Affordable Care Act – Seattle Insurance and ERISA Blog

Court Confirms Health Insurers Can’t Sell Discriminatory Insurance Policies

The Ninth Circuit Court of Appeals (the federal appeals court with jurisdiction over Washington and other west coast states) is having a busy summer for insurance cases. On the heels of recent decisions regarding attorneys’ fees in ERISA-governed insurance disputes and insurers’ duty to reasonably investigate insurance claims comes the July 14, 2020 ruling in Schmitt v. Kaiser Foundation Health Plan of Washington, holding health insurers cannot design health plans that have a discriminatory impact under the Affordable Care Act (a/k/a “Obamacare”).

For decades before the ACA, it was legal for health insurers to design health plan benefits however they chose, even if those plan designs had a discriminatory impact. As long as the insurer provided the same benefits to everyone, the insurer could decide what benefits to offer and what not to offer. Insureds could not sue their insurer for designing a health plan that had a discriminatory effect.

The Schmitt ruling confirms that the ACA changed that. Part of the ACA’s purpose is to expand so-called “minimum essential coverage” under health insurance policies. There are certain minimum benefits that must be included in most health plans. This includes, for instance, emergency services, maternity care, mental health treatment, and rehabilitative treatment.

Additionally, the ACA specifically provides that insurers cannot design health plans in a discriminatory manner. It states that an insurer may not “design benefits in ways that discriminate against individuals because of their…disability.”

The Schmitt ruling emphasizes that the ACA is different from prior federal laws that had been interpreted not to prohibit discriminatory plan design. Prior to the ACA, no federal law guaranteed any person adequate health care. The ACA, on the other hand, explicitly guarantees the right to minimum health insurance benefits and prohibits designing health plans that deprive people of those minimum benefits on a discriminatory basis.

The court noted the ACA does not require insurers cover all treatment no matter how costly or ineffective. But the court emphasized insurers cannot design health coverage that has a discriminatory impact.

The Schmitt ruling is an important victory for advocates of fair insurance coverage.

Texas Judge Strikes Down Affordable Care Act

A federal judge in Texas has ruled the Affordable Care Act (a/k/a “Obamacare”) can no longer be enforced. The judge determined the Act cannot function without its individual mandate requiring virtually all Americans to carry minimum health coverage. Congress repealed the ACA’s individual mandate at the end of 2017.

If the ruling becomes the law of the land, it will have serious implications for health insurance coverage. Among other things, the ruling eliminates the ACA’s minimum coverage requirements including guaranteed coverage for people with pre-existing health conditions, emergency medical treatment, maternity and newborn care, mental health and substance abuse treatment, prescription drugs and pediatric care.

The ruling has the potential to eliminate health coverage for about 17 million Americans — including millions who gained coverage through the ACA’s expansion of Medicaid. Policyholders with pre-existing conditions could see significant premium increases once the ACA’s prohibition against increased charges for pre-existing conditions become void.

For the time being, the ruling has little practical impact for insureds. The federal Centers for Medicare and Medicaid Services emphasized “There will be no impact to enrollees’ current coverage or their coverage in a 2019 plan.” For now, the biggest concern is that the ruling will confuse insureds into failing to purchase coverage during open enrollment, which CMS states will proceed normally.

What Are The Rules For Short Term Health Coverage?

Many people buy short term medical coverage to fill in gaps in long term coverage. For instance, if you start a new job, you’ll often lose coverage from your former employer’s medical plan prior to becoming eligible for coverage under your new employer’s medical plan. This gap can often last several months. To maintain coverage for medical expenses, people often purchase short term medical coverage for just a few weeks or months. Short term coverage isn’t designed to be your primary insurance but just to cover the gap while you transition between health insurance policies.

Short term medical coverage isn’t subject to all the same rules as typical medical coverage. In particular, short term coverage is not required to meet the Affordable Care Act’s minimum standards for health insurance. Moreover, the federal agencies responsible for overseeing short term medical plans, including the Department of Labor, Department of Health and Human Services, and IRS, frequently tweak the rules by issuing updated regulations, most recently on August 3, 2018.

So what are the current rules for short term medical insurance? Here are some of the highlights:

The ACA Individual Mandate: Under the current rule as of August 3, 2018, short term medical coverage isn’t considered “Minimum Essential Coverage” under the Affordable Care Act. Ordinarily, that would mean a person covered only by short term medical insurance isn’t complying with the Affordable Care Act’s individual mandate, and could be subject to tax penalties. However, Congress’ tax overall bill passed in late 2017 effectively eliminates the Affordable Care Act’s individual mandate. That means as of today, individuals covered solely under short term medical coverage won’t have to worry about paying the Affordable Care Act individual mandate penalty.
No Minimum Standards: Since short term medical insurance isn’t subject to the Affordable Care Act’s minimum standards, short term medical insurance can do things like exclude pre-existing conditions, refuse to cover essential health services like emergency care, and impose annual caps on coverage.
Duration of Coverage: Short term medical coverage with the same carrier may last no longer than 36 consecutive months. This also applies if a shorter-duration policy is renewed with the same carrier. This rule likely doesn’t preclude coverage under a short term medical policy for longer than 36 months so long as the coverage is under multiple carriers.
State Regulations Apply: Regardless of regulations under federal law, many states still regulate short-term medical coverage. Washington State’s insurance commissioner recently proposed new rules that, among other things, limit short term medical coverage plans’ duration to three months and establish certain minimum standards for coverage.

