This was a message from world insurance (health insurance carrier)
With the changes in the major medical insurance marketplace and the resulting uncertainties brought on by the regulatory environment, I need to inform you that World Insurance Company/American Republic Insurance Company has made a decision to exit the individually underwritten comprehensive major medical insurance business. As a result, we will be cancelling our individually underwritten comprehensive major medical policies,
subject to and in accordance with applicable law. This decision was made after much deliberation and planning; it was not an easy decision to make because of the impact on customers, agents and employees. We are no longer able to provide the kind of major medical insurance protection our customers have come to expect.

Two very important factors in reaching this decision were our ability to provide a guaranteed issue option to as many as possible of our individually underwritten comprehensive major medical policyholders and the potential for ongoing payment of meaningful agent compensation on business placed under the guaranteed issue option.
We have negotiated an arrangement with Celtic Insurance Company (“Celtic”), a wholly-owned subsidiary of Centene
Corporation, a multi-billion dollar health services organization. We are pleased to provide most of our policyholders in states where Celtic has product available with this important guaranteed issue option to elect replacement coverage from Celtic.

To provide this offer, Celtic has a prescribed set of conditions and processes for policyholders to follow. The process will begin on the date policyholders are notified their policy will be cancelled. During an initial defined offer period of up to 60-days (but shorter in some cases), policyholders will have a guaranteed option to obtain coverage from Celtic without undergoing a new underwriting process or providing evidence of insurability. This offer will be based on Celtic’s benefits and premium.

Similar waivers and rate-ups on policyholders’ current coverage will be carried over to the replacement coverage. Policyholders that do not take the guaranteed option during the initial offer period will have an additional 30 days to apply for new coverage through Celtic’s normal business process. However, it is very important policyholders take action within the initial offer period to ensure continuation of coverage on a guaranteed issue basis to protect against catastrophic events—the reason they purchased their existing policies.

Renewal commissions will be paid on existing business placed with Celtic. In addition, commissions will be paid on any new business issued as a result of a policyholder’s choice to go through Celtic’s new business process. However, the amount available for agent compensation due to regulatory changes has been reduced consistent with the lower compensation amounts built into these products. To ensure the quality of the risk pool, the level of the commissions will depend upon the percentage of existing policyholders that convert their policies to Celtic. Because new policies will be issued, agents are required to be appointed in the policyholder’s state of residence to receive compensation on any business placed with Celtic.

Although we have no legal obligation to negotiate a guaranteed issue option for our policyholders, our policyholders and agents are important to us. By providing this offer to our policyholders, they can choose to have the major medical protection they need.
You are a valued business partner, and we appreciate the relationship we’ve had with you. Please do what you can to ensure continuation of coverage for these policyholders; we will do what we can to assist in the appointment process for any agent or agency that wants to be appointed.

September 16th, 2011  – A few months ago Colorado introduced a new state law that allows companies with 50 or fewer employees to pay or reimburse employees for the costs of health insurance premiums through a Health Reimbursement Arrangement (HRA). Previously it had been illegal for companies to pay for individual coverage for an employee/family, but this law seemed to change that.

However, now it seems that employers using HRAs to purchase individual policies for employees may be violating Federal law.  Employers who contribute to or reimburse employees for individual plan premiums through an HRA may cause the Individual/Family health insurance policy to be seen as part of an Employer Sponsored Group Health Insurance plan and subject to the requirements found in ERISA, COBRA, HIPPA and other Federal mandates.

Moreover, by combining an HRA and an individual policy funded by the HRA the employer could be liable for medical costs for benefits not covered by individual plans, but that are required by Federal laws that govern group plans. Another concern is that CoverColorado may not cover applicants when an HRA replaces a group plan.

Senate Bill 11-019 adds the following language to the Colorado Revised Statues:

“10-16-105.2. Small employer health insurance availability program. (1.5) NOTWITHSTANDING ANY OTHER PROVISION OF LAW, A SMALL EMPLOYER THAT DOES NOT HAVE, AND HAS NOT HAD IN THE PREVIOUS TWELVE MONTHS, A SMALL GROUP HEALTH BENEFIT PLAN PROVIDING COVERAGE TO ITS EMPLOYEES UNDER THIS ARTICLE MAY REIMBURSE AN EMPLOYEE, WHETHER THROUGH WAGE ADJUSTMENTS OR HEALTH REIMBURSEMENT ARRANGEMENTS, FOR ANY PORTION OF THE PREMIUM FOR A HEALTH COVERAGE PLAN.”

