Phia Group Media


Phia Group Media

2014 & Beyond - Reacting to PPACA's Volatile Evolution
2014 & Beyond - Reacting to PPACA's Volatile Evolution

Health Insurance Reform (aka Obamacare, aka PPACA, aka Healthcare Reform) has not enjoyed a smooth implementation.  In fact, its birth has been quite turbulent.  Are you surprised?  Like many in our industry, The Phia Group’s CEO – Adam V. Russo, Esq. – as well as its Sr. VP & General Counsel – Ron E. Peck, Esq. – were not shocked to see the many issues developing in the law’s rollout, but even we have been impressed by some of the hurdles.  From the “Pay or Play” employer mandate being delayed by a year, to a complete lack of guidance regarding the many costs, fees, and expenses of the law, join us as we – along with our special guest – The Phia Group’s legal counsel and VP of Consulting, Jennifer McCormick, Esq., analyze the volatile evolution of this controversial law.

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2nd Quarter Newsletter 2013
It’s been a crazy few months for the health insurance industry as you all know.  All I can tell you is that we are here for you with your questions and needs.  We attempt to stay ahead of the curve and I can tell you confidently that more changes are ahead, so be sure to tune into our webinars over the next few months.  

As always, thank you for your support of The Phia Group.  We promise to keep you informed so you can protect yourselves and your clients. Happy reading. 

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Insurers Commissioners Signal Retreat on New Stop-Loss Insurance Regulation and Discuss MEWA Issues

August 26, 2013 – Comments made by regulators over the weekend at the summer meeting of the National Association of Insurance Commissioners (NAIC) in Indianapolis made it clear that ongoing pushback by SIIA and other stakeholder groups has dampened enthusiasm for new stop-loss regulation.

As an alternative, the NAIC ERISA Working Group agreed to move forward with the preparation of a white paper discussing regulatory issues associated with small employer self-insurance and the use of stop-loss insurance. To initiate this project, the Working Group recently surveyed all 50 states to obtain preliminary data regarding perspectives on regulatory activity.  
Survey results included the following:

  • 23 states responded to the survey (AK, AL, AR, CT, CO, GA, HI, MI, MD, ME, MO, NC, ND, NE, NV, OK, OR, TN, UT, VA, WA, WI, and WY);
  • 16 of the states responding (AK, AR, CT, CO, MD, ME, MO, NC, ND, NV, OK, OR, TN, UT, WA, and WI) reported having laws or policies regarding medical restrictions;
  • The remaining seven states (AL, GA, HI, MI, NE, VA, and WY) reported either not having specific stop loss insurance laws or did not include specific requirements beyond filing requirements for stop loss;
  • 12 states (CT, CO, GA, ME, MI, NC, NE, NV, OR, TN, UT, and WI) indicated some level of interest in self-funding in the small employer market since the passage of the ACA;
  • 11 states (AK, AL, AR, HI, MD, MO, ND, OK, VA, WA, and WY) responded that the level of interest in self-funding in the small employer market was unknown or very little;
  • One state (MI) indicated that it has seen an increase in self-funded MEWAs;
  • Five states (AR, CO, NC, RI, and UT) have changed their stop loss rules recently in response to the ACA; These changes affect stop loss by either imposing specific limits or introducing restrictions or caveats regarding the writing of this risk.

​It was reported that work will continue on this White Paper, with the goal of completion by the end of the year. Individual states could then utilize the findings on an advisory basis.

In Other ERISA Working Group News….
DOL Presentation on New Employee Benefits Security Administration Final Rule on Ex Parte Cease and Desist and Summary Seizure Orders for MEWAs.  The DOL made a presentation to the Working Group and reminded them that the ACA authorizes the DOL to issue a cease and desist order ex parte (without prior notice or hearing), and the DOL may issue a summary seizure order when it appears that a MEWA is in a financially hazardous condition.  The DOL talked about MEWA regulations, and there was significant discussion regarding insolvent plans and the need to identify and police these better.  The DOL mentioned with regard to cease and desist orders and summary seizures that it has expanded its breadth of financial review to include the brokers as well as the fiduciaries of the plans.  However, the DOL noted the distinction between unfunded health plans, which pay claims out of their operating budgets, and self-funded health plans, which pay claims from a trust or separate account.  The DOL noted that it does not have a good method to locate these unfunded plans prior to an insolvency event.  Members of the Working Group asked if the DOL could develop regulations to address this deficiency, but the DOL said it did not think it was feasible to write such regulations.

Sham MEWA Plan Investigations.  The regulators then met afterwards in a private session to discuss sham MEWA plan investigations.

What's Good for the Goose is Good for the Gander? Analyzing BUCA-ASO PPO Agreements!
What's Good for the Goose is Good for the Gander? Analyzing BUCA-ASO PPO Agreements!

