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What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
What Do Health Insurance Litigators Face in 2012 and Beyond?
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What Do Health Insurance Litigators Face in 2012 and Beyond?

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  • 1. What Do HealthInsurance LitigatorsFace in 2012 and Beyond?Bryan D. Bolton Eric B. Myers Robert R. PohlsFunk & Bolton Aetna Inc. Pohls & AssociatesBaltimore, MD Philadelphia, PA Walnut Creek, CA 1
  • 2. What Do Health Insurance Litigators Face in 2012 and Beyond?Agenda1. Judicial Challenges to the Affordable Care Act2. Interim Final Regulation3. Medical Loss Ratios4. Questions and Answers 2
  • 3. What Do Health Insurance Litigators Face in 2012 and Beyond?A History of Health Care Reform in America “. . . the hazards of sickness, accident, invalidism, involuntary unemployment, and old age should be provided for through insurance. This should be a charge in whole or in part upon the industries, the employer, the employee, and perhaps the people at large. “ Teddy Roosevelt (August 1912) 3
  • 4. What Do Health Insurance Litigators Face in 2012 and Beyond?A History of Health Care Reform in America March 23, 2010 Patient Protection and Affordable Care Act March 30, 2010 Health Care and Education Reconciliation Act of 2010 4
  • 5. What Do Health Insurance Litigators Face in 2012 and Beyond?Affordable Care Act -- Overview · Alters rules for private insurers · Creates health benefit exchanges · Imposes new requirements on employers · Mandates individual coverage · Changes Medicare and Medicaid · Commits $350 million to fighting waste, fraud and abuse · Creates incentives for improving the quality of care · Reforms the health care delivery system · Modifies the tax code 5
  • 6. What Do Health Insurance Litigators Face in 2012 and Beyond?Judicial Challenges -- Timeline 3/23/2010 (Affordable Care Act Passed) Florida v. DHHS Virginia v. Sebelius Liberty University, Inc. v. Geithner Thomas More Law Center v. Obama 3/24/2010 Bellow v. Sebelius New Jersey Physicians, Inc. v. Obama 3/25/2010 Taitz v. Obama 3/26/2010 Assoc. of American Physicians and Surgeons, Inc. v. Sebelius 6
  • 7. What Do Health Insurance Litigators Face in 2012 and Beyond?Judicial Challenges -- Timeline3/30/2010 (Reconciliation Act Passed) 5/14/2010 Baldwin v. Sebelius4/2/2010 Walters v. Holder 6/3/2010 Physicians Hospitals of America4/7/2010 Calvey v. Obama v. Sebelius4/8/2010 Shreeve v. Obama 6/9/2010 Mead v. Holder4/12/2010 Goudy-Bachman v. DHHS 7/7/2010 Kinder v. Dept. of Treasury4/22/2010 Fountain Hills Tea Party 7/26/2010 Sissel v. DHHS Patriots, Inc. v. Sebelius 8/12/2010 Coons v. Geithner4/27/2010 Burlsworth v. Holder 8/31/2010 Independent American Party of5/4/2010 Peterson v. Obama Nevada Eagle Forum v. Obama5/12/2010 U.S. Citizens Association 9/20/2010 Purpura v. Obama v. Obama 1/25/2011 Pruitt v. Sebelius http://www.justice.gov/healthcare/ 7
  • 8. What Do Health Insurance Litigators Face in 2012 and Beyond?Judicial Challenges – Pending Cases Petitions for Certiorari Filed: Thomas More Law Center v. Obama (No. 11-117) Virginia v. Sebelius (11-420) Liberty University v. Geithner (No. 11-438) Petitions for Certiorari Granted: National Fed. of Ind. Business v. Sebelius (No. 11-393) HHS v. Florida (No. 11-398) Florida v. HHS (No. 11-400) 8
  • 9. What Do Health Insurance Litigators Face in 2012 and Beyond?Judicial Challenges – Key ProvisionsThe “Individual Mandate”· All individuals must obtain and maintain “minimalessential coverage” by January 2014 (unless exempt).· Anyone without minimum essential coverage will berequired to make a “shared responsibility payment.” · Tax Year 2014: $95 or 1% of household income · Tax Year 2015: $325 or 2% of household income · Tax Year 2016: $695 or 2.5% of household income 9
  • 10. What Do Health Insurance Litigators Face in 2012 and Beyond?Judicial Challenges – Key ProvisionsExpansion of Medicaid· Under the Affordable Care Act, Medicaid is acornerstone for expanded health care coverage.· From 2014 to 2016, the federal government will pay100% of the fees associated with the increased Medicaideligibility· The federal government’s percentage will then dropgradually each year until reaching 90% in 2020. 10
  • 11. What Do Health Insurance Litigators Face in 2012 and Beyond?Supreme Court – Process and Schedule Oral Arguments: March 2012 Allotted Time: 5 and ½ hours Issues: 4 specific questions Decision(s): June 2012 (estimated) 11
  • 12. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 1: Is the shared responsibility payment a tax?· The Tax Anti-Injunction Act generally prohibits any suitwhich is filed to restrain the assessment or collection ofa tax. 26 U.S.C. §7421(a)· If the Court concludes the share responsibility paymentis a tax, it could decide that constitutional challenges tothe individual mandate can be considered only as part ofa suit for a tax refund. 26 U.S.C. §6532; 26 U.S.C. §7422(a) 28 U.S.C. §1346(a); 11 U.S.C. §505(a)(2) 12
