“Distressed Babies” and Employment-Based Health Coverage

jacobi-176x220_1AOL CEO Tim Armstrong was the center of a story bringing together issues of whining one-percenters, employees’ rights to privacy in their health information, and the growing evidence that some employers are simply not good agents for their employees’ health coverage.

 Armstrong is an accident-prone speaker. Most recently, he gained attention for the way he explained a change in AOL’s methods of contributing to employees’ 401(k) plans. AOL announced that I planned to shift from a system by which employees received matches for their contributions each pay period, to one in which the company contributes only at the end of the year. AOL has been criticized for this move, as it deprives employees who move on during the year of any contributions, and denies ongoing employees a substantial amount of the money’s time value.  AOL has had second thoughts, and apparently will not change its current 401(k) policy.

But Armstrong’s curious explanations for the harsh move generated more interest than the change itself, and the story therefore lives on. After initially explaining that Obamacare made him do it, a published informal transcript of his remarks to employees has him shifting the blame in part to the cost of care for two mothers and children covered by AOL’s employee health plan:

[W]e had two AOLers that had distressed babies that were born that we paid a million dollars each to make sure those babies were okay in general.

It is not clear from the reports what Armstrong meant by “distressed babies.” Also unexplained was how this particular health cost so deeply affected AOL, with over 5,000 employees, $2.3 Billion in gross revenue in 2013 (and second on Fortune’s list for profit growth), and with a CEO pulling down over $12 Million. Of course some insureds use more health care than others in any year; that’s why the cost-spreading mechanism of health insurance is so important. Or, as Deanna Fei, identifying herself in Slate as the mother of one of the babies, said,

[W]e experienced exactly the kind of unforeseeable, unpreventable medical crisis that any health plan is supposed to cover. Isn’t that the whole point of health insurance?

In short, the message is that two covered families suffered catastrophic childbirth experiences last year, and those experiences justified a reduction in retirement benefits. Really. But as even the WSJ noted, employees have privacy rights in their medical information. And the vivid description of the employees’ experiences may well constitute the release of Protected Health Information (PHI), leading to the families and their medical experiences being outed to coworkers and others.

AOL may be self-insured, in which case it operates a health plan that may be a covered entity for HIPAA purposes. And/or, AOL may have a Business Associate relationship with an insurer, third party administrator, or other covered entity. It appears, in any event, that Armstrong may have received PHI regarding these two employees – and then felt free to use the PHI as a talking point. AOL and/or its plan may have to deal with charges of violation of the following HIPAA regulation:

[With some exceptions,] a group health plan, in order to disclose protected health information to the plan sponsor or to provide for or permit the disclosure of protected health information to the plan sponsor by a health insurance issuer or HMO with respect to the group health plan, must ensure that the plan documents restrict uses and disclosures of such information by the plan sponsor consistent with the requirements of this subpart.

45 CFR 164.504(f)(1)(i). It is unlikely that disclosing the information to justify cutting back on pension benefits is a permitted disclosure.

In addition, the ADA (see 42 USC § 12112(d)) limits the use of medical information by employers – whether or not the employee is a person with a disability. The EEOC states [  ] the general rule well:

Medical records are confidential. The basic rule is that with limited exceptions, employers must keep confidential any medical information they learn about an applicant or employee.

So, Armstrong’s discussion of his employees’ medical condition might violate the law. The tone of Armstrong’s message with respect to his employees’ benefits also raises an issue I’ve touched on in a previous post. Briefly stated, the compromises leading to the enactment of the Affordable Care Act left employment-based health coverage at the center of our health care system. Most employers are good stewards of their employees’ health coverage, and make decisions in the employees’ best interest. Some do not embrace the role of faithful agent for their employees in such matters – far from it. As we work to improve the implementation of the ACA, we should be mindful that there were and are other ways to organize our health insurance system, many of which would take the Tim Armstrongs of the world out of the position of making decisions about Americans’ health care, divesting him of the power to disclose PHI on a whim, and perhaps protecting his employees from his next cut – perhaps of their health benefits.

