:: Congress Uses The COBRA Platform To Boost Health Care Coverage
The American Recovery and Reinvestment Act, now signed into law, is a 1,000-page plan to spend $787 billion. The subsidy of COBRA premiums provided in the legislation is one provision that will particularly affect the self-funded health plan sector of the economy.
Though I have not read the text, here is a summary from Workforce Management:
The COBRA subsidy would give employers tax credits for paying a large portion of a former employee’s health care premium for up to a year. It provides a nine-month, 65 percent subsidy for COBRA premiums for people who lose their jobs between September 1, 2008, and December 31, 2009. The premiums average about $1,000 a month.
Of course, COBRA terminees are not the best actuarial asset for a self-funded plan. Thus, this move will increase the burden to self-funded health plans.
Here is a troubling aspect of the legislation – it will be offered to those who lost their jobs from Sept. 1 to the end of this year – and, according to this report,
those who were put out of work after September but didn’t elect to have COBRA coverage at the time will have 60 days to sign up.
Business Insurance states:
Employers will face a significant communications and administrative challenge to comply with the COBRA provisions, which go into effect March 1.
Employees who were laid off since Sept. 1, 2008, and declined to opt for COBRA coverage will have a new right to enroll in COBRA, and employers are required to inform those individuals of that right.
The failure to provide COBRA notices can result in substantial penalties. Moreover, until the COBRA notice is supplied, the election period does not begin to run.
If this is the beginning of a push to place more uninsured on employer-based plans, as many are predicting, then there will be perilous times ahead for those employers that opt to self fund their benefit plans. The task at hand, however, will be to start identifying those workers that involuntarily separated from service since September 1, 2008.
DOL will be preparing a model notice. I’ll update this post later with upcoming compliance deadlines.
:: Employee Benefit Websites – Academic
Paul Secunda, University of Mississippi Law School law professor, has posted a list of blogs most visited by those in the academic community as indicated by .edu addresses:
Justia has just included a top 200 list that counts only visitors who have an IP address that are from .edu networks. In other words, all of these visitors come from academic institutions. The ranking, therefore, tells something about the popularity of a blog within the academic community. Admittedly, the system is not perfect. An .edu IP address could be used by students or staff and many faculty visit sites using from non-academic (non-.edu) networks. Nonetheless, for now, it is as close as we get . . .
Topping the list, Paul notes is the site Abovethelaw “a self described source of ‘news and gossip about the profession’s most colorful personalities and powerful institutions’.
Congratulations to Paul on Workplace Prof Blog on that site’s status as most popular among academics.
:: Senate Approves SCHIP Measure Over Objections Of Republican Minority
On the Republican side, Representative John Shadegg, an influential conservative from Arizona, said, “This debate is the opening salvo in a battle over the future of health care in America.†Senator Mel Martinez of Florida, chairman of the Republican National Committee, acknowledged Tuesday that a vote against the bill would be portrayed as a vote against health care for children.
“If we allow that to be the end of the conversation, then we will probably have a very bad election cycle,†Mr. Martinez said. “Children’s Health Plan Focus of New Struggle”, The New York Times (August 1, 2007)
The Senate added its weight yesterday to that of the House in pushing forward the extension of the State Children’s Health Insurance Program. The Senate legislation, though less expansive than that passed in the House, nonetheless adds 3 million lower-income children to the program. The vote was 68-31.
Now the Senate version of the legislation must be reconciled with the House bill which passed earlier this week. Under the House bill, the $50 billion expansion would be financed in part by cutting government payments to Medicare health maintenance organizations. For additional comment on the measure, see :: Senate Passes “Veto-Proof†Version Of SCHIP Legislation
:: House Passes “Sweeping Healthcare Legislation” Expanding SCHIP Coverage
“This is the children’s hour,” House Speaker Nancy Pelosi (D-Calif.) declared last night. “We are able to meet our moral obligation to our children.” “Children’s Health Bill Approved By House”, The Washington Post (August 2, 2007)
A divided House on Wednesday approved sweeping healthcare legislation that would expand government benefits for children and seniors while boosting tobacco taxes and cutting Medicare payments to private insurance companies. The largely party-line 225-204 vote came after hours of rancorous debate and parliamentary stalling tactics by Republicans. Cheers rang out in the House chamber when Speaker Nancy Pelosi (D-San Francisco) announced that the legislation had passed. “House passes boost in kids’ health planâ€, Los Angeles Times (August 2, 2007)
Scheduled to expire on September 30, the Children’s Health Insurance Program is now in the political spotlight. According to the New York Times, President Bush has threatened to veto the House bill, developed entirely by Democrats, as well as a more modest bipartisan measure, that is expected to pass in the Senate.
For those unfamiliar, the State Children’s Health Insurance Program (SCHIP) is a national program intended to benefit the so-called “working poor”. These individuals earn too much money to qualify for Medicaid, but find it difficult to purchase health insurance. The program, created in 1997 under a Republican Congress, represented a substantial expansion of health care on a par with the Medicaid program itself which dates back to the 1960’s.
How do these developments affect group health plans? In several ways.
:: Retail Industry Leaders Association Takes Out Another “Pay Or Play” Mandate Through ERISA Preemption Challenge
The United States District Court for the Eastern District of New York handed down another victory for the Retail Industry Leaders Association. In this decision, filed July 14, 2007, the district court ruled that ERISA preempted the Suffolk County, New York Fair Share Act. The reasoning of the opinion essentially follows that in Retail Industry Leaders Association v. Fielder, — F.3d —-, 2007 WL 102157, C.A.4 (Md.) (January 17, 2007)
From the RILA press release:
:: DOL Imposes Penalty In ERISA Case
The U.S. Department of Labor has obtained a settlement restoring $760,000 to participants covered by the employee stock ownership plan (ESOP) of Cambar Software Inc. (CSI), in Charleston, South Carolina and requiring the payment of a civil money penalty of $76,000 by the plan officials. Under the settlement, proof will be furnished to the Labor Department verifying that plan assets have been restored and any additional interest has been paid. The department may appoint an independent fiduciary, if necessary, to distribute the assets to participants of the CSI plan.
The Labor Department’s 2006 lawsuit alleged that Hagemeyer North America Inc., GreatBanc Trust Co., and members of the plan administrative and advisory committees violated the Employee Retirement Income Security Act (ERISA) by mismanaging two ESOPs sponsored by the Cameron & Barkley Co. (C&B) and CSI. United States Dept. of Labor News Release
Release Date: July 5, 2007
Release Number: 07-948-ATL
Contact Name: Gloria Della/Richard Manning
Phone Number: 202.693.8664/202.693.4676
:: HHS Office Of Inspector General Reports False Claims Act Settlements With Health Care Entities
Under the Inspector General Act of 1978, the HHS Inspector General must report semiannually to the head of the Department and the Congress on the activities of the office during the 6-month periods ending March 31 and September 30. These reports are intended to keep the Secretary and the Congress fully and currently informed of significant findings and recommendations by the Office of Inspector General.