  • 13. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 1: Is the shared responsibility payment a tax? Thomas More Law Center v. Obama (6th Circuit): No Florida v. HHS (11th Circuit) No Liberty University v. Geithner (4th Circuit) Yes 13
  • 14. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?Congress has “broad implied powers” under theCommerce Clause. McCulloch v. Maryland, 17 U.S. 316, 421 (1819)Congress has authority under the Necessary and ProperClause to regulate local non-economic activities when theregulation “is a necessary part of a more generalregulation of interstate commerce.” Gonzales v. Raich, 545 U.S. 1, 16-17 (2005) 14
  • 15. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“The powers of the legislature are defined and limited;and those limits may not be mistaken or forgotten.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 176 (1803) 15
  • 16. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?The exercise of Congress’ power under the CommerceClause has been limited to three subjects: · channels of interstate commerce; · instrumentalities of interstate commerce; and · activities that “substantially affect” interstate commerce. United States v. Lopez, 514 U.S. 549 (1995) 16
  • 17. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“Neither the Supreme Court nor any federal circuit courtof appeals has extended Commerce Clause powers tocompel an individual to involuntarily enter the stream ofcommerce by purchasing a commodity in the privatemarket.” Virginia v. Sebelius 728 F.Supp.2d 768 (E.D. Va. 2010) 17
  • 18. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“The Secretary relies on what is commonly referred to asan aggregation theory, which is conceptually based on thehypothesis that the sum of individual decisions toparticipate or not in the health insurance market has acritical collective effect on interstate commerce.” Virginia v. Sebelius 728 F.Supp.2d 768 (E.D. Va. 2010) 18
  • 19. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“The power of Congress to regulate a class of activitiesthat in the aggregate has a substantial and direct effect oninterstate commerce is well settled. . . . But theseregulatory powers are triggered by some type of self-initiated action.” Virginia v. Sebelius 728 F.Supp.2d 768 (E.D. Va. 2010) 19
  • 20. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“It would be a radical departure from existing case law to hold thatCongress can regulate inactivity under the Commerce Clause. If ithas the power to compel an otherwise passive individual into acommercial transaction with a third party merely by asserting . . .that compelling the actual transaction is itself ‘commercial andeconomic in nature, and substantially affects interstate commerce,’it is not hyperbolizing to suggest that Congress could do almostanything it wanted.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 20
  • 21. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?The Affordable Care Act recites Congress’ findings thathealth care and health insurance: · affect the nation’s economy; · are commercial and economic in nature; and · substantially affect interstate commerce. 21
  • 22. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?The mere fact that Congress asserts a particular activitysubstantially affects interstate commerce “does notnecessarily make it so.” United States v. Morrison, 529 U.S. 598, 614 (2000) 22
  • 23. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?Under the Commerce Clause, the Supreme Courttraditionally examines two issues: · Did Congress have a rational basis for finding that the regulated activity affects interstate commerce? · Is the means selected to regulate the activity reasonable and appropriate? United States v. Morrison, 529 U.S. 598, 614 (2000) 23
  • 24. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“Congress’s insurance industry reforms . . . will encourageindividuals to delay purchasing private insurance until anacute medical need arises.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 24
  • 25. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“. . . unless the individual mandate forces individuals intothe private insurance pool before they get sick or injured,Congress’ insurance industry reforms will be unsustainableby the private insurance companies.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 25
  • 26. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“. . . without full market participation, the financialfoundation supporting the health care system will fail, ineffect causing the entire health care regime to ‘implode’.” Virginia v. Sebelius 728 F.Supp.2d 768 (E.D. Va. 2010) 26
  • 27. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“. . . the provision regulates economic activity thatCongress had a rational basis to believe has substantialeffects on interstate commerce.”“Congress had a rational basis to believe that the provisionwas essential to its larger economic scheme reforming theinterstate markets in health care and health insurance.” Thomas More Law Center v. Obama 651 F.3d 529 (6th Cir. 2011) 27