We are all familiar with the contractual restrictions, limitations, and prohibitions imposed upon independent benefit plans and third party administrators utilizing major PPO networks.  Whether it is restrictive deadlines, an inability to negotiate directly with providers, a prohibition on audits, or an obligation to pay in accordance with terms you’ll never see, many have complained about the apparent inequity established by these contracts.  Few, however, have analyzed the network contracts existing between major carriers and their own network providers.  One might be surprised to learn that these major carriers and ASOs not only recognize the importance of these items, but assert these rights for themselves!  Join The Phia Group’s CEO – Adam V. Russo, Esq. – as well as its Sr. VP & General Counsel – Ron E. Peck, Esq. – as they dissect contractual terms existing between carriers and their network providers, and share the realization that they know exactly what is important to you.

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Ensuring Cost Containment Success - Member Outreach & Support
Ensuring Cost Containment Success - Member Outreach & Support

On July 31st at 1 PM EST, The Phia Group’s CEO – Attorney Adam V. Russo – and The Phia Group’s Sr. VP and General Counsel – Attorney Ron E. Peck – will address one of the most pressing issues facing our industry today – balance billing.  In particular, they will discuss what benefit plan administrators can do to assist their participants and push back against this problem.
To maintain benefit program viability, employers are cracking down on excessive spending through auditing and implementing new methodologies, such as cost based reimbursement and Medicare pricing, in addition to traditional network policies.  In this new environment, participants will be thrust into the fray like never before; exposed to the threat of balance billing.

Topics that will be discussed include, but are not limited to –

•           When strict enforcement of the plan terms and preventing balance billing may not be harmonious goals

•           Undertaking efforts on behalf of benefit plans to resolve disputes with providers so that participants benefit as well, compared to “patient advocacy”

•           Providing support to participants facing balance billing by explaining why the payments were capped, describing the appeals process in detail, and providing arguments they can raise against the provider

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Rain Delay – Postponing Play (or Pay)

A Delay In Play (or Pay) – The News Isn’t As Good As You May Think

The Obama administration announced that it is postponing the requirement that employers provide employees robust, affordable health plans; also known as “pay or play.” You may think that this is good news… It’s another year to consider options, prepare funds, and study the intricacies of PPACA. DON’T BE FOOLED!

Regulatory officials have stated that the delay was prompted by so-called “compliance complexity concerns.” Employers have attacked the rule from every angle; targeting unrealistic expectations, costs, and difficulties in reporting. In addition, many employers have threatened to “trim” their employment rosters. Employers with fewer than 50 employees (or full-time equivalent employees) are exempt from the rule. It should have come as no surprise, then, that some employers were going to cut employees’ hours or terminate staff, dropping below 50 lives. With all of this in mind, the administration – “thankfully” – pulled back on the reins. Great news, right? Wrong!

At The Phia Group, we hope for the best but plan for the worst. For the following reasons, now is not the time to disregard cost containment efforts.  – Read More

New York Assembly Bill 7828 (Companion Senate Bill 5715)
Article Taken From: The National Association of Subrogation Professionals AMICUS Updates

As you may recall, New York introduced a bill which would close perceived loopholes which allowed a fully insured ERISA plan to pursue subrogation or reimbursement. New York General Obligations 5-535 prohibits a health carrier from pursuing a subrogation or reimbursement claim that is not protected by ERISA preemption. One federal court in the case of Wurtz v. Rawlings, 2013 WL1248631 (E.D.N.Y.), recently held an insured ERISA plan was protected by preemption and the carrier was able to pursue subrogation and reimbursement claims. TheWurtz court found the NY statute was not “saved” from preemption as the regulation of insurance. The case is currently on appeal and the National Association of Subrogation Professionals (NASP) has been requested to write an Amicus Brief.

In response to this decision, Assembly Bill 7828 was introduced to clarify that health insurers and fully insured ERISA plans fall under NY General Obligation 5-535.Bill 7828 specifically claims that 5-535 is directed to the health insurance industry necessary to qualify under ERISA’s savings clause.This means NY General Obligation 5-535 would apply to fully insured ERISA plans as it involves a state’s right and ability to regulate insurance. Essentially, the bill seeks to reverse the Wurtz decision and barring fully insured ERISA plan’s right to subrogation or reimbursement. This bill further clarifies that the anti-subrogation law applies to not only claims in suit, but pre-suit claims.

Last minute amendments to the bill appear to protect personal injury protection (PIP) subrogation rights. However, short term disability carriers and municipalities did not fare as well and certain subrogation rights of theirs may be in jeopardy. The bill is headed to the Governor’s desk for his signature and seems a foregone conclusion that the bill will be signed.