Two Health Care-Related Settlements Featured
For the 6-month reporting period that ended March 31, 2007, the HHS Officer of Inspector General reports the conclusion of two large health care-related settlements. From the report:
:: Edwards’ New Proposal: Require Insurance Companies To Expend 85% of Premium On Patient Care
In the Edward’s campaign’s blog today, the candidate’s latest proposal appears as a platform goal of:
Reforming the insurance industry by setting national accounting standards requiring insurers to spend at least 85 percent of their premiums on patient care. Without new rules, insurance companies could continue to charge hardworking families excessive premiums, pocketing the savings from health care reform instead of delivering more to patients. Edwards’ Health Care Markets will also drive down costs by making private insurers compete with a public plan.
For the highlights of the Edwards’ plan, see the fact sheet from his website.
:: Large Employer Organization Releases Health Care Reform Platform
The ERISA Industry Committee (”ERIC”), represented by executives from some of the largest U.S. employers (e.g., IBM and Tyco International Ltd.), has released a set of conceptual proposals that supports a platform of health care coverage and retirement plans for American workers delivered by competing third-party benefit administrators such as banks, investment companies and insurers. Under the proposal, employers and employees would continue to fund health insurance and retirement benefits.
Entitled “A New Benefit Platform For Life Security”, the proposal is long on conceptual propositions and short on specifics. In possible anticipation of this reception, the 50-page piece includes a section on “How This Proposal Should Be Viewed”. From this section, it appears that the preferred characterization of the plan is roughly that of a thought-piece with the hope of fostering discussion which will in turn lead to the development of “legal and operational details”.
:: Senator Clinton Unveils Her Seven Point Health Care Reform Plan
On Thursday, as a candidate for president, Clinton (D-N.Y.) returned to the complicated and contentious topic, acknowledging mistakes and promising that she had learned from the experience. “Now, I’ve tangled with this issue before, and I’ve got the scars to show for it,” she told an auditorium packed with medical students and doctors at George Washington University. “But I learned some valuable lessons from that experience. One is that we can’t achieve reform without the participation and commitment of health-care providers, employers, employees and other citizens who pay for, depend upon and actually deliver health-care services.” “Clinton Revisits Health-Care Ideas”, Chicago Trib Read more
:: State Health Care Reform Versus ERISA Preemption
Mr. Chairman, I understand that one of your specific aims in holding today’s hearing is to examine the Employee Retirement Income Security Act (ERISA), its potential impact on the ability of states to implement initiatives to expand health insurance coverage, and whether some form of ERISA waivers may be appropriate in this regard.
This is indeed a timely point of interest given the recent legal challenge to Maryland’s “Fair Share Health Care Fund Act†based on ERISA preemption and the growing momentum in many states to engage in similar efforts. In that vein, I want to note that our bill specifically allows for state plans approved by Congress under the Act to seek “exceptions to otherwise applicable federal statutes, regulations, and policies,†such as and including ERISA. Testimony of U.S. Rep. John F. Tierney (MA-06) before the House Education and Labor Committee, Subcommittee on Health, Employment, Labor, and Pensions May 22, 2007
:: Caremark And Its Insurer Continue Legal Battle Over Lawyers’ Fees
In 2001, Steadfast issued a managed care professional liability policy to Caremark. Pursuant to the policy, Steadfast agreed to pay those sums in excess of the policy’s deductible that Caremark might become legally obligated to pay as “Damages†for “Claims†made by reason of any negligent act, error, or omission committed by Caremark arising out of its rendering or failing to render “Professional Services†in the course of business. The policy excluded claims for intentional, criminal, or fraudulent acts. Under the policy, Steadfast was required to defend any “Claim†against Caremark seeking “Damages†payable under the terms of the policy, even if the allegations were groundless, false, or fraudulent.
In 2002, members of health plans administered by Caremark filed two lawsuits in federal court. The federal actions alleged that, in managing the plans’ prescription-drug benefits, Caremark breached its fiduciary duties under the Employee Retirement Income and Security Act (ERISA) (29 U.S.C. § 1001 et seq. (2000)) by conspiring with drug manufacturers to obtain for its own benefit undisclosed discounts, rebates, and “kickbacks†for favoring certain higher-priced drugs. The complaints also charged Caremark with misrepresentation and failure to disclose material information and sought an accounting. Caremark tendered the defense of these two suits to Steadfast. . . . Steadfast stated that it had no obligation to defend or indemnify Caremark in the federal actions. Steadfast Ins. Co. v. Caremark RX, Inc., — N.E.2d —-, 2007 WL 1485900 (Ill.App. 1 Dist.) (May 22, 2007)
The byzantine procedural history of this litigation will not be recounted here, but in the latest skirmish, Caremark’s insurer succeeded in obtaining leave to amend its complaint to state a claim for unjust enrichment. The insurer is suing to recover the $964,846.43 averred to have been paid toward Caremark’s defense against the charges of malfeasance. The appeal was from the Circuit Court of Cook County, Case No. 03 L 001363. The opinion has not been officially released for publication. At that time, the Illinois Courts website will post it.
:: Solicitor General Supports Petitioner’s Position In LaRue v. DeWolff, Boberg & Associates, Inc
The Fourth Circuit decision in LaRue v. DeWolff, Boberg & Associates, Inc., 450 F.3d 570 (4th Cir.2006) involves issues of relief under both Section 502(a)(2) and 502(a)(3). As to the Section 502(a)(2), the question is one of whether a participant in a defined contribution plan can seek individualized relief as a proxy for the plan as required by that provision. As to Section 502(a)(3) issue, the question is whether a claim for make whole relief may be asserted against a fiduciary. The plaintiff petitioned for certiorari and the Supreme Court invited the Solicitor General’s office to file an amicus brief to aid in review of the petition. I was advised today by counsel for the petitioner that the Solicitor General has filed an amicus brief in the case. When a link is available on the SG’s website I will post it here.
:: Reluctant Massachusetts Tax Collector Has Good Reasons
Taxpayers are bearing a larger share of the cost of the expansion of healthcare coverage than expected because the state has not yet collected a penny from businesses that do not help insure their workers. Penalties on those businesses were expected to bring in $95 million this fiscal year and $76 million next year, according to the Legislature’s estimates when the bill was signed into law a year ago. “Mass. Has Yet to Collect Fees From Firms for Healthcare”, The Boston Globe (May 10, 2007)
The Massachusetts taxpayers bought into a much bigger financial obligation than they were told.
Here’s what the deal was supposed to be.
:: The Real Obstacles To Health Care Reform: A Checklist
Health care reform proposals typically find expression in blue-sky manifestos with political flavor and little practical foundation. The following is a list of problems that must be addressed for real improvement in the delivery of health care.