  • 28. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“. . . the conduct regulated by the individual mandate – anindividual’s decision not to purchase health insurance andthe concomitant absence of a commercial transaction – inno way ‘burdens’ or ‘obstructs’ Congress’s ability to enforceits regulation of the insurance industry.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 28
  • 29. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“At best, the individual mandate is designed not to enablethe execution of the Act’s regulations, but to counteractthe significant regulatory costs on insurance companiesand adverse consequences stemming from the fullyexecuted reform.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 29
  • 30. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 2: Does the individual mandate exceed Congress’ powers under Article I of the Constitution?“That may be a relevant political consideration, but it doesnot convert an unconstitutional regulation . . . into aconstitutional means to ameliorate adverse costconsequences on private insurance companies engenderedby Congress’s broader regulatory reform of their healthinsurance products.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 30
  • 31. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 3: Is the individual mandate severable from the rest of the Act?“Unless it is evident that the Legislature would not haveenacted those provisions which are within its power,independently of that which is not, the invalid part may bedropped if what is left is fully operative as a law.” Alaska Airlines, Inc. v. Brock, 480 U.S. 678 (1987) 31
  • 32. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 3: Is the individual mandate severable from the rest of the Act?Given the vagaries of the legislative process, “this inquirycan sometimes be ‘elusive’.” Virginia v. Sebelius, 728 F.Supp.2d 768 (E.D. Va. 2010)“. . . it is reasonably ‘evident’ . . . that the individual mandatewas an essential and indispensable part of the health reformefforts, and that Congress did not believe other parts of theAct could (or it would want them to) survive independently.” Florida v. HHS, 780 F.Supp.2d 1286 (N.D. Fla. 2011) 32
  • 33. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 3: Is the individual mandate severable from the rest of the Act?“The presumption of severability is rooted in notions ofjudicial restraint and respect for the separation of powers inour constitutional system.”“The Act’s other provisions remain legally operative afterthe mandate’s excision, and the high burden needed underSupreme Court precedent to rebut the presumption ofseverability has not been met.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 33
  • 34. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“Congress shall have power . . . to pay the Debts and providefor the common Defence and general Welfare of the UnitedStates.” U.S. Constitution, Art. I, Sec. 8, Cl. 1 34
  • 35. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“. . . legislation enacted pursuant to the spending power ismuch in the nature of a contract: in return for federal funds,the States agree to comply with federally imposedconditions.” Pennhurst State Sch. & Hosp. v. Halderman 451 U.S. 1, 17 (1981)“Medicaid is a jointly financed federal-state cooperativeprogram, designed to help states furnish medical treatmentto their needy citizens.” Moore ex rel. Moore v. Reese, 637 F.3d 1220, 1235 (11th Cir. 2011) 35
  • 36. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?Four primary restrictions on legislation under the SpendingClause:· must be in pursuit of the general welfare;· must be reasonably related to the legislation’s stated goal;· Congress’ intent to condition funds on a particular action must be unambiguous so that states can knowingly choose whether to participate; and· cannot induce state activities which are unconstitutional. Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 36
  • 37. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“The powers not delegated to the United States by theConstitution, nor prohibited by it to the States, are reservedto the States respectively, or to the people.” U.S. Constitution, Tenth AmendmentCongress may not employ the spending power in such a wayas to “coerce” the states into compliance with the federalobjective South Dakota v. Dole, 483 U.S. 203, 211 (1987) 37
  • 38. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“Congress cannot directly compel a state to act, nor canCongress hinge the state’s right to regulate in an area thatthe state has a constitutional right to regulate on the state’sparticipation in a federal program.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 38
  • 39. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“Congress cannot place restrictions so burdensome andthreaten the loss of funds so great and important to thestate’s integral function as a state . . . as to compel the stateto participate in the ‘optional’ legislation.”“This is the point where ‘pressure turns into compulsion’.” Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 39