The rules for short term medical coverage are very much influx due to changes by federal regulators, Congress and states. It’s important to carefully review your policy and any applicable rules to determine your rights under short term medical coverage.

Out of Network Billing for Emergency Room Visit: New Legislation Aims To Fix Loophole In Existing Law

In a medical emergency, patients are typically concerned with getting to the emergency room as fast as possible. They often don’t stop to check whether the closest emergency room is at a hospital that is “in-network” with their health insurance plan; or, even if they do, the nearest in-network emergency room may be too far away.

Most health insurance plans exclude coverage for treatment with out-of-network hospitals, so this can cause insureds who seek treatment in an emergency without carefully checking whether their hospital is in-network with their insurer to pay astronomical out of pocket costs for treatment.

The federal Affordable Care Act (a/k/a “Obamacare”) imposed new rules on insurers that partially fix the problem of coverage for out-of-network emergency healthcare. The ACA requires covering emergency care without limiting coverage on the basis care was rendered by an out-of-network provider. The statute provides:

If a group health plan, or a health insurance issuer offering group or individual health insurance issuer [sic], provides or covers any benefits with respect to services in an emergency department of a hospital, the plan or issuer shall cover emergency services … in a manner so that, if such services are provided to a participant, beneficiary or enrollee … such services will be provided without imposing any requirement under the plan for prior authorization of services or any limitation on coverage where the provider of services does not have a contractual relationship with the plan for the providing of services that is more restrictive than the requirements or limitations that apply to emergency department services received from providers who do have such a contractual relationship with the plan….

42 U.S.C. § 300gg-19a(b)(1) (emphasis added).

Courts have summarized this rule as requiring insurers “to cover out-of-network emergency services in a way ‘that is [no] more restrictive than the requirements or limitations’ applicable to emergency department services received from in-network providers.” Northside Hosp., Inc. v. Ambetter of Peach State, Inc., 2017 WL 8948348, at *1 (N.D. Ga. Dec. 1, 2017) (quoting 42 U.S.C. § 300gg-19a(b)(1)(ii)).

Washington State’s Patient Bill of Rights similarly precludes insurers from limiting coverage for emergency care on the basis the provider was out-of-network. Washington law provides:

A health carrier shall cover emergency services necessary to screen and stabilize a covered person if a prudent layperson acting reasonably would have believed that an emergency medical condition existed…With respect to care obtained from a nonparticipating hospital emergency department, a health carrier shall cover emergency services necessary to screen and stabilize a covered person if a prudent layperson would have reasonably believed that use of a participating hospital emergency department would result in a delay that would worsen the emergency.

RCW 48.43.093 (emphasis added).

But there’s an important loophole in this rule. Health insurers have to cover out-of-network emergency care under the rule, but the rule never states how much of the bill an insurer must pay. This is a critical omission. Most health plans limit the amount the insurer pays to special discount rates the insurer negotiated with its in-network providers. But out-of-network providers haven’t agreed to accept this rate, which is often a tiny fraction of the out-of-network provider’s charge for an emergency room visit.

Thus, even where the insurer nominally covers emergency treatment at an out-of-network hospital, the insurer is only required to pay the amount it negotiated with its in-network providers. Since the out-of-network emergency room hasn’t agreed to accept those rates, the insurer’s coverage will be inadequate – often by hundreds of thousands of dollars. The patient then receives a bill for the difference despite having “coverage” for the emergency room visit.

This leads to the unfair situation where a person goes to an out-of-network emergency room and supposedly has coverage under the ACA and Washington Patient Bill of Rights, yet still winds up on the hook for medical bills that would have been paid had the provider been in-network. As a practical matter, this renders the intent of the ACA and Washington Patient Bill of Rights – protecting insureds from crippling medical bills for visiting an out-of-network emergency room – completely ineffective.

Unfortunately, until a legislative solution emerges, insureds must still check the in-network status of their providers with agonizing precision – even in the event of a life-threatening medical emergency – despite the ACA and Washington Patient Bill of Rights. Washington State’s legislature has proposed such a solution: HB 2114 – 2017-18 (“Protecting consumers from charges for out-of-network health services”). That bill remains in legislative committee and faces harsh opposition from industry groups.