Don Levit

Steve: I am not stating that the insurer can advocate for a change in state insurance law. An insurer can submit an amended policy to the state department of insurance for its approval or disapproval, based on the desires of the plan sponsor. This is not changing insurance law. On the contrary, commissioners generally have the right to approve or disapprove of experimental policies. Can you cite a federal court case, in which this practice was disallowed? Don Levit

George: Thanks for your reply. I believe there is a distinct difference between an ERISA plan, and how it is funded. That is why there are different levels of action, depending on whether we are looking at the employer level of designing the plan (including modifying the plan), and the level of funding the benefits. I believe Steve said that the employer has the freedom to structure his plan similarly, regardless if the plan is self insured or fully insured. On this I agree. Steve also said that insurers are prohibited from providing policies that are not approved by the states. On this I agree. I was trying to point out that ERISA provides employer freedoms in designing plans. These same freedoms are not provided to individuals that purchase fully insured plans, outside of the ERISA arena. Using that rationale, one would think that fully insured ERISA plans have an avenue that fully insured non ERISA plans do not have: plan sponsors requesting that insurers offer modified policies, tailored more to the needs of the employees of that particular employer. While insurers cannot modify plans without the plan sponsors first initiating the request, there is nothing prohibiting insurers from taking the sponsors' requests to the departments of insurance for their approval or decline, right? Don Levit

Leevena: What I mean to say by that is, from a practical standpoint, is a fully insured ERISA plan any different from a fully insured non ERISA plan, as far as the employer or individual being able to structure the plan to fit his needs (mandated benefits, etc). Don Levit

George: Thanks for your reply. I really am not asking about the differences between a fully insured plan and a self insured plan. I am asking if there are any academic differences regarding how a fully insured ERISA plan can be structured by the employer, as compared to how a fully insured non ERISA plan (for example, an individually owned policy) can be structured by the individual? Don Levit

Steve (and others): Thanks for your reply. From an academic standpoint, is there any difference between a fully insured ERISA plan, and a fully insured non-ERISA plan, in relation to how the employer (or individual) could structure the plan? Don Levit

Budman: You are asking if the plan sponsor can provide the terms within the ERISA plan itself to exclude spouses who are eligible for other coverage, whether or noy they actually enroll. To my knowledge, this does not violate federal law. This is a settlor function of plan design, in which the terms of the plan document would be enforced, unlessx they violated or were inconsistent with ERISA, or other federal law. I can appreciate your concern, but you are asking the question, as if the ERISA plan document had little protection from state regulators. You seem to be implying that there is as little freedom in designing ERISA plans, whether self insured or fully insured, as an individual deciding the plan terms of an individual policy from a commercial insurer. Don Levit

Folks: I can sense a feeling of disillusionment after all these years of "solutions" being put forth. We are living in very cynical times, and for good reasons. Too many times we have experienced people saying things, in which they were either lying or ignorant. Occasionally, I will fall into that snare also. Cynicism is nothing but frustrated idealism. I have been working on the affordability/portability/permanency issue for 9 years. Many times I have thought about doing something else more "practical," in which the results can be more quickly seen and appreciated. However, if we don't get this issue straightened out, the failure will have dramatic consequences in all phases of our economy. Do any of you have any suggestions about products for the working poor? As many of you know, the CHIP program is designed for children of the working poor, who earn too much for Medicaid. The last time I looked at this program, the premiums per child was around $100 per month. If we are looking at subsidizing insurance for the working poor, why not subsidize a product that is less costly? Don Levit

Leevena: My research and experience tells me that if you can increase the deductible between $25,000 and $50,000, you can reduce the premium from a low deductible policy by 60-70%. The problem, of course, is accumulating that much money in an HSA. As you know, with limited exceptions, one cannot have another policy, in addition to the HDHP to qualify for an HSA. However, with or without an HSA, if a person had a savings plan to offset the deductible, this scenario could work. Instead of accumulating $25,000 in savings, one could look at another option: The savings/insurance combination plan. Of course, this option will require an additional insurance premium. Here, an insurance trust could match the savings balance, in the event of a qualified claim. If the match was $4 for every dollar in savings, then $5,000 in savings could produce a $20,000 match; thus, providing total coverage of $25,000. Don Levit

b2kates and others: Assuming that the plan is self insured, could Ford have made those changes if the plan was fully insured? Don Levit

Leevena: When you write about increasing the deductible along with the savings, this could reduce the premiums, based on one's attained age, and the amount in savings. The way individual policies are priced today, particularly on renewals, the deductible may have to rise higher even than $15,000, depending on how long the person has held the policy, and his age at issue, to lower his premiums. For example, I had an individual policy for 11 years. In year 11, the premium was 60% higher than the initial premium in my state's high risk pool. Don Levit

b2kates and others: Do you have an opinion regarding the design of an ERISA plan, even a fully insured plan, being a settlor function, not only not subject to ERISA, but also not being subject to state regulation? Don Levit

