11.23.09

The Confusing Insurance Categories in the Senate Bill

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Another feature of the Senate bill that compares unfavorably with the House bill is its confusing definitions of insurance coverage. The House bill recognizes one category of private insurance, a “qualified health benefits plan,” which employers are obligated to provide and individuals to buy. This term is used throughout the bill. Only grandfathered plans are permitted to not meet the QHBP requirements.

The Senate bill is far more complicated, indeed confused. Individuals are required under §5000A(f) of the Internal Revenue Code, added by Section 1501 of the Senate bill, to have “minimum essential coverage.” Minimum essential coverage is defined, in turn, to include public insurance (like Medicare and Medicaid), “an eligible employer-sponsored plan,” a “health plan offered in the individual market in the state,” or a grandfathered plan. (“Eligible employer-sponsored” coverage is defined to include all employee benefit plans.) Section 1301 defines “health plan” to include “health insurance coverage” and group health plans. The bill states, however,

Except to the extent specifically provided by this title, the term “health plan” shall not include a group health plan or multiple employer welfare arrangement to the extent the plan or arrangement is not subject to State insurance regulation under section 514 of [ERISA].

The bill cross references the definition section of Title XXVII of the Public Health Services Act, which defines “Health insurance coverage,” to include all medical insurance offered by a health insurance issuer, which in turn is defined to include all health insurers and managed care companies.

Most of the insurance reform requirements of the bill address group health plans and health insurance issuers in the group or individual market. “Group health plans” would on its face seem to include self-insured plans, were it not for the “health plan” definition, which excludes them. But section 1562, “Conforming Amendments,” adds a new section 715 to ERISA, stating that all of the new health insurance regulatory provisions that the reform bill adds to Part A of title XXVII of the Public Health Services Act apply to ERISA plans, except for two sections dealing with insurance equity regardless of salary in insured group plans and minimum loss ratios. This would seem to contradict section 1301, which defines “health plan,” to exclude ERISA plans. I am not sure the Senate has really thought through what it intends to do with self-insured plans.

The problems caused by this confusion are illustrated by section 2707, which requires health insurance issuers that offer health insurance coverage (which would not seem to include self-insured plans) to ensure that plans cover the “essential benefits package” required under the legislation. Section 1302 defines “essential health benefits package” to include the essential benefit package defined by HHS, the cost-sharing limits imposed by the bill, and the requirement that insurers offer coverage fitting into the four tiers (bronze, silver, gold, or platinum). These requirements seem to apply to all individual insurance and group insurance plans, but whether they apply to self-insured plans is not clear.

One important reason to straighten this out is to clarify when individuals who are offered coverage by their employers can refuse that coverage and instead purchase insurance through the exchange using affordability credits. Individuals can qualify for premium credits if “the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” It is not wholly clear what the “employer plan’s share,” means, but presumably it means the employer contribution to coverage. The term “total allowed cost of benefits” is also not defined in the bill, nor is it defined in the Public Health Service Act. The real problem, however, is that since the bill does not clearly state that self-insured plans must cover essential benefits, it is far from clear what the benefits are that the employer plan must cover 60% of. Presumably HHS regulations will come up with some answer to this question, but since employers will be penalized if their employees take advantage of the premium subsidies, this provision is bound to result in litigation.

Another confusing term in the bill is “qualified health plan.” Qualified health plans must meet a number of additional requirements addressing such issues as marketing, coverage design, network adequacy, coverage of out-of-network emergency services, accreditation, and quality and patient safety. The exchanges must offer “Qualified health plans” and almost every time the bill uses the term “qualified health plan,” it refers to qualified health plans offered through the exchanges. However, one of the requirements that a health insurance issuer must meet under section 1301, which defines qualified health plan, is to agree “to charge the same premium rate for each qualified health plan of the issuer without regard to whether the plan is offered through an Exchange or whether the plan is offered directly from the issuer or through an agent.” This would suggest that a qualified health plan could be offered outside of the exchange, but that raises the question of whether all health plans sold by health insurance issuers outside of an exchange must be “qualified.” The bill does not, as far as I can see, solve this mystery.

One cannot help but wonder whether all of this complexity is intentional. It could be that I am missing something (the insurance reform sections of the bill fill 400 pages and the search function of the bill has limitations). It could also be that I am too dense to figure out what the drafters are trying to do. But, in all humility I would suggest that if I can’t understand it, I doubt the bills meaning is going to be immediately obvious to a court interpreting the bill, or, more importantly, that the meaning of the legislation will be sorted out without litigation. I would hope that as the bill goes through conference, we get something closer to the simplicity of the House version.

Update: I have learned that it is the intention of the Senate bill that qualified health plans can be offered outside of the exchanges, but that health plans offered outside of the exchanges do not need to be qualified health plans. Also, although self-insured plans do have to comply with many of the new insurance regulatory requirements added by the Senate legislation, they are not required to offer essential benefits. This leaves unsolved the mystery of how the “allowed costs of benefits” are to be determined that employers must pay 60% of to avoid being liable for penalties if their employees receive affordability credits.

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Comments

Anonymous says:

Thank you for your great articles. I am glad that someone else is noticing the conflicts in the Senate bill. In your update to the article above you stated: “although self-insured plans do have to comply with many of the new insurance regulatory requirements added by the Senate legislation, they are not required to offer essential benefits.” I would appreciate some information about the authority for that statement. How do you reconcile Sections 1562(a)(2), 1562(c)(12) and 1562(f)? The first two apparently take self-insured group plans out of either subpart I or subparts I and II of Part A title XXVII of the PHSA, and the last one makes most of Part A applicable, even for non-ERISA plans (your comment is consistent with 1562(f), but why should that provision override the other two?). Also, in Section 1301, what do you think about the conflict between the definition of “group health plan” and the exception that you quoted above, with respect to group health plans that are not subject to state regulation? Can they be “health plans” under the definition of “health plans” in that Section? Finally, Section 1301(b) defines terms “in this title,” so are group health plans that are not subject to state regulation likewise not subject to most of the provisions of Title I (“Quality, Affordable Health Care for All Americans”) since they are not “health plans”? Will individuals enrolled in such plans be able to meet their individual mandates? Perhaps the reference to “title” should have been “subtitle”. I would appreciate your thoughts. Thank you.

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