:: Kaiser HMO HealthConnect Project Criticism Goes Public
In a blistering 2,000-word treatise, Mr. Deal wrote: ‘We’re spending recklessly, to the tune of over $1.5 billion in waste every year, primarily on HealthConnect, but also on other inefficient and ineffective information technology projects.’ He did not stop there. Mr. Deal cited what he called the ‘misleadership’ of Kaiser Chief Executive George Halvorson and other top managers, who he said were jeopardizing the company’s ability to provide quality care. “How an Email Rant Jolted a Big HMO“, Wall Street Journal (April 24, 2007)
This WSJ article describes a now public conflict between Kaiser Permanente and an employee (now former employee) over an information system called Health Connect. The issue is making the rounds on the health care blogs. While Kaiser denies the allegations of system failures, Computer World magazine ran an article based upon a a 722-page internal report obtained by Computerworld.
:: Maker Of OxyContin Settles With States For $19.5 Million
Attorney General Lisa Madigan, along with 26 other attorneys general, today filed a lawsuit and entered into a settlement agreement with Purdue Pharma, L.P., requiring the pharmaceutical company to significantly alter and restrict its practices in promoting the drug, OxyContin, and to pay $19.5 million to the states involved. Press Release, Office of Illinois Attorney General.
Approved by the FDA in 1995, OxyContin, a synthetic form of morphine, has developed a legendary association with abuse and addiction. The allegations leading to the settlement included charges that Purdue Pharma, maker of the drug, used sales reps to convince doctors that OxyContin was “the one to start with and the one to stay with” for a wide variety of pain, despite its limited uses approved by the FDA. According to the court complaint, the drugmaker wanted doctors to choose the drug as the first resort in everything from surgery pain to broken bones.
:: Maryland Bows To ERISA’s Preeminence
After very careful and thorough consideration, the Office of the Attorney General will not seek review before the Supreme Court on the Fair Share Health Care Act. Statement of Maryland Attorney General.
In a previous article on this site, the Fourth Circuit decision in Retail Industry Leaders Association v. Fielder has been reviewed. See, :: Retail Industry Leaders Association v. Fielder: Case of Preemption Over Federalism Now the Maryland Attorney General has thrown in the towel.
Good retrospective comment can be found on several sites. For example, The Jurist, Stephen Roseberg’s ERISA blog and Paul M. Secunda’s article on Workplace Prof Blog. The Maryland legislation was dead on arrival and, like several similar initiatives, evokes the obvious question – why? Not why were the proposals DOA – that should have been clear from a cursory review of the ERISA preemption precedent. Rather, why did the public officials not undertake more legal analysis before drafting the legislation? In any event, absent Congressional intervention, odds are in favor of several more preemption decisions within the next year involving health initiatives contrived with little regard to ERISA’s preemptive force. See, e.g., :: California’s Universal Health Coverage Proposal Unveiled; and Pennsylvania Business Journal article “Does the proposed 3% tax on employers violate ERISA?”
:: Denial of Long Term-Care Claims Brings Insurance Carriers Under Public Scrutiny
Companies like Conseco, Bankers Life and Penn Treaty were aggressively signing up clients who were not in the best health at rates far below their competitors’ in order to win more business, former agents said. From 1991 to 1999, long-term-care sales helped drive total revenue gains of roughly 500 percent each at Penn Treaty and Conseco, including its affiliate Bankers Life.
Cracks in the business, however, soon started to appear. Insurance executives began warning they had underestimated how long policyholders would live after entering nursing homes. The costs of treating Alzheimer’s, Parkinson’s and diabetes ballooned. “Aged, Frail and Denied Care by Their Insurers”, New York Times (3/26/2007)
The current series in the New York Times spotlights the claims payment practices of several large insurers. The article notes that certain companies are standouts when the subject is complaints in relation to market share. The supporting data are derived from the National Association of Insurance Commissioners website.
The complaint in Derks v. Conseco, which provided the thematic organization for the article, may be viewed on this site.
:: Senator Clinton Remains Vague On Proposals In Town Hall Meeting
I’m going to pass universal health care that lowers costs for Americans. Families and businesses are drowning in skyrocketing health care premiums. There’s a lot of wasted money in our health care system . . .
My goal is to have a health care system that provides quality, affordable care to every American. On way to achieve this goal is to have a national health care system where there is only one source of care and the government runs it . . .
While I haven’t proposed a specific health care plan this early in the campaign I have proposed two pieces of legislation in the Senate that would expand access and care for immigrants. from “ABCNews.com Exclusive: Sen. Hillary Clinton Answers Your E-Mails”
:: Department of Labor Sues Health Plan Fiduciaries Alleging Asset Diversion, Illegal Fees
The U.S. Department of Labor has sued fiduciaries of the Georgia Plumbers Trade Association (GPTA) health plan in Griffin, Georgia, affiliated firms and their owners for mismanagement of the health plan sponsored by the association. The department alleges that the defendants failed to pay benefits when due, paid illegal fees and commissions, and diverted plan assets for personal use. As a result, $646,875 in health claims were never processed or paid when the plan was terminated in April 2004. Chao v. Georgia Plumbers Trade Association Health Plan, Civil Action No. 1:07-CV-0595 DOL News Release (March 22, 2007)
The Georgia Plumbers Trade Association is a non-profit organization providing education and resources to assist Georgia plumbers in complying with building code changes. The health plan was a multiple employer welfare arrangement (”MEWA”) that included approximately 500 participants in Georgia.
According to the complaint, the defendants allegedly:
- failed to properly evaluate and underwrite benefits,
- failed to adjust rates and benefits to pay promised benefits,
- failed to adequately fund claims owed by the plan, and
- paid excessive fees for services provided to the health plan.
The complaint can be viewed on this website.The text of the release is reproduced below:
:: Hartford Backs Out Of Stop Loss, Sells To UnitedHealth Group Subsidiary
The Hartford Financial Services Group Inc. says it has agreed to sell its medical stop-loss insurance business to National Benefit Resources Inc. NBR is a subsidiary of UnitedHealth Group Inc., Minnetonka, Minn.
National Underwriter, Hartford To Sell Stop-Loss Health Business (Mar. 7, 2007)
Hartford has been in the stop-loss business since 1974, according to the article, and has about $200 million of stop-loss premium with over 800 self-funded employer plans. The transaction is expected to close in April.
:: GAO Says EBSA Should Conduct Routine Compliance Examinations
I recently featured the Employee Benefit Security Administration’s report on enforcement actions. For sake of completeness, you are directed to the Government Accountability Office (GAO) report indicating deficiencies in the EBSA enforcement efforts.
Principal deficiencies were (1) identifying the nature and extent of ERISA non-compliance and (2) failure to conduct routine compliance examinations. The EBSA did not agree with the findings. Of particular interest are the tabular comparisons of the EBSA, the IRS and the SEC and the EBSA response, all included as appendices (see pp. 42 et seq.) Notwithstanding its resistance to the report findings, the EBSA can be expected to step up enforcement efforts in response to the criticisms of its enforcement efforts.