When you say "spousal careve out" rule, are you saying that if the spouse has other coverage, or has other coverage available which the spouse declines, that the group plan does not have to cover the spouse? If so, this seems to be a "settlor function" of how the plan is designed, or modified. Why would the states be able to prohibit plan sponsors from doing so, even with fully insured plans? I see the settlor function, as a business decision, not an insurance decision, which would not be subject to state regulation. Don Levit

This is a very worthwhile discussion. I share all of your concerns, but I do have a couple of positive points about HSAs. First, all bleeding stops, at some point. We are fast approaching the time when medical costs will have to start leveling off. We have fewer participants being covered, and have reached near the breaking point on affordability. Second, HSAs do address the issue of accruing "reserves," in order to help pay future expenses. This is very important in getting some control over medical costs, for we normally don't get healthier as we age. Pay-as-you-go funding does not work in health care. Reserves will accumulate, only for those having lower medical expenses. Fortunately, that should be the vast majority each year. By raising the deductible to match the amount in savings, we will keep the lower claimants in the pool, and total medical costs will be more affordable. The system is skewed presently toward the higher claimants. We must make the environment more friendly for the lower claimants, for indeed, they make the system work for all. Don Levit

Leveena; If the employer funds the HRA, and puts that money into a trust, is the contribution deductible at that point? Don Levit

Right, Leveena, thanks for correcting me. This seems loike a better solution than setting up an HSA. The employer gets the deduction for funding the HRA, right? And, the employer need not comply with the HDHP requirements associated with an HSA. Don Levit

JTK: Thanks for posting the detailed information about excepted benefits. Doesn't this mean, basically, that the FSA is not subject to ERISA? If that is the case, couldn't you design provisions which are not preempted by ERISA? If that is the case, I would assume the FSA provisions would be subject to state law? Don Levit

I can appreciate your client's concerns about the use of HSA money. He (or she) sounds like a very campssionate individual. Have you seriously thought about a funded HRA? Is there a way that, at termination, an employee could take any balances with him, as with an HSA? Don Levit

According to the Nov. 2005 newsletter from Reish, Luftman, Reicher, & Cohen, "Government plans are not subject to ERISA. The rules governing such plans are found in state law as well as the rules under the Internal revenue Code. The Taxpayer Relief Act of 1997 permanently exempted government plans from the rules of the following Code sections: 401(a)(3), 401(a)(4), 401(a)(26), 401(k),401(m),and 410(a) and (b). This means a government plan isn't subject to the rules that prevent discrimination in favor of the highly compensated employees in the plan. However, according to the newsletter, state law could apply. I assume that means state law which does not conflict with federal law, including the code sections which were permanently exempted. Don Levit

Folks: I was under the impression that a lot of the provisions that would come under ERISA, instead, are applied ti gfovernments through the PHS Act. In fact, as I recall, a lot of the provisions for ERISA apply to this act. Don Levit

I have had extensive conversations with Tery Keating, who is the chief MEWA litigator in PA. You are correct, Vebaguru, that PA has no laws regulating MEWAs. I assume that would mean that a self funded MEWA would have to meet similar requirements of a full-blown commercial insurer. This is not legally binding, however, but we can save that discussion for another time. This situation seems to have a fully insured MEWA, which is allowed in PA. Yes, you must still be licensed thru the PA DOI, and you must file the appropriate forms with the DOL. Does your MEWA, for example, file an M-1 annually with the DOL? What is the actual name of the MEWA? There are quite a few MEWAs which are licensed to operate in PA, self funded as well as fully insured. Don Levit

Folks: Would it be possible to split the plan itself into 2 distinct plans? The primary plan would cover up to $25,000, or $50,000 per family, per year. The secondary coverage would provide the excess? Don Levit

Gary: My theory is that the ERISA plan sponsor has at least 3 options. First, he can request approval from the department of insurance for an "amended" policy offered by an insurer that would qualify as an HSA/HDHP. The policy could be issued by Hawaii as an "experimental plan," if approved by the insurance commissioner. Every state insurance code I have reviewed allows for this option, although I have not reviewed Hawaii's code. You seem to suggest that this option, number 2, is available in Hawaii. Are you familiar with their insurance code regarding this option? Second, would be the self funded single employer route. I am not aware if Hawaii is allowed to regulate self funded ERISA plans, although from your post, you seem to infer that they can, for ERISA preemption does not seem to apply. The third option is a self funded MEWA. As you know, plan sponsors are free to design their plans virtually with any benefit design, other than the federal mandates, for self funded plans. I believe that, even for fully insured plans, this freedom to design the plans still remains. The inconvenience comes in, however, for the commercial insurer will need to get the commissioner's okay to offer the amended (experimental) plan. Don Levit

Gary: Regarding numbers 2 and 3 in your question. Would the difference in numbers 2 and 3 be for employer plans that are either fully insured or self insured? In other words, in number 2, are you suggesting that an employer could request a specific policy to be sold by a commercial insurer? Don Levit

I did struggle with the wording, no doubt. If two or more people each put one foot in their respective mouths, they are putting feet in their mouths. As I see it, there is no way for one foot to go into two mouths, at least the entire foot. I stand by my original posting. Either one foot in one mouth, or feet into mouths. Don Levit

You guys are making complete fools of yourselves! Why keep putting your feet in your mouths? Don Levit