While the legality of using an HRA to reimburse employees for individual plans is a serious concern, insurance carriers have introduced a new portfolio of Employer Sponsored Group Health Insurance plans for HRA’s that are legal, reduce the amount that employers are required to contribute, and often have reduced premiums compared to traditional group plans.   There is no 12 month wait period requirement to obtain these plans.

Commercial-Lines Survey Points to Hardening Rates

NU Online News Service, Sept. 13, 1:51 p.m. EDT

Commercial-insurance prices increased by almost 1.5 percent in the 2011 second quarter after the first quarter remained flat, indicating that the market may be hardening, according to Towers Watson’s most recent Commercial Lines Insurance Pricing Survey (CLIPS).

Towers Watson says its survey results, which uses data by 38 insurers representing about 20 percent of the U.S. commercial-insurance market, is consistent with a CFO survey it will be releasing soon, in which 75 percent of respondents say standard property-market prices were at the bottom or turning upward.

Workers’ compensation and commercial property show the most significant price increases in the quarter, Towers Watson says. For workers’ comp, it is the second consecutive quarter in which rates have increased, while commercial-property prices increased for the first time in five quarters. Towers Watson notes commercial-property rates are likely influenced by catastrophes early in the season, and adds that “third-quarter indications will provide a more-complete indication of the pricing response.”

A notable exception to the price-increase trend was directors and officers liability, Towers Watson says, which continued to show “significant declines in price levels.”

The firm says historical loss-cost information reported by participating carriers points to a 3 percent deterioration in loss ratios in the 2011 first half, relative to the same period in 2010.

Rep. Ron Paul was at the center of one of the most memorable moments of Monday night’s “CNN-Tea Party Republican Debate” when a member of the audience shouted “Yeah!” in response to a question asking whether a critically ill person without health insurance should be left to die.

In an interview Wednesday the Texas congressman, who was being asked the question when the outburst happened, responded to critics who said his response lacked compassion.

“You know, it’s so overly simplified to explain a full philosophy on how you care for people in 30 or 60 seconds,” Paul said Wednesday on CNN Newsroom.

Paul continued, “The freer the system, the better the health care. For somebody to turn around and say there’s one individual who didn’t have this care, you know, all of a sudden you hate people and you’re going to let them die? I spent a lifetime in medicine. To turn that around like that is foolish.”

Paul went on to say that of all the Republican presidential contenders, he was uniquely positioned to speak out on the government’s role in providing medical care. Paul is a licensed medical doctor specializing in obstetrics and gynecology.

“I understand it differently,” Paul said. “I want the maximum medical care and the maximum prosperity for everybody, and it doesn’t come from the big government welfare and bankruptcies that we have now.”

He continued, “Nobody can compete with me about compassion because I know and understand how free markets and sound money and a sensible foreign policy are the most compassionate systems ever known to mankind.

NEW YORK (CNNMoney) — The number of people who lacked health insurance last year climbed to 49.9 million, up from 49 million in 2009, the Census Bureau said Tuesday.

Nationwide, 16.3% of the population was uninsured last year, statistically unchanged from 2009.

Three groups comprised the bulk of the uninsured in 2010, including foreign-born residents who are not U.S. citizens, young adults ages 19 to 25 and low-income families with an annual household income of less than $25,000.

Much of the declines in insured rates in recent years can be attributed to the loss of employer-provided coverage, which fell amid sustained unemployment and as employers continued to cut back on benefits.

The percentage of people who had health insurance through their employers fell to 55.3% in 2010 from 56.1% the year before, continuing a long, downward trend. In 2000, 64.1% of the population received health insurance through their employers.

“As the job market remains weak, Americans can no longer depend on their workplace for consistent affordable coverage,” said Elise Gould, Director of Health Policy Research for the Economic Policy Institute, a Washington-based think tank.

Some employers have stopped