See the GAO Report
:: Military Hospital Lapses Have Politicians On The Move
The VA hospitals are not good either except for the staff who work so hard. It brings tears to my eyes when I see my brothers and sisters having to deal with these conditions. I am 70 years old, some say older than dirt but when I am with my brothers and sisters we become one and are made whole again. ‘It Is Just Not Walter Reed’, Washington Post (March 5, 2007)
The current scandal over military hospitals stands in stark contrast to the praise bestowed on the VA hospitals by a recent survey also reported in the Washington Post. For example, the Post has reported:
The Department of Veterans Affairs medical system once epitomized poor-quality care. But after a series of changes, the system has been hailed in recent years as a model for health care reform.
:: Connecticut Democrats Propose Health Care Plan Based On Vanity Taxes, Provider Taxes & Subsidies
Democratic lawmakers unveil a comprehensive health care proposal designed to provide coverage for virtually all uninsured in the State. Package price for universal care is set at $900 million. The program is called the Connecticut Healthy Steps Program. The idea is to address specific areas of the health care system rather than overhaul the entire system.
According to state House Deputy Majority Leader Michael Christ (D), the proposal would involve a combination of financing sources including a proposed 3% provider tax, a vanity tax for optional cosmetic surgery, increasing the state cigarette tax, tax subsidies to help workers pay for employer-based health coverage and tax incentives where employers provide coverage.
:: Reflecting On The Delaware Battle of the Titans – Are The Pharmarcy Benefit Managers Really Helping Health Plans?
A Delaware corporate law judge Friday refused to stand in the way of a shareholder vote on the proposed combination of Caremark Rx Inc. and drug store operator CVS Corp. . . .
With a $26.8 billion rival offer already on the table from Express Scripts Inc. Caremark’s rival in the business of pharmacy-benefits management, the threat of an appraisal lawsuit from Caremark shareholders who say the CVS deal is too cheap could be a potent factor in the three-way takeover fight.
Wall Street Journal, Judge Refuses to Halt Deal Between Caremark-CVS (February 26, 2007)
Pharmacy benefit managers, or “PBM’s”, continue the path of consolidation which led to the dominance of the major players in the early 1990’s. The three way fight described in the WSJ represents yet another step in consolidation of the industry. In essence, the struggle is over Express Scripts Inc. competition with CVS Corporation in an attempt to acquire Caremark Rx Inc.
While the Delaware judge refused to halt the sale, the court did require Caremark to hold up on a vote until advised shareholders more about factors that may sway their decision.
PBM’s promise to deliver cost savings to health plans through plan design, effective purchases of appropriate pharmaceuticals, disease management and various ancillary services. The PBM’s dictate the formularies that drive traffic toward certain drugs and away from others based on reimbursements that the PBM’s specify. Inasmuch as the big are posed to get even bigger, these current events present an occasion to reflect on the utility and effect of the PBM mechanism in the American health care system.
:: Fifth Circuit Denies Rehearing In Landmark Retiree Benefits Case
Having carefully considered the petition for rehearing, we clarify that this decision results from and is limited to the specific language used in the corporate documents involved in the Halliburton-Dresser merger. For the reasons stated in the panel opinion, this court held that section 7.09(g)(i) of the merger agreement amended the Dresser retiree medical plan to obligate Halliburton and Dresser to maintain the Dresser retiree medical plan for eligible participants “except to the extent that any modifications thereto are consistent with changes in the medical plans provided by [Halliburton] for similarly situated active employees.â€
Halliburton Company Benefits Committee v. Graves, — F.3d —-, 2007 WL 446442 (5th Cir. 2007) (February 13, 2007)
“Treating the Petition for Rehearing En Banc as a Petition for Panel Rehearing”, the Fifth Circuit denied the petition for a rehearing. Further, inasmuch as no member of the panel requested that the court be polled on Rehearing En Banc, the Petition For Rehearing En Banc was also denied. Read more
:: Whistle Blower Rewards Increased For Reporting Tax Violations
Under the newly amended IRS statute, the whistleblower generally would submit information relating to violations of the internal revenue laws to the office of an IRS district director, preferably to a representative of the Criminal Investigation Division. The informant should also, at that time, file a formal claim with the IRS seeking the reward.
The Tax Relief and Health Care Act of 2006 amended the Internal Revenue Code to provide more incentives for private citizens to turn in tax evaders. The new law requires the Internal Revenue Service to establish a “Whistle Blower Office”. This office will report on an annual basis to the Secretary of the Treasury and Congress.
Unlike the False Claims Act, the statute does not contemplate any private cause of action by whistleblowers. If the IRS decides to pursue the matter, upon its successful conclusion, the IRS Whistleblower Office would notify the informant of his or her reward. If he or she is not satisfied, the informant can appeal the amount by filing a lawsuit in the United States Tax Court. Read more
:: John Edwards Calls For Tax Hikes To Pay For Universal Health Care Plan
Yes, we’ll have to raise taxes. The only way you can pay for a health care plan that costs anywhere from $90 [billion] to $120 billion is there has to be a revenue source.
“Edwards’s healthcare plan entails tax increase”, Boston Globe (Feb. 5, 2007) (boston.com)
According to the foregoing Associated Press article printed in the Boston Globe, John Edward’s health care reform proposal will entail higher taxes to fund his concept of universal health coverage. The article, based upon his appearance on Meet the Press [watch here], may be summarized as follows: Read more
:: Hillary on Health Care Reform: For Now, Just “Stay Tuned”
A Clinton spokesman, asked for details last night, would only say, “stay tuned,†followed by a smiley face emoticon. Mrs. Clinton said she wanted to “tackle problems of coverage†so everyone is insured for health care; has access to quality care; and can afford the insurance.
Senator Clinton’s rival, Sen. Barack Obama, stepped forward with his views during a speech at the annual Families USA Conference in Washington. (Long on charm, short on facts according to the WSJ)
Radioactive for more than a decade, universal health insurance emerged Thursday as a 2008 Democratic presidential primary issue for chief rivals Barack Obama and Hillary Rodham Clinton.
:: Senators Sununu, Gregg and Clinton Introduce Bill Incorporating “Michelle’s Law” Into ERISA
A federal version of New Hampshire’s “Michelle’s Law” has been introduced which would mandate that full-time college students covered by their parents’ health plan can take up to a year of medical leave from school with continued health insurance coverage. Michelle’s Law” was passed in New Hampshire in June 2006.
S.400, is described as a bill to amend ERISA and the IRC to ensure that dependent students who take a medically necessary leave of absence do not lose health insurance coverage, and for other purposes. Sen Sununu in introduced the bill on 1/25/2007 and it has been referred to the Senate Committee on Health, Education, Labor, and Pensions.
The introduction of the bill: Read more
:: EBSA “Targeting Criteria” Enhancements Lead to Large Enforcement Gains
The Employee Benefits Security Administration (EBSA) reports total monetary recoveries for FY 2006 of more than $1.4 billion. Included in this figure is $829 million in assets restored to plans and benefits recovered for individual workers, “an increase of more than 200% over FY 2001″.
The agency breaks its 2006 recoveries into three categories: Read more
:: President Advocates Tax Code Reform As Basis For Healthcare Reform
As promised, last night President Bush aired his proposals for making private health insurance more available and affordable. In his State of the Union address, the President emphasized his commitment to the private insurance systems as the best way to accomplish health care goals.