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1st Quarter Newsletter 2013

As you have no doubt heard by now, on April 15, 2013 – two bombs were detonated just before 3 P.M. Eastern Standard Time in the Copley Square area of Boston, MA.

Since the news broke, many of you have reached out to us to ascertain our situation and confirm our wellbeing. I am pleased to advise you that our entire team is whole and healthy. The outpouring of support from you, our industry partners, has been moving.

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SIIA Provides Analysis on “Skinny” Health Plans in Response to WSJ Article
 May 30, 2013 – The Wall Street Journal on May 20th ran a news story describing a strategy that an increasing number of employers are reportedly examining – especially self-insured employers – that involves offering a low-cost health plan covering only preventive health services.  As the article indicated, in essence, offering this type of low-cost – or “skinny” – plan does not violate the law.  More specifically, employers subject to the so-called employer mandate would not be subject to the punitive first prong of the employer mandate penalty tax (often referred to as the “no-coverage” penalty).  In other words, these employers would be found to be offering “minimum essential coverage,” and thus would avoid the penalty tax, provided the employer offered these low-cost, skinny plans to at least 95% of its full-time employees and their dependent children (under age 26). 

This article has generated multiple inquiries, so SIIA has prepared the following analysis to make sure its members are fully-educated on this subject matter.  Should you have additional questions, please contact SIIA Washington Counsel Chris Condeluci at 202/463-8161, or via e-mail at


So, how are “skinny” health plans permissible under the Patient Protection and Affordable Care Act (PPACA)?  To understand how offering a low-cost, skinny plan does not violate the law, thereby allowing an employer otherwise subject to the employer mandate to avoid a penalty tax, we must piece together various aspects of PPACA, starting with the definition of “minimum essential coverage,” and explain why this definition is so important.

“Minimum Essential Coverage” and the Individual Mandate

PPACA generally requires all individuals (and their dependents) to maintain “minimum essential coverage” each year.  “Minimum essential coverage” includes health insurance coverage provided under (1) a governmental program (e.g., Medicare, Medicaid, SCHIP, or TRICARE), (2) an employer-sponsored plan (i.e., a group health plan), (3) individual coverage offered by a health plan in the individual market, (4) “grandfathered” individual or group market coverage, and (5) any other coverage as specified by the Department of Health and Human Services (HHS).  If an individual (and their dependents) fails to obtain “minimum essential coverage,” the individual will be subject to a penalty tax for himself/herself (and their dependents, if any), unless a specific exemption from the penalty tax applies. 

Why Is This Important To Employers Interested In Offering Low-Cost, Skinny Plans? 

Recently proposed regulations implementing the individual mandate penalty tax indicate that an employer-sponsored plan (i.e., “minimum essential coverage”) is a “group health plan” as defined under the Public Health Services Act (PHSA).  The PHSA provides that a group health plan means an “employee welfare benefit plan” as defined under the Employee Retirement Income Security Act (ERISA).  ERISA defines an employee welfare benefit plan as “any plan, fund, or program…established or maintained by an employer…for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, medical, surgical, or hospital care or benefits…”

A plan that covers preventive health services only would be considered a plan, fund, or program established and maintained by an employer that provides medical care or benefits through the purchase of health insurance or otherwise.  As a result, a low-cost, skinny plan would be considered a group health plan under the PHSA, and thus, “minimum essential coverage” for purposes of PPACA.  Therefore, an individual employee (and their dependents, if any) covered under this type of arrangement (i.e., a low-cost, skinny plan) would satisfy the individual mandate requirement and would not be required to pay a penalty for the year.

“Minimum Essential Coverage” and the Employer Mandate

Nothing under the PPACA requires an employer to offer health coverage to its employees.  Providing an employee benefit (i.e., health insurance coverage) is still voluntary.  But, an employer employing 50 or more “full-time equivalent employees” (FTEs) will be subject to a penalty tax if (1) it does not offer “minimum essential coverage” to at least 95% of its full-time employees and their dependent child(ren) under age 26 (known as the “first prong” of the employer mandate) or (2) the employer offers “minimum essential coverage,” but the coverage (a) is “unaffordable” (i.e., the employee contribution for the lowest cost self-only health plan exceeds 9.5% of the employee’s household income (or certain other “safe harbor” measures) or (b) does not provide “minimum value” (i.e., the plan fails to pay at least 60% of the cost of benefits under the plan) (known as the “second prong” of the employer mandate).

