
Of course, the big picture was not taken into account. They acknowledge that the immediate negative financial impact for self-insured employers is bad but manageable. Not considered was that if state efforts to tax and/or regulate self-insured health plans are left unchecked, self-insurance may cease to be an attractive option for employers in Michigan and elsewhere, which would effectively trap employers in the traditional health insurance marketplace – a much more ominous situation than being subject to a one percent tax as problematic as that may be.
My contacts appreciated this analysis and agreed that there are, in fact, bigger issues at play. That said, the bottom line is that many within the leadership of their very influential organization would likely applaud an effort to push back against the health plan tax, but this would be private support with no organizational fingerprints.
So there you have it. The very important fight over ERISA preemption has been dealt away in Michigan in favor of other business community priorities that likely are less important to employers from a P&L perspective. It’s uncertain how things will eventually play out in Michigan, but this look behind the curtain on the relationship between state employer organizations and government exemplifies why the self-insurance industry has an ongoing challenge at the state level.
While the ability of employers to self-insure is more significant than most tax and regulatory initiatives (again from a P&L perspective), self-insurance issues simply do not get much attention for state organizations, which tend to have more broad-based legislative agendas. To be fair, this is understandable because these groups generally have diverse membership constituencies and not have the resources to focus on issues that only a single constituency. Moreover, the member representatives do not generally insist that their organization put self-insurance issues front and center.
To the extent that employers can be mobilized to rattle the cages of state business associations to pay more attention to self-insurance issues we may be able to turn “private support” to visible public advocacy on the future threats that are almost certain to arise.
Let the cage rattling begin.
In anticipation of this legislative development, I spoke with senior representatives from a leading Michigan employer organization to explore possible response options, including litigation coordination if necessary. When asked specifically what their appetite was for legal action assuming the legislation is signed into law, their answer was pretty clear – “zero.”
Given that this association represents many self-insured employers such strong push back was surprising to say the least. Then the “off the record” discussion began.
It turns out that there had been some significant wheeling and dealing between the Legislature, the governor and the business community in order to craft various budget reform initiatives designed to head off a projected deficit.
My contacts confided in me that their organization is privately opposed to the health plan tax proposal but will not go on record to say so, much less getting involved in possible litigation. They cite two reasons for this seemingly contradictory stance.
First, their membership includes health insurance companies in addition to self-insured employers and they believe an outspoken defense of self-insurers would alienate this other membership constituency. The other rationale is if the boat was rocked on this issue, then some of the other “deals” presumed to be favorable to the employer community could fall apart.
Of course, the big picture was not taken into account. They acknowledge that the immediate negative financial impact for self-insured employers is bad but manageable. Not considered was that if state efforts to tax and/or regulate self-insured health plans are left unchecked, self-insurance may cease to be an attractive option for employers in Michigan and elsewhere, which would effectively trap employers in the traditional health insurance marketplace – a much more ominous situation than being subject to a one percent tax as problematic as that may be.
My contacts appreciated this analysis and agreed that there are, in fact, bigger issues at play. That said, the bottom line is that many within the leadership of their very influential organization would likely applaud an effort to push back against the health plan tax, but this would be private support with no organizational fingerprints.
So there you have it. The very important fight over ERISA preemption has been dealt away in Michigan in favor of other business community priorities that likely are less important to employers from a P&L perspective. It’s uncertain how things will eventually play out in Michigan, but this look behind the curtain on the relationship between state employer organizations and government exemplifies why the self-insurance industry has an ongoing challenge at the state level.
While the ability of employers to self-insure is more significant than most tax and regulatory initiatives (again from a P&L perspective), self-insurance issues simply do not get much attention for state organizations, which tend to have more broad-based legislative agendas. To be fair, this is understandable because these groups generally have diverse membership constituencies and not have the resources to focus on issues that only a single constituency. Moreover, the member representatives do not generally insist that their organization put self-insurance issues front and center.
To the extent that employers can be mobilized to rattle the cages of state business associations to pay more attention to self-insurance issues we may be able to turn “private support” to visible public advocacy on the future threats that are almost certain to arise.
Let the cage rattling begin.
Wednesday, September 7, 2011
lenders on the RESPA hot seat for reinsurance partnerships
In exchange for the their business, companies such as Citigroup Inc, Wells Fargo & Co, SunTrust Banks Inc. and Countrywide allegedly required reinsurance partnerships on generous terms that violated the Real Estate Settlement Procedures Act, a 1974 law prohibiting abusive home sales practices.
During a two-day presentation in the summer of 2009, HUD's team presented DOJ attorneys with a thick
lenders on the RESPA hot seat for reinsurance partnerships
In exchange for the their business, companies such as Citigroup Inc, Wells Fargo & Co, SunTrust Banks Inc. and Countrywide allegedly required reinsurance partnerships on generous terms that violated the Real Estate Settlement Procedures Act, a 1974 law prohibiting abusive home sales practices.
During a two-day presentation in the summer of 2009, HUD's team presented DOJ attorneys with a thick
Monday, September 5, 2011
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