Highlights of the President’s views: Read more
:: Senator Clinton’s Health Care Reform Proposal
For balance, I have contacted Senator Clinton’s office for details on her proposal. The Albany office referred me to the D.C. office and there I was referred to the legislative department. For the present, the Senator’s position consists of highlights on her website here. I do anticipate I will have a more comprehensive summary of her proposals very shortly. They will be posted as an article upon receipt.
:: President Bush Will Propose Health Care Plan Of Tax-Based Aid for Consumers
President Bush outlined a proposal for improvement in the health care delivery system in his radio address this weekend. The proposal features a tax deduction for people who get health coverage either at work or on their own. On the other hand, employer-provided health insurance would be counted as income and thus would become taxable – constituting a tax increase for an estimated 20% of employees.
The President will add additional detail in his State of the Union address.
The text of the radio address is set forth below or available through a link to the White House website. (In the text, I supplied emphasis to those concepts which appear central to the proposal.)
The remarks begin with an affirmation of commitment to the present Medicare and Medicaid programs, and specifically the State Children’s Health Insurance Program. (Speaking yesterday at the Ryan Chelsea-Clinton Community Health Center on Manhattan’s West Side, Senator Clinton also claimed the latter issue, stating “it is simply wrong for any child in America to go without health insurance.” Read more
:: Retail Industry Leaders Association v. Fielder: A Case of Preemption Over Federalism
The Maryland General Assembly, in furtherance of its effort to require Wal-Mart to spend more money on employee health benefits and thus reduce Wal-Mart’s employees’ reliance on Medicaid, enacted the Fair Share Act. Not disguised was Maryland’s purpose to require Wal-Mart to change, at least in Maryland, its employee benefit plans and how they are administered. This goal, however, directly clashes with ERISA’s preemption provision and ERISA’s purpose of authorizing Wal-Mart and others like it to provide uniform health benefits to its employees on a nationwide basis. Were we to approve Maryland’s enactment solely for its noble purpose, we would be leading a charge against the foundational policy of ERISA, and surely other States and local governments would follow. As sensitive as we are to the right of Maryland and other States to enact laws of their own choosing, we are also bound to enforce ERISA as the “supreme Law of the Land.†U.S. Const. art. VI. Retail Industry Leaders Association v. Fielder, — F.3d —-, 2007 WL 102157, C.A.4 (Md.)(January 17, 2007)]
In ten pages, the Fourth Circuit delivered delivered the news to Maryland that ERISA still reigns king over the employee benefits economic sector. The Maryland legislation, enacted on January 12, 2006, requires employers with 10,000 or more Maryland employees to spend at least 8% of their total payrolls on employees’ health insurance costs or pay the amount their spending falls short to the State of Maryland. Read more
:: Wal-Mart Wins: Fourth Circuit Rules That ERISA Preempts Maryland’s “Fair Share” Legislation
In a 2-1 decision, the Fourth Circuit Court of Appeals held today in Retail Industry Leaders Association v. Fielder, No. 06-1840 (January 17, 2007), that ERISA preempts Maryland’s Fair Share Health Care Fund Act. Because the Act forces employers to restructure their employee benefit plans, the Court opined, the Act conflicts with ERISA’s goal of permitting uniform nationwide administration of self-funded employee benefit plans. Judge William B. Traxler Jr. joined Niemeyer in his decision. Judge M. Blane Michael dissented. [Retail Industry Leaders Association v. Fielder, --- F.3d ----, 2007 WL 102157, C.A.4 (Md.)(January 17, 2007)]
For background information, see :: Fourth Circuit Hears Argument Over ERISA Preemption Of Maryland “Fair Share†Legislation
The reaction of the Retail Industry Leaders Association:
RILA Applauds the U.S. Court of Appeals Decision to Uphold Lower Court Ruling Striking Down Maryland Health Mandate – The United States Court of Appeals for the Fourth Circuit today affirmed a district court decision to invalidate Maryland’s mandated health benefits law. To view a copy of the ruling, click here.
“Today’s Appeals Court decision makes clear that employer health plans are governed by federal law, not a patchwork of state and local laws,†said RILA President Sandy Kennedy. “The Court’s decision sends a strong message that similar bills under consideration in other states and municipalities also violate federal law…” Click here to view RILA’s press release.
Reaction of Maryland Attorney General’s Office:
Christine Hansen, a spokeswoman for the Maryland attorney general’s office, said it was reviewing the ruling and had no comment. The state has 14 days to file a petition for a rehearing, she said.
Source: Washingon Post
:: PPO Litigation Settles For $12 Million
Concentra announced today that one of its wholly owned subsidiaries, FOCUS Healthcare Management, Inc., has tentatively settled a class action lawsuit in Louisiana. The case, Gunderson, et al. v. F.A. Richard & Associates, Inc., et al., has been pending since 2004 in the state court of Louisiana, Parish of Calcasieu. The company, along with other preferred provider organizations (PPOs), insurance companies and third-party administrators, had been sued by four Louisiana health care providers alleging that the defendants provided legally insufficient notice under Louisiana law of PPO discounts to which the health care providers had contractually agreed. Similar cases were also filed against insurance carriers, PPOs and third-party administrators in the state court trial system and the workers compensation court system. In the settlement, FOCUS has agreed to create a $12 million settlement fund and to pay an additional $250,000 to cover actual expenses related to the administration of the settlement of the class action. The parties to the class action have mutually agreed that the settlement represents a compromise of disputed claims and is not an admission of liability for any purposes. The settlement remains subject to final court approval, following notice to class members.
BusinessWire Press Release (1/11/07)
One aspect of this case was previously discussed in :: Arbitration of Provider Reimbursement Disputes ). Â
:: Universal Health Plan Touted: Kennedy Presents A Solution
The “Medicare for All” plan will make health care coverage available to every American by expanding the Medicare program to the under 65 population. To promote competition and choice, enrollees will also have the option of choosing any of the plans offered to members of Congress, the President, and Federal employees.
from Senator Kennedy’s “Medicare For All” proposal
Ted Kennedy drew attention to his proposal for universal medical verage in his first hearing Wednesday as chairman of the Senate Health, Education, Labor and Pensions Committee. With some obvious exultation, Kennedy opened with praise for the Democratic legislators in his home state who worked with Republican Gov. Mitt Romney in crafting a universal coverage plan. Kennedy now joins the Democratic ranks seeking universal coverage by setting forth a national plan. Read more
:: California’s Universal Health Coverage Proposal Unveiled
Gov. Schwarzenegger presented his plan to provide universal health coverage yesterday. The proposal can be reviewed at the governor’s website. There you can view a live video Q & A session on the proposal or just read the proposal text.