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Seton Hall Law’s John Jacobi Testifies Before the New Jersey Legislature on the Obama Fix

December 13, 2013 by · Leave a Comment
Filed under: Health Reform 

Last week, John V. Jacobi, the Dorothea Dix Professor of Health Law & Policy at Seton Hall University School of Law—and a contributor to this blog—testified before the New Jersey legislature at a hearing on the New Jersey insurance commissioner’s decision to allow insurers to renew recently-cancelled plans for an additional year.

Professor Jacobi responded to a number of issues, including whether New Jersey, rather than simply permitting insurers to renew policies out of compliance with the Affordable Care Act (as President Obama requested) could instead mandate such renewals.  Jacobi explained that such a mandate would violate specific terms of the ACA, and therefore be unlawful.  The permissive renewals, in contrast, can be seen simply as an exercise of administrative discretion by both federal and New Jersey officials.

Jacobi also, however, suggested that insurers might not be fully protected were they to renew these technically noncompliant policies.  While administrative officials have agreed not to enforce the law, people covered by the insurance have entered into no such agreement.  They could, then, if the renewed policy failed to cover services mandated by the ACA, insist on the coverage as a matter of federal statutory law.

In an article at NJ Spotlight, Andrew Kitchenman writes the following:

Seton Hall University health law professor John V. Jacobi raised a separate point – the possibility of legal challenges over coverage being denied in plans that are extended but don’t comply with the ACA.

Jacobi put forward the hypothetical example of a child of a worker at a small business that offers an insurance plan that is extended but would otherwise have been cancelled because it didn’t comply with the ACA. Jacobi said that if that child were to become sick and be denied coverage that would be mandated by the ACA, the child’s family would be in a strong position to challenge that denial.

For example, pediatric dental care and treatment for some mental illnesses aren’t covered by current health plans, but must be covered under ACA-compliant plans.

“While the employer and maybe even the employee may have agreed to this lesser coverage, the statute still requires that those services be covered,” Jacobi said.

Read Kitchenman’s entire article, Insurers Face Tough Decisions on Whether to Extend Health Plans, here.

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Halbig v. Sebelius: A Case to Watch Challenging Subsidies in the Federal Exchanges

November 27, 2013 by · 1 Comment
Filed under: Health Reform 

IRS_BuildingOne of the important aspects of the Patient Protection and Affordable Care Act (“PPACA”) is the creation of new health insurance exchanges where individuals can buy regulated healthcare insurance. To encourage states to establish such exchanges and individuals to buy healthcare from these exchanges, Congress chose to offer subsidies in the form of refundable tax credits to help a state’s low and moderate-income residents be able to buy healthcare. Section 1401 of the PPACA states that individuals who purchase healthcare insurance through an exchange established by a state will qualify for the subsidies.

The wording “through an exchange established by the State” is the precise issue in a case to watch, Halbig v. Sebelius. The case, filed in the federal district court in the District of Columbia, involves four taxpayers and three employers (one, Innovare Health Advocates, a Tea Party-backed organization) who are challenging the authority of the IRS to issue subsidies to health-insurance companies and impose penalties on individual taxpayers and employers in the 36 states that have not established a health insurance exchange under PPACA.

Plaintiffs argue that these subsidies and penalties violate the clear and unambiguous language of the Act, which anticipates premium assistance only in states with state-operated exchanges. (Pruitt v. Sebelius also challenges the IRS’ authority and will be in front of the Eastern District of Oklahoma in the near future). Plaintiffs have a strong argument as the exact language of the statute states “through an exchange established by the State.” Should this case proceed to the Supreme Court, the Court will engage in statutory construction to deliver a ruling on this issue. The first step of statutory construction is a plain language analysis in which the Court will assume the legislative purpose is expressed by the ordinary meanings of the words used. See Sec. Indus. Ass’n v. Bd. of Governors. And where the plain language is clear and unambiguous, the Court will usually not inquire further to ascertain meaning. See Qi-Zhuo v. Meissner. Only if the Court finds ambiguity within the statute will it then look to legislative intent to interpret the statute. Here, it seems that the language clearly states that subsidies will only be afforded to those 14 states that have established an exchange, so it will be interesting to see further ruling on the issue.

