H&W Compliance Tests

[Guest Annabella]

We are working with a client to determine what compliance tests are performed on a H&W Medical Plan for all areas (COBRA, FSA, HSA, Dependant Care, Prescription Plan, LTD, STD, GTL, etc.) of a Health & Welfare Plan. Can anyone guide us as to where to find a list and the descriptions?

Thanks in Advance for your responses.

Annabella

[Ron Snyder]

Any good ERISA attorney who specializes in health plans will have such a list. That is where I suggest that you start. Most national actuarial consulting firms have such a list that their health care consulting division uses.

Get someone competent involved rather than risking malpractice by trying to do this yourself.

[Guest Annabella]

We are working with a client to determine what compliance tests are performed on a H&W Medical Plan for all areas (COBRA, FSA, HSA, Dependant Care, Prescription Plan, LTD, STD, GTL, etc.) of a Health & Welfare Plan. Can anyone guide us as to where to find a list and the descriptions?

Thanks in Advance for your responses.

Annabella

[Guest Annabella]

Actually, we're already in the process of hiring vendors to do this, however, we are in contract negotiations and we want to be sure that all compliance tests (listed by name) are included in contracting. Just wondering if anyone could list these so we can follow up and include.

Thanks!

Bella

[GBurns]

The May 18, 2006 EBIA weekly had a list of the major Federal mandates. Maybe someone has a copy they can let you have.

The list of Federal laws that could be applicable is lengthy. There also are applicable state laws.

I do not understand why you would be helping nor why the client would be negotiating something like this without first having the required knowledge.

I suggest that you seek competent legal advice. I would not rely on an ERISA attorney, per se, since that attorney could very well only focus on ERISA. Seek an attorney that handles all laws related to health and welfare plans.

[Don Levit]

George:

I am glad you brought up the issue of federal and state mandates.

I kept a copy of the material, because only the federal mandates apply to the ERISA plan.

The state mandates apply only to the commercial insurer, who is subject to full state regulation.

Don Levit

[oriecat]

Here's a self compliance list I found on the DOL a couple years ago...

http://dol.gov/ebsa/pdf/selfcompliancetool.pdf

Here's another one:

http://dol.gov/ebsa/pdf/CAGTableOfContents.pdf

[Don Levit]

oriecat:

Thanks for those 2 postings.

I especially liked the definitions of a group health plan and a health insurance issuer in the introduction.

A group health plan means an employee welfare benefit plan to the extent the plan provides medical care to employees directly or through insurance, reimbursement, or otherwise.

A health insurance issuer or issuer means an insirance company that is required to be licensed to engage in the business of insurance in a State and that is subject to State law that regulates insurance.

It looks like that, because a plan is not in the business of insurance, (even if it provides insurance, instead of direct reimbursement), the only mandated benefits that apply to the plan would be the federal mandates that George referred to.

Right, George?

Don Levit

[GBurns]

No! Don. Also if a plan provides insurance it IS in the business of insurance. Although "provides insurance" might not mean the same thing to both of us.

I noticed that although the TOC was dated in late 2005, the list did not include ERISA, USERRA, FMLA, ADA, COBRA and Medicare. Of course Medicare Part D would have been since. There was also no mention of QMCSOs, HIPAA Privacy and HIPAA Security.

[Don Levit]

George and others:

No!

I understand the "business of insurance" to mean a commercial insurer, who is in the insurance business to make a profit. How do you understand the term the "business of insurance"? Would it be simply an ERISA plan that provides medical benefits? No, siree, not in my book, and not in the federal government's book either. That is a plan, which is really neither none of your business, nor that of the business of insurance!

Don Levit

[GBurns]

So where does that put BCBS and all the other not-for-profit providers? Where does that put many HMOs?

They are not commercial insurers and they are not-for-profit entities.

Also can you say MET or MEWA? Aren't most regulated under state insurance regulations pertaining to the business of insurance?

[Guest Steve_72]

Whether the plan itself is in the business of insurance (it is not, with the limited statutory exception applicable to MEWAs) does not have a bearing on whether it willbe able to offer an insured benefit that does not comply with state mandates, which i believe is the point you are trying to make, Don.

The insurer that provides the contract is in the business of insurance, and cannot (and more importantly, will not) offer a contract that does not comply with state law.