The highlights, as presented: Read more
:: The Enrollment Challenge: A Big Task Ahead For Massachusetts
Massachusetts hospitals and community health centers are joining a major campaign to enroll residents with low and moderate incomes in subsidized insurance plans that are a key part of the state’s sweeping healthcare initiative . . . But even as they take to the radio waves, prepare to distribute brochures written in multiple languages, and mail out flyers, hospital executives are finding their jobs complicated by a major problem: Few uninsured residents know anything about the landmark initiative, and fewer still understand that the new law requires them to purchase health coverage beginning July 1. The Boston Globe, January 4, 2007
The success of the enrollment will depend largely on provider efforts and particularly hospitals according to observers. One of the biggest hurdles appears to be getting the people that need the program to identify themselves and actually apply.
For more information on the status of the enrollment (a little over 28,000 as of year-end), visit the website of the Commonwealth Health Insurance Connector Authority, “an independent authority created, under c. 58 of the Acts of 2006, as part of the sweeping reform designed to increase access to health care in Massachusetts.” The site contains an insurance broker presentation in Power Point, health care quality and cost information (such as mortality rates by institution), and other items that are simply interesting to read through.
Critical view of the program can be found on several sites including the Heritage Foundation website, NPR’s website, and several articles in the Boston Globe. A Kaiser Foundation factsheet is available for a quick overview. For a larger collection of articles, visit the News search tool on BenefitsLink and simply type “Massachusetts”.
:: Issue Joined Over Future of Healthcare System
Within days of convening, the new Congress will return to some of the biggest battles of the last decade as House Democrats try to rush through legislation requiring the government to negotiate lower drug prices for Medicare beneficiaries and overturning President Bush’s restrictions on embryonic stem cell research. The Medicare proposal highlights the profound differences between Democrats and Republicans over the future of the nation’s health care system, the proper role of government and the role of private markets in securing the best value for the huge sums spent on health care. “Power Shift in Congress Revives Health Debate”, The New York Times, 1/1/2007
The new year brings vows of attention to the working poor and expanded health care in a “mainstream” agenda according to Iowa Democrats. Democratic presidential contender John Edwards is quoted as saying that it is more important to invest in universal health care and lifting people out of poverty than to reduce the budget deficit. Not to be outdone, Republicans such as Charles Crist, the newly-elected governor of Florida, vow to make health insurance more affordable.
Oregon is among the States looking to increase access to health care through legislation. “The goal is to design a new system that provides health care to all Oregonians and use current funding more effectively”. According to one policymaker, “it absolutely is the year for reform. Meanwhile, after “an extraordinary year for health care in Massachusetts”, the citizens of that State contemplate what they are supposed to do under the new legislation. (Boston Globe article, registration required).
Mandating that individuals and employers buy into the existing health insurance structure forces people into a broken and inefficient system, according to Jerry Flanagan, health policy director of the Foundation for Taxpayer and Consumer Rights in Santa Monica. With Massachusetts, Maine and Vermont now in the nascent stages of their universal care legislation, New Jersey is giving the idea consideration.
State lawmakers expect to introduce legislation in the spring that would require all New Jersey residents to have health insurance. The projected first-year cost of covering the 1.4 million uninsured: $1.7 billion.
Newly-elected governor Eliot Spitzer weighed in on the issue at his inauguration yesterday, declaring an end to the “Rip Van Winkle” era in New York. Noting that “some may feel threatened by health-care reforms”, he promised a sometimes “bumpy ride” on the path to reform.
A recent news article takes stock of various State initiatives, including the once-ebullient, now-flagging Tennessee healthcare program (described as currently in “meltdown”). In 2005, Gov. Phil Bredesen (D) had to cut 170,000 enrollees from the TennCare program because of “perennial budget overruns”. Bredesen is quoted as describing the program as “too expensive, too rigid, too hard to control.†Oregon’s present program is in similar straits. Jonathan Oberlander, PhD, associate professor of health policy at the University of North Carolina, is quoted as stating that “for states like Massachusetts, the real challenges have just begun†with cost containment constituting the most difficult hurdle.
So, as the politicians air their lofty goals, we must recall that their agendas are frequently revised and compromised. In such matters their plans for the funding of campaign promises present troublesome details that give rise to obscure observations. For example, with regard to his various benevolent proposals, Senator Edwards opines that he wants to get the country “out of this ditch we’re in fiscally” but acknowledges his plan “means you cannot do about the deficit what you’d like to do, that’s true.”
See also, Bush signs tax bill with mental health parity and HSA provisions (CCH), Congress’ New Priorities (Business Week); :: Healthcare Reform: Agenda of the New Congress; :: Election 2006 – Implications For ERISA
:: The “Trouncing of the Trial Lawyers”
By focusing on litigation reform at the state level, business has won key battles. Suddenly, it’s a tough time to be a plantiffs’ attorney.
An interesting article appears in this issue of BusinessWeek. By channeling huge investments into advertisements, elections of judges and Congressional races, the business community has succeeded in suppressing plaintiff’s cases across the nation. Ironically, the article suggests that perhaps the effort has gone too far:
Sitting in a conference room high over Houston’s Galleria neighborhood, James L. Reed Jr. and two other attorneys from Looper, Reed & McGraw contemplate the new legal landscape. Looper Reed’s 60 attorneys represent small and midsize businesses, so one would presume that their clients have only benefited from the new environment. But Reed notes that there has been a “ripple effect” from the changes that is affecting commercial cases, too. His colleagues J. Cary Gray and Jack Rains, both self-described conservative Republicans, agree.“It’s a hell of a lot harder for one of our clients when a contract gets breached to collect all of their damages,” complains Gray, noting that conservative judges take a very narrow view of what kind of damages they will even allow a jury to consider. In general, Gray says, he thinks many Texas judges are “afraid of big verdicts coming out of their courtrooms,” even in a dispute between businesses. Citing a group of rice producers he and Gray represent and the limits they may face on their claims, Reed notes: “They’re starting to get educated about how much tort reform is too much tort reform.”While the success of tort reform cannot be disputed, the cause of the current trend will be the subject of debate.
Insurance companies with poor complaint versus market share ratios have been at the forefront of the successful campaign for limiting plaintiffs’ rights. And medical malpractice insurance rates rose dramatically during the past five years, though the amount insurers paid out in claims did not according to a CBS News Report. The article contains the following comment which sums up the obvious question:
“This is wacky,” said Jay Angoff, a former insurance commissioner in Missouri and the primary author of the study. “Now what’s the insurance companies’ defense to this?”
Nonetheless, successful trial lawyers have neglected the public relations aspect of their high profile cases. The focus has shifted from the harm visited on the consumer by reckless and negligent acts to the fees and conduct of lawyers representing the consumer. The issue has become so acute that the trial lawyers have actually changed their name.
In the end, the consumer will most likely be the casualty of the large scale battle between the special interests groups. The ultimate irony will be that each protagonist will continue to battle using the small consumer as a proxy for their cause.
:: Acordia Sued Over Secret Commission Agreements
Reuters reports that Attorneys General for three States sued Acordia, an insurance broker unit of Wells Fargo & Co. for allegedly receiving payments to steer clients to insurers. Acordia received about $200 million in undisclosed payments known as contingent commissions from 2000 through 2005, according to the attorney general’s office.