  • 40. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“. . . the Act’s expansion of Medicaid is not unduly coercive.” · Congress reserved the right to make changes · federal government will bear nearly all of the costs · states have plenty of notice · no certainty that states will lose Medicaid funding if they opt out Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 40
  • 41. What Do Health Insurance Litigators Face in 2012 and Beyond?Question No. 4: Does the expansion of Medicaid violate state sovereignty?“. . . the Act’s expansion of Medicaid is not unduly coercive.” · Congress reserved the right to make changes · federal government will bear nearly all of the costs · states have plenty of notice · no certainty that states will lose Medicaid funding if they opt out Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011) 41
  • 42. What Do Health Insurance Litigators Face in 2012 and Beyond? HEALTH CARE REFORM AND THE CHANGED LITIGATION LANDSCAPE 42
  • 43. What Do Health Insurance Litigators Face in 2012 and Beyond? Background: The Interim Final RegulationThe IFR modified the existing DOL claims and appealsregulations in several respects and imposed a numberof new requirements on plans and insurers.Expanded the scope of an “adverse benefitdetermination” to include rescission of coverage,regardless of whether the rescission pertains to aspecific adverse decision. 43
  • 44. What Do Health Insurance Litigators Face in 2012 and Beyond? The Interim Final RegulationReduced the timeframe for deciding urgent care claims from amaximum of seventy-two (72) hours, to twenty-four (24) hours afterreceipt of the claimRequiring plans and insurers to provide claimants (at no cost) with theopportunity to review their claim file, as well as any new or additionalevidence considered, relied upon, or generated by the plan or insurerin connection with a claim, as well as any new or additional rationalefor denial during the internal appeals process, and allow a reasonableopportunity to respond to any new evidence or rationaleRequiring claims and appeals be adjudicated in a manner designed toensure independence and impartiality by the decision-maker. 44
  • 45. What Do Health Insurance Litigators Face in 2012 and Beyond?Notices of denial of claims or appeals must include thefollowing content: a. sufficient information identifying the claim, such the date of service, the health care provider, and claim amount; b. diagnosis and treatment codes and their corresponding meanings; c. denial code and corresponding meaning, as well as a description of any standard applied. A final adverse internal benefit determination also must include a discussion of the decision; d. description of available internal appeals and external review processes, including how to initiate; and e. the availability of, and contact information for, an applicable office of health insurance consumer assistance or ombudsman 45
  • 46. What Do Health Insurance Litigators Face in 2012 and Beyond?If a plan or insurer fails to strictly adhere to therequirements of the IFR, then the claimant was deemedto have exhausted the plan or insurer’s internal claimsand appeals processRegardless of whether the plan or insurer substantiallycomplied with the IFR or the violation was de minimisAllowing the claimant to initiate any available externalreview process or remedies available under ERISA orstate law 46
  • 47. What Do Health Insurance Litigators Face in 2012 and Beyond?Directing all insured (both individual and groups) and non-ERISA self-fundedplans, such as state and local government and church plans), are subject tostate external reviews, consistent with the protections afforded by the NAICUniform Model Act, including: (a) apply to decisions involving medical necessity, health care setting, level of care and effectiveness; (b) allow exceptions to exhaustion requirement consistent with appeals rules; (c) require the plan or insurer to pay the costs of an independent review organization (“IRO”) for the external review; (d) impose no minimum dollar limit on the claim; (e) allow four (4) months for an external appeal; (f) establish rules for the assignment and independence of the independent reviewer; (g) decisions on external review are binding on insurer or plan; and (h) allow expedited review of certain claims. 47
  • 48. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final RuleThe amendment eliminates the IFR requirement that urgent careclaims be decided within twenty-four (24) hours.The amendment retains the current rule that urgent care claimsmust be decided as soon as possible, taking into account medicalexigencies, but not longer than seventy-two (72) hours.The Preamble states a plan or insurer must defer to an attendingprovider’s determination as to whether a claim is “urgent.”The IFR’s required disclosure of diagnosis and treatment codeswas also eliminated. 48