To the contrary, proponents of the PPACA argue that Plaintiffs’ argument is inappropriate based on other sections of the PPACA, the legislative history, and the overall structure of the Act. First, supporters argue that the availability of tax credits through federally operated exchanges is recognized in other sections of the Act such as 1311, 1321, 1401 (36B of Internal Revenue Code), and 1413. Second, proponents argue that the legislative history suggests that Congress intended for the subsidies to be available in every state. In making such claim, they rely heavily on the Senate Finance Committee Report of 2009, which stated that tax credits would be provided to reduce the cost of purchasing insurance, but with no mention of any limitation based on the nature of the exchange. They also point to the fact that the Congressional Budget Office provided Congress in 2009 with an analysis of the impact of the PPACA on premiums, with the assumption that tax credits would be available in all states. Lastly, they claim that the overall purpose of the PPACA is to bring millions of individuals into insurance markets by providing tax credits, and to rule that tax credits will be inapplicable in over half the country would defeat the purpose of the statute. The proponents’ arguments rest heavily on legislative intent, which as stated above, will only be addressed if ambiguity is found within the statute.

Plaintiffs sought a preliminary inunction to block subsidies immediately for those who buy health insurance through the federally operated exchanges, however, U.S. District Judge Paul Friedman refused to grant the injunction. Nonetheless, Judge Friedman allowed the case to proceed and stated that it would be handled on an expedited basis, giving consumers a clear answer under the law before the March 2014 deadline to buy insurance.

Why, you ask, are the Plaintiffs challenging the IRS subsidies to all exchanges, whether federally or state established? In their complaint, Plaintiffs claim that the subsidies “financially injure and restrict the economic choices of certain individuals.” There is an exemption from the individual mandate for low- and moderate-income individuals for whom healthcare insurance is “unaffordable,” however with the subsidies, such individuals are no longer exempt, and are thereby forced to purchase healthcare under the individual mandate. Following from this, employers are charged a penalty if they do not adhere to the “employer mandate,” which is triggered by their employees receiving a federal subsidy.

Although there is little attention paid to this case right now, more should tune in to see the final result. One of the most important aspects of the PPACA will be inapplicable to over half the country if the Court chooses to rule in favor of the Plaintiffs. One way or another, this will be a case to watch.

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Obama: “Everybody Who Wants Insurance Through the Marketplace Will Get Insurance. Period.”

October 24, 2013 by · Leave a Comment
Filed under: Health Reform 

Capture 2After lengthy debates in Congress, a Supreme Court decision, and a government shutdown, President Obama’s healthcare plan will finally be rolled out.  Every hurdle has been cleared—or has it?

According to the website designated for the new health insurance marketplace, www.healthcare.gov, “The Health Insurance Marketplace is Open!”  Yet, despite this encouraging message, people are having trouble accessing the website since its launch.  According to sources, the website had over 19 million visits in the first ten days, which caused numerous problems for users.

On October 21, 2013, President Obama spoke publicly about the disappointing malfunctioning of the government’s healthcare website.  Obama’s speech was apologetic yet optimistic, as he reassured the public that this minor kink in the system would be fixed.

“[L]et me remind everybody that the Affordable Care Act is not just a website,” Obama said.  “It’s much more.”

Obama also responded to critics of the healthcare law and rollout of the website, as he reassured the public,

“It’s time for folks to stop rooting for its failure, because hardworking, middle-class families are rooting for its success.”