According to news reports Wells Fargo and its subsidiary Acordia Inc. are accused of steering their clients to insurance companies that paid Acordia “kickbacks”.
From the New York Attorney General’s website:
When insurance companies refused to make the improper payments, according to the lawsuit, Acordia’s management punished them by steering customers away from them and towards insurers who did pay kickbacks. As Acordia’s then-Chief Marketing Officer, Charles Ruoff told Acordia staff in 1999: “At this time we are concentrating on the plans and initiatives put forward by our ‘priority’ [insurance companies] to the exclusivity [sic] of all other [insurance companies].”
Wells Fargo participated directly in Acordia’s fraud. In one scheme, Wells Fargo agreed to “funnel” its own retail banking clients to Acordia for advice about insurance coverage. Wells Fargo did so with the understanding that Acordia, in turn, would steer this additional business to The Hartford, an insurance company that paid Acordia for such steering.
The lawsuit, filed today in State Supreme Court in Manhattan, seeks restitution for the companies’ customers, disgorgement of illegal profits, and penalties.
The Attorneys General of Connecticut and Illinois filed parallel lawsuits today. Attorney General Spitzer thanked the Attorneys General of Connecticut and Illinois for their assistance and cooperation in the investigation leading up to today’s filing.
The complaint can be viewed online together with exhibits.
The Office of Attorney General of Connecticut states:
Acordia promised its customers that “We maintain the highest standards with our customers and believe in taking the steps to follow these values: Do what’s right for the customer; Talk and act with the customer in mind; exceed the expectations of customers.” They also promised a policy of “full disclosure” to the consumer.
Despite these claims to consumers, before 2005, Acordia did not disclose a series of select and secret, back-door agreements it had with insurance companies that paid Acordia millions of dollars annually for the insurance Acordia recommended to its clients.
In many cases, these hidden commissions – negotiated only with a small number of insurers – were in addition to the normal sales commission and other standard sales incentives that Acordia received for each policy it sold.
As one carrier put it, Acordia had a “VERY LUCRATIVE plan!”
See the complaint here.
The Illinois Attorney General’s Office reports that the Acordia lawsuit “is part of the Illinois Attorney General’s wider investigation of the insurance industry, which began in late 2004. To date, Illinois has settled with several insurers and brokers, resulting in the recovery of tens of millions of dollars in restitution and penalties.” See the complaint here.
Note: Given the fiduciary requirements imposed on plan administrators by ERISA, it is imperative that employers engage in proper due diligence to assure that plan assets are protected and applied in a prudent manner. A due diligence questionnaire should explore relationships between plan advisors and those entities providing services or products to the plan. The range of inquiry should not limited to those in the insurance industry. As an example, if plan advisors, including legal counsel, accountants or actuaries, have independent business or professional relationships with other service providers to the plan, this is a material fact which should be discovered through the due diligence process.
:: DOL Sues Employer Seeking Payment of Health Plan Claims
As perennial as the ragweed, unscrupulous health plan operators surface each year and cover large areas of the country with consternation and misery. Meridian Benefits, Inc. was one of the more prevalent forms of this pestilence. (For background, see the DOJ information here] Recently, the DOL took to task one of the employers using Meridian. The following is from a DOL news release:
The U.S. Department of Labor has sued Chatsworth, Georgia-based Bryant Transportation Inc., and two company officials, seeking payment of more than $85,000 in unpaid employee health benefit claims.
“This action demonstrates the Labor Department’s commitment to protect the benefits of America’s workers,†said Howard Marsh, regional director in Atlanta for the department’s Employee Benefits Security Administration (EBSA).
Bryant Transportation provided health insurance to employees and their dependents through a self-insured health benefit plan that covered approximately 80 participants.
The department’s lawsuit alleges that beginning in May 2002, the company and two of its officers, E. Lester Bryant and Leesa Cardin, violated the Employee Retirement Income Security Act (ERISA) when they failed to prudently select and monitor the plan and its administrator, Meridian Benefits Inc., and to ensure that the company paid all claims. At the time of the alleged improper actions, Bryant was the company’s president and CEO and Cardin was vice president. Both served as fiduciaries for the health benefits plan.
According to the suit, Meridian Benefits unsuccessfully attempted to collect from the defendants more than $85,000 to cover the shortfall between the amount actually submitted and the amount of incurred claims and expenses.
Filed in U.S. District Court in Rome, Georgia, the suit seeks an order requiring the defendants to pay all legitimate unpaid claims incurred under the plan and owed as a result of their breaches of fiduciary duties. The suit also seeks to bar Bryant and Cardin from future service as fiduciaries to any plan covered by ERISA.
Chao vs. Bryant Transportation, Inc., Civil Action File Number 4:06-cv-00249-HLM, Northern District of Georgia, Rome Division.
:: The Supreme Court “Dwindling Docket” Phenomenon
Recent attention to the dwindling United States Supreme Court docket finds several explanations in an article by Linda Greenhouse appearing in the Amherst Times. Supreme Court observers state that the shortfall in cases on the Court’s docket may soon be the most significant in modern history. Additional insight into the logistics of calendar and cases may be found on Scotusblog, where the docket dearth is described in more quantitative terms. Read more
:: Fourth Circuit Hears Argument Over ERISA Preemption Of Maryland “Fair Share” Legislation
For about 40 minutes in a wood-paneled courtroom overlooking the state capitol, the panel of three judges from the Court of Appeals for the 4th Circuit led by Judge Paul V. Niemeyer considered the appeal of that ruling. They needled with constant questioning an assistant Maryland attorney general defending the state and a lawyer for the Retailers Industry Leaders Association, a trade group including Wal-Mart that challenged the Maryland law.
Baltimore Sun (November 30, 2006)
Under The Fair Share Health-Care Fund Act, Md. Code Ann., Lab. & Empl. § 8.5-101, et seq. (“Fair Share Actâ€), non-governmental employers of 10,000 or more people that “[do] not spend up to 8% of the total wages paid to employees in the state on health insurance costs, shall pay to the Secretary an amount equal to the difference between what the employer spends for health insurance costs, and an amount equal to 8% of the total wages paid to employees in the State.â€
The Maryland legislature passed the legislation in January in an override of Republican Gov. Robert Ehrlich’s veto, but the law was struck down as preempted by ERISA in Retail Leader Associate v. Fielder, (D. Md. 2006) (The Retail Industry Leaders Association is a trade group that represents Wal-Mart.)
According to a Wall Street Journal report, State Solicitor General Steven Sullivan told the appeals court that the law is part of the state’s “ongoing, long-standing efforts to address health care and skyrocketing costs of Medicaid.”
The Sun reports that Niemeyer, joined on the panel by Judges M. Blane Michael and William B. Traxler Jr., spent most of his questioning badgering Sullivan on the issue of whether federal law should trump the contested state law. The following colloquy is of interest:
At one point, Niemeyer asked hypothetically whether the state could pass a law requiring all employers to provide health care benefits for their employees and still not violate federal law. Sullivan answered yes, drawing skepticism from Niemeyer. “I don’t think you help yourself to make that argument,” the judge said.