[Don Levit]

George:

As I understand it, BCBS is losing some of its tax exempt status for it is deemed by the IRS to be "commercial" in nature.

Notice 2003-31 states, "Section 501(m) provides that an organization described in 501©(3) or 501©(4) shall be exempt from tax under 501(a) only if no substantial part of its activities consists of providing commercial-type insurance. Section 501(m)(3)(A) provides that the term commercial-type insurance does not include insurance provided at substantially below cost to a class of charitable recipients.

Congress adopted 501(m) in 1986 because it was concerned that exempt charitable and social welfare organizations that engage in insurance activities are engaged in an activity whose nature and scope is so inherently commercial that tax exempt status is inappropriate.

Congress explained that that the provision of insurance to the general public at a price sufficient to cover the costs of insurance generally constitutes an activity that is commercial."

Don Levit

[Don Levit]

George and Steve:

MEWAs are regulated, not because they are in the "business of insurance," but because they are considered insurers who provide insurance.

In Kentucky Assn. of Health Plans v. Miller, it states, "ERISA's savings clause does not require that a state law regulate 'insurance companies' or even the 'business of insurance' to be saved from pre-emption; it need only be a 'law which regulates insurance,' and self insured plans engage in the same sort of risk pooling arrangements as separate entities that provide insurance to an employee benefit plan. Any contrary view would render superfluous ERISA's 'deemer clause', which provides that an employee benefit plan covered by ERISA may not 'be deemed to be an insurance company or other insurer ... or to be engaged in the business of insurance ... for purposes of any law of any State purporting to regulate insurance companies or insurance contracts.'"

Don Levit

[Guest Steve_72]

State insurance laws regulate entities which are in the business of insurance. I don't understand what distinction your first post is trying to make.

Also, you may want to re-read the cite you provided. It actually weakens the case you have tried to make repeatedly.

ERISA's savings clause does not require that a state law regulate 'insurance companies' or even the 'business of insurance' to be saved from pre-emption; it need only be a 'law which regulates insurance,'

...All of that is immaterial in any case. Employer sponsored health plans are not in the business of insurance because they are not directly regulable by state insurance companies. However, if a plan determines to fund its benefit by buying an insurance contract, it must by definition purchase that contract from an entity which is engaged in the business of insurance. Such a contract will be subject to state mandates.

Incidentally, have you set a challenge to yourself to determine how many unrelated threads you can insert this issue into?

[Don Levit]

Steve;

My first post was trying to point out that if an organization has features of being commercial in nature, they could very well lose their tax exempt status. It makes the playing field an unlevel one for 2 entities to provide similar products, yet one entity receives favorable tax treatment.

From the Kentucky v. Miller case, one could reasonably infer that since single employer ERISA plans provide insurance, their regulation should not be preempted.

I think the Supreme Court is finally getting it right, after 20 years of arbitrarily saying that single emloyer self insured plans are not subject to state regulation, while multiple employer self funded plans are subject to regulation.

Both single and multiple employer self funded plans should be subject to regulation, in my opinion.

Did I state otherwise previously?

Don Levit

[Guest mjb]

FYI: The Idaho Sup ct recently ruled that a professional employer organziation violated ID ins. law by operating a MEWA and transacting insurance business without being licensed to do so. Employers Resource Management Co v. Department of Ins. 5/9/06. ERM provided health benefit plans and other employment services to ID employers under a co emplyment agreement between the employers and ERM.

[Don Levit]

mjb:

Thanks for providing this interesting case.

I believe the court was correct in holding ERM liable as an unlicensed insurer.

I am not sure why you mentioned this case, as I don't have any material disagreements with it.

One excerpt stated, on p.4, "States may regulate a MEWA which is not fully insured to the extent that the state's regulations are not inconsistent with ERISA."

"Inconsistent with ERISA," has been further explained in ERISA, and a DOL Advisory Opinion to mean that the insurer is able to pay claims on a timely basis.

In this case, the Idaho MEWA was not fully insured, and there are no specific MEWA laws in Idaho.

Nevertheless, Idaho does have the right to apply any and all state laws to regulate the MEWA, in order that the licensed insurer will pay claims on a timely basis.

That does not mean, in my opinion, that the Idaho department of insurance is obligated to treat this particular MEWA as a full-fledged commercial insurer. In fact, to chosse to do so makes little or no sense, for a host of reasons, which I will explain if there is any interest in hearing about.