The employer mandate penalty tax is only triggered if a full-time employee purchases an individual market health plan through an Exchange created under PPACA and accesses the premium subsidy for health insurance now available under the law (provided the employee is eligible based on income).  Importantly, the amount of the penalty tax depends on whether the employer is offering “minimum essential coverage” or not.  For example, if an employer fails the first prong of the employer mandate, the penalty tax is equal to $2,000 times all of the employer’s full-time employees (minus 30).  Under the second prong, the penalty tax is equal to $3,000 for every full-time employee that accesses the premium subsidy.

Why Is This Important To Employers Interested In Offering Low-Cost, Skinny Plans?

As the first prong of the employer mandate indicates, if an employer is not offering “minimum essential coverage” to at least 95% of its full-time employees and their child dependent(s), the employer may be subject to a penalty tax equal to $2,000 times all of the employer’s full-time employees (minus 30).  For employers employing a significant number of full-time employees, this penalty tax could be substantial.  However, if an employer offers a low-cost, skinny plan to at least 95% of its full-time employees and their child dependent(s), the employer can avoid substantial penalties because – as discussed – this type of arrangement would be considered a group health plan for purposes of the PHSA, and thus, “minimum essential coverage” for purposes of PPACA, including the employer mandate.

Would an Employer Offering a Low-Cost, Skinny Plan Avoid All Penalties Under the Employer Mandate?

No.  As stated, under the second prong of the employer mandate, if an employer is offering “minimum essential coverage,” but the coverage is unaffordable or does not provide minimum value, the employer would be subject to a $3,000 penalty tax for every full-time employee that purchases an individual market health plan through an ACA-created Exchange and accesses a premium subsidy for health insurance.  In the case of a low-cost, skinny plan, this arrangement would in most, if not all cases, be affordable.  However, this type of arrangement would not satisfy the minimum value test. 

According to regulations issued by HHS and the Department of Treasury (Treasury), while a self-insured plan is not required to provide coverage for the “essential health benefit” categories, the plan’s minimum value is measured with reference to benefits covered by the employer that also are covered in any one of the “essential health benefit”-benchmark plans adopted by a State.  In other words, a plan’s anticipated spending for benefits provided under any particular “essential health benefit”-benchmark plan for any State counts towards the plan’s minimum value.  An “essential health benefit”-benchmark plan covers more than just preventive health services.  Therefore, a low-cost, skinny plan would not provide minimum value, thereby exposing the employer to a penalty tax in the event a full-time employee accesses the premium subsidy.

Will Federal Regulators Try to Restrict Skinny Health Plans Going Forward?

As the Wall Street Journal article indicates, Federal agency officials have stated that employers may offer a low-cost, skinny plan and at least avoid the first prong of the employer mandate.  But, the Federal regulators are certainly not approving of this practice.  Which begs the question, will the Federal regulators try to shut this practice down?  If they do, how can they do it? 

SIIA believes that the Federal agencies may conclude that this type of practice violates the new nondiscrimination rules that apply to fully-insured group health plans.  To date, the Federal government has not issued regulations detailing these rules.  In the case of self-insured plans, this practice may already violate the nondiscrimination rules applicable to self-insured arrangements under section 105(h) of the Internal Revenue Code (“Code”).  If not, contemporaneous with the issuance of the new nondiscrimination rules for fully-insured plans, Treasury may add to the current regulations under Code section 105(h), providing that offering low-cost, skinny plans could be discriminatory in certain instances. 

Only time will tell whether this Administration will attempt to use the nondiscrimination rules applicable to both fully-insured and self-insured group health plans to put a stop to this practice.  Until then, it appears that offering a low-cost, skinny plan is a viable strategy when it comes to an employer’s overall approach to offering health insurance benefits to its employees and complying with the new requirements under PPACA, including the employer mandate.  

That said, SIIA is not commenting on the relative merits of this approach at this time.  The purpose of this communication is simply to educate its members in order that they understand what is happening in the marketplace and potential regulatory responses.  Please watch for additional exclusive reporting as developments warrant.

Maine Amends Anti Subrogation Bill
As you may recall, Maine recently introduced a bill, Maine Legislative Document 756, which attempted to eliminate Med Pay subrogation claims.  This bill was recently amended to allow for the limited pursuit of subrogation claims.  The new language would allow the casualty insurance policy to provide for Med Pay subrogation rights or priority over the insured when the insured’s awarded or settled damages exceed $20,000. 

Although, the amended language is restrictive and does not allow for the pursuit of all Med Pay subrogation claims where there is a responsible party, it does allow a carrier to pursue claims where the insured has settled with the tortfeasor or been awarded damages of more than $20,000.  

Additionally, the amended language purports to give the carrier priority over the insured on allowed claims.  This suggests the insured would not be able to assert the Made Whole Doctrine as a defense to the carrier’s right to recover.  The bill appears applicable to only those cases where the insured is pursuing a claim against the responsible party.