Despite Obama’s optimistic remarks, reports indicate that the website could take weeks or months to work properly, citing heavy traffic on the website as a roadblock to accessibility.  To address this delay, Obama read aloud the phone number listed on the government website—1-800-318-2596—whereby citizens can still apply for healthcare coverage, despite the issues with the government website.  Insisting that waiting times for people calling the toll-free number have been minimal—averaging less than one minute—Obama hoped that reading the number on camera would encourage people to make the call.

Meanwhile, the Department of Health and Human Services plans to bring in specialists to help fix the problems with the website.  The website has been updated several times since problems arose, and officials hope it will be running seamlessly soon.

Currently, the website includes several features which will become more useful in the coming weeks, including a live chat option, resources in foreign languages, and quick information links for different populations, including states, businesses, and the media.

While the federal healthcare exchange has been experiencing problems, many of the nation’s uninsured have been able to sign up on state-run healthcare exchanges with fewer issues.  Still, state-run exchanges relying on federal processes such as identity verification have experienced complications. 

To date, at least sixteen states and the District of Columbia have their own state-run exchanges in lieu of the federal exchange, offering a variety of options for consumers to choose from.  After consumers start buying insurance on the exchanges, companies will decide whether to increase or decrease their participation in the federal and state healthcare exchanges, as they gauge the interest of various populations.

Though reports have illustrated the healthcare marketplace roll out as slow, since the new program has been implemented and the marketplace has been opened, almost 500,000 people have already applied for healthcare—though it is unknown how many of those 500,000 actually purchased a policy.  Moreover, a Pew Research Center poll reported that 22% of America’s uninsured have visited the online exchange since its launch.  To increase the number of people signed up in the new program, administration officials will soon be venturing to areas of the country with a significant portion of uninsured individuals, in order to persuade people to sign up for healthcare on the exchanges.

Undeterred by the critiques of the website, Obama stated,

“Our goal has always been to declare that in this country the security of health care is not a privilege for a fortunate few, it’s a right for all to enjoy.  That’s what the Affordable Care Act’s all about.  That’s its promise.  And I intend to deliver on that promise.”

It seems that Obama has made it to the last hurdle.  The coming weeks will show whether he can make the jump.

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Restricted Provider Networks and Patient Access: The Need for Contextual Analysis

jacobi_johnTheresa Brown’s op-ed in the New York Times on Sunday, title “Out of Network, Out of Luck,” raised concerns about patients’ access to physicians within a restricted provider network.  Brown describes the market in Pittsburgh, where two large hospital systems, each with an allied health plan, are battling for market share, leaving some patients with a painful choice: leave their treating physician, sometimes during a course of care, or pay higher out-of-network fees.  Brown notes that the hospital systems’ integration with payers, and their aggressive swallowing up of physician practices, are steps taken in furtherance of the goals of cost containment and quality improvement.

The piece highlights the growing problem of network adequacy in health plans.  The Affordable Care Act’s goal is expanded coverage, but it encourages some mechanisms to restrain cost.  For example, health insurance exchanges’ lower-than-expected premiums resulted in part from insurance plans’ restrictive provider networks.  The business proposition for narrow networks has been clear for decades, as plans can offer providers patient volume in return for price concessions.  This dynamic is complicated, as Professor Tim Greaney has described, near-monopsony power of insurers  in some states, and hospital system mergers undertaken in reaction to insurer power, but which can also have anti-competitive effect.

As the Pittsburgh situation demonstrates, powerful hospital systems and insurance plans will duke it out for market power, but may also combine in new, hybrid organizations.  As the battleground moves from fee-for-service to more sophisticated reimbursement tools such as global payments, the elbows will get sharper, and the competition that remains will likely narrow patient choices even further.   Massachusetts, the precursor in so much that is cutting edge in health policy, is showing the way.  As Mechanic, Altman, and McDonough described last year, substantial pressure from plan sponsors and government have led provider systems to cooperate in programs that narrow patient choice, in the interest of restraining cost.

Is this a bad thing?  Read more

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