  • 49. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final Rule• The amendment to IFR still requires disclosure of diagnosis and treatment codes, as well as their meanings, but only if requested.• A request for diagnosis or treatment codes is not a request for an internal appeal or an external review.• The amendment to the IFR also reversed the “deemed denied” provision, which provided no exception for even a de minimis violation of the IFR.• The amended regulation permits the internal review process to continue if the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the plan or insurers control; (d) part of a good faith exchange of information between the claimant and the plan or insurer; and (e) not indicative of a pattern or practice of non-compliance. 49
  • 50. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final RuleIf a claimant files for external or judicial review, but theattempt at immediate review is rejected based on a deminimis violation, then the claimant may resubmit theclaim to the plan and pursue an internal appeal.The plan or insurer must notify the claimant of the rightto resubmit the claim for internal appeal within ten daysafter rejection by the external reviewer or court.The time for re-filing the claim begins upon theclaimants receipt of the notice from the plan or insurer. 50
  • 51. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final RuleFederal External ReviewThe amendment to the IFR narrowed the scope of thefederal external appeal process for self-funded ERISAplans, and in so doing, narrowed the scope of appealsthat are subject to external review.The amendment suspended the requirement that “any”adverse benefit determination (other than one involvingeligibility) was subject to external review.During the suspension period, only claims involvingmedical judgment and rescissions will be subject to thefederal external review process. 51
  • 52. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final RuleFederal External ReviewThe amendment also provides a definition of “medical judgment.”“Medical judgment” is defined to include claims for: medicalnecessity, appropriateness of care, health care setting, level ofcare, effectiveness of a covered benefit, or determinations ofwhether a treatment is experimental or investigational.The Preamble also suggests a broad view of what constitutes amedical judgment, including a claim denied on the basis of apreexisting condition exclusion would be eligible for externalreview. 52
  • 53. What Do Health Insurance Litigators Face in 2012 and Beyond? Changes to the Interim Final RuleFederal External ReviewThe amendment to the IFR also explains whether a claim involvesa medical judgment is to be “determined by the externalreviewer.”The Technical Release and Preamble to the amendment furtherclarify that plans must rotate external review among contractedIROs, to minimize the risk that and IRO may become dependent onthe plan.Careful scrutiny will be applied to any “process other thanrotational assignment” in determining whether a plan qualifies forthe non-enforcement safe-harbor. 53
  • 54. What Do Health Insurance Litigators Face in 2012 and Beyond? THE IMPLEMENTATION AND IMPACT OF MEDICAL LOSS RATIOS• Insurers offering coverage in the small group or individual market must meet a minimum MLR of eighty percent (80%). 42 U.S.C. § 300gg-18(b)(1)(A)(ii).• Insurers offering coverage in a large group market must meet a minimum MLR target of eighty-five percent (85%). 42 U.S.C. at § 300gg-18(b)(1)(A)(i).• The MLR regulation adopts a threefold approach to achieving this goal. (1) public reporting on premium dollar spending; (2) setting standard percentages of each premium dollar that must be spent on health claims and quality improvement expenses; (3) requiring insurers to rebate a pro-rata portion of premium if the MLR is less than the standard percentage. 54
  • 55. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRInsurers must pay all other expenses of transactingbusiness out of this remaining twenty percent (20%).The remaining expenses insurers must bear include,but are not limited to, overhead, commissions,underwriting expenses, fraud prevention/detection,employee salaries, compliance costs, as well as profit. 55
  • 56. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRSection 2718(a) requires insurers to submit a publicreport detailing the MLR calculations to HHS for eachplan year.Each insurer is required to submit an aggregate reportto HHS, on a State-by-State basis for each market.Reports are due by June 1 of the following MLRreporting year. 56
  • 57. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRSection 2718(a)(2) of the Act allows insurers to includeany costs spent on “activities that improve health care”in the MLR numerator.This could significantly increase the ability to complywith the applicable MLR requirement.The question, of course, is what constitutes “activitiesthat improve health care”? 57
  • 58. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRThe four categories in § 2717 encompass activities and benefitsthat: (A) improve health outcomes through the implementation ofactivities such as quality reporting, case management, carecoordination, and chronic disease management;(B) implement activities to prevent hospital readmissions;(C) implement activities to improve patient safety and reducemedical errors through the appropriate use of best clinicalpractices, evidence based medicine, and health informationtechnology; and(D) implement wellness and health promotion activities. 58