The “Fair Share” legislation is a part of a growing trend of State activism in forcing employers to pick up the expense of medical care for the uninsured. Recent efforts in this direction were noted in a previous article on this site. The Fourth Circuit decision will be closely watched as a bellweather for whether such efforts have any spark of life outside of the broad blanket of ERISA preemption.
According to the Richmond Times-Dispatch (AP Wire), Sullivan argued that the legislation is not preempted “because it doesn’t force Wal-Mart to offer health care; it gives companies the choice of spending at least 8 percent on employee health benefits or covering the costs with increased taxes.”
The Times-Dispatch reports that Sullivan argued “They have real options; Wal-Mart knows it . . . They were trying to convince the legislature they weren’t as chintzy as their competitors were saying they were.”
RILA attorney William J. Kilberg argued that ERISA does not permit States to compel companies’ health-care spending. Since companies can opt to pay the tax, Niemeyer asked if the legislation was actually mandating benefits. In reply Kilberg stated: “It’s a Hobson’s choice, because no sane employer would make that choice” between increasing its spending and paying more taxes, Kilberg said.
Kilberg characterized the legislation as “an unprecedented, direct assault on ERISA” and, if upheld, the end of a uniform national plan as envisioned by ERISA.
Additional information is available on the RILA website.
:: HHS Secretary Mike Leavitt Calls For “Four Steps” To Quality
At a meeting of business leaders representing large and small companies nationwide, DOL Secretary Leavitt said commitment to four “cornerstone” goals would lead to improved quality of care and lower costs:
- Standards for connecting health information technology, making it possible to share patient health information securely and seamlessly among health care providers
- Quality of care reporting, so that health care providers as well as the public can learn how well each provider measures up in delivering care
- Providing costs of health services in advance, so that when patients choose routine and elective care, they can make comparisons on the basis of both quality and how much of the total cost they will have to pay under their health plan
- Providing incentives for quality care at competitive prices, as inpayments to providers based on the quality of their services, or insurance options that reward consumers for choosing on the basis of quality and cost [from Pharmalive, November 17, 2006 PRNewswire release]
Read more here.
:: Healthcare Security Ordinance Challenged As Preempted By ERISA
With the changing fortunes in Congress, pundits have forecast more initiatives to address healthcare concerns. As to the possible form of such proposals, one might review the AFL-CIO “Fair Share Health Care†campaign in which “activists are working with state legislators to win legislation to require corporations to pay their fair share for health care.”
Inevitably, however, State and local initiatives will encounter the preemptive borders of ERISA if employer mandates form a part of the funding of such plans. In the most recent example, the Golden Gate Restaurant Association, described as a nonprofit group representing the interests of restaurant owners, filed suit yesterday in the U.S. District Court in San Francisco alleging that San Francisco’s Worker Healthcare Security Ordinance is preempted by ERISA.
According to an article appearing in the San Francisco Examiner, the ordinance requires businesses with 20 employees or more to invest $1.06 to $1.60 for each employee hour worked for health care.
The complaint alleges that “if implemented, the ordinance would intrude both directly and indirectly upon the administration of such [ERISA] plans.†On the other hand, Ken Jacobs, chairman of the UC Berkeley Center for Labor and Research, is quoted as stating that “This law was written very carefully to avoid pre-emption under ERISA . . .â€
Jacobs claims that “[t]his law is like the minimum wage law. It sets standards for spending on health care. The law says nothing about the content of the health services, which is what ERISA addresses.â€
The preemption issue is a substantial threat, however, as the District Court of Maryland has only this summer struck down legislation aimed at increasing healthcare spending through employer dollars. On July 19, 2006, the District of Maryland ruled that Maryland’s so-called “Wal-Mart law,†was preempted by ERISA.
Under The Fair Share Health-Care Fund Act, Md. Code Ann., Lab. & Empl. § 8.5-101, et seq. (“Fair Share Actâ€), non-governmental employers of 10,000 or more people that “[do] not spend up to 8% of the total wages paid to employees in the state on health insurance costs, shall pay to the Secretary an amount equal to the difference between what the employer spends for health insurance costs, and an amount equal to 8% of the total wages paid to employees in the State.†See, Retail Leader Associate v. Fielder, (D. Md. 2006)
The Maryland legislation targeted Wal-Mart in a way distinguishable from the San Francisco ordinance, but it remains to be seen if the financial burden on employer plans may nonetheless find apt analogies in the Fielder decision. (The Fielder decision is reportedly being appealed – see August 2006 Lorman newsletter prepared by McGuire, Woods.)
Presumably, the approach taken by the San Francisco ordinance has been informed by experience gained from observing the fate of the Fair Share initiative in Maryland. For more discussion of the policy driving such legislation, a good resource may be found on The Faculty Law Blog where Saul Levmore provides insight on the Chicago “big-box†retail store ordinance and additional links.
On a related issue, the Los Angeles Times online portal includes an article today, “San Francisco Labor Hails Passage of Sick Leave Measure” (unrelated ordinance):
Cementing its reputation as a progressive haven and further irking business groups, San Francisco has become the first city in the country to mandate paid sick leave for all employees. The ballot measure, which hardly generated discussion here and passed with a resounding 61% of the vote, comes at a time when businesses are reeling from a city plan that requires employers to contribute to universal healthcare and a citywide minimum wage boost phased in over the last few years.
Whatever the outcome of the legal battle in San Francisco, two items are certain -the decision on the ERISA preemption issue in that case will have an impact well beyond its borders – and the City’s “irksome” reputation will undoubtedly stick for some time to come among business groups.
:: Election 2006 – Implications For ERISA
“What would happen if Democrats take control of the House of Representatives — and possibly the Senate? This question is on many minds and is the subject of much speculation. . . . Democrats will not pursue a strategy reminiscent of Hillary Clinton’s proposal in the early 1990s. Instead, they will promote grass roots efforts to pass state legislation, similar to recent “fair share” initiatives in Massachusetts, Maryland, Maine, and California. For these efforts to succeed, ERISA (Employee Retirement Income Security Act) must be weakened . . .” Bruce Davis, Health and Group Benefits Consulting National Practice Leader at Findley Davies, Inc., (quoted in October 25, 2006 Drug Newswire article)
In this article, Election 2006: A Shift in Power Spells Trouble for ERISA, Medicare Part D and HSA’s, the author suggests that a swing to Democratic control of Congress could mean a curtailment of ERISA’s preemptive reach thereby opening the door for increased State mandates and initiatives. The present administration’s interest in association plans and has previously been noted here. Regardless of election outcomes, it is apparent that both parties view reform proposals in terms of changes to ERISA’s current structure.
In the case of either party, one has to wonder if their proposals are advanced simply to show that the sponsors are “doing something” about healthcare issues or if they actually constitute well-considered judgments on how the health care delivery system should function. The notion of ad hoc changes to the present system brings to mind the dictum from the Hippocratic Corpus, “first do no harm”.