  • 59. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRThe MLR regulation directs an activity can only be classified as aquality improvement activity if it first falls within one of thecategories provided in § 2717, and further meets all therequirements in § 158.150.The regulation requires any proposed quality improvementactivity be both primarily designed to improve patient care andthe effectiveness of any proposed activity must be capable ofobjective measurement and produce verifiable results.An insurer is not required to present initial evidence ofeffectiveness, but must demonstrate “measurable resultsstemming from the executed quality improvement activity.” 59
  • 60. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRThe MLR regulation contains a specific listing ofactivities that definitively are within and without thecategory of quality improvement activities.The list includes such items as blood glucosemonitoring programs and medication adherenceprograms. 60
  • 61. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRAn activity primarily designed to “control or containcosts” cannot be categorized as a quality improvementactivity, even if it meets all of the category’srequirements.If an activity’s primary design is to improve healthoutcomes, and a secondary effect is a cost savings, thenthe activity can qualify as a healthcare qualityimprovement activity, assuming all other requirementsare satisfied. 61
  • 62. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRMost administrative expenses were determined not related orprimarily designed to improve the quality of patient health.Some traditional administrative expenses may qualify as a qualityimprovement activity, provided they meet all other criteria for thecategory.One example is “prospective utilization review” as compared to“concurrent” and “retrospective utilization reviews.”Prospective utilization review is considered a quality improvementactivity because it is forward looking, rendered before care isgiven and with the goal of ensuring the most appropriate medicaltreatment in the most appropriate setting. 62
  • 63. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRIf an insurer fails to meet the minimum MLRrequirement, then the insurer must rebate directly tothe consumers the difference between the insurer’sactual MLR percentage for the reporting year and therequired MLR standard for that market.The rebate must be paid directly to the each individualenrollee in the applicable market.The rebate must be paid by no later than August 1following the end of the reporting year. 63
  • 64. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRAn insurer has discretion to choose among a range of optionsavailable to provide the rebate.The rebate for a current enrollee may be given in the form of“a premium credit, lump-sum check, or, if an enrolled paid thepremium using a credit card or direct debit, by lump-sumreimbursement to the account used to pay the premium.”Rebates for former enrollees must be paid in either a lump-sum check or, in the case of electronic premium payment, alump-sum reimbursement to the account used to pay thepremiums. 64
  • 65. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRFraud prevention is not a quality improvementactivity.Insurers can offset fraud detection and recoveryexpenses against actual recoveries, up to the amountrecovered, if the recovery efforts are successful.By excluding the costs of fraud prevention anddetection from the MLR numerator, the regulationsdiscourage insurers from devoting resources to frauddetection and prevention. 65
  • 66. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRThe definition of “Federal Taxes” that could be excluded from thepremium revenue in the MLR denominator created somecontroversy.Chairs of the congressional committees that drafted legislationwrote to HHS stating the intent was to only exclude “Federal taxesand fees that relate specifically to revenue derived from theprovision of health insurance coverage that were included in thePPACA.”HHS disagreed, defining the exclusion for taxes broadly, to includemost Federal taxes other than taxes on investment income andcapital gains. 66
  • 67. What Do Health Insurance Litigators Face in 2012 and Beyond? IMPACT OF MLRCommissions are not part of the MLR calculation andmust be absorbed as non-claims relatedadministrative expenses.Agents are concerned that their commissions will bereduced and/or jobs eliminated as insurers are forcedto reduce costs to comply with the MLR. 67
  • 68. What Do Health Insurance Litigators Face in 2012 and Beyond? Questions? Bryan D. Bolton Eric B. Myers Robert R. Pohls Funk & Bolton Aetna Inc. Pohls & Associates Baltimore, MD Philadelphia, PA Walnut Creek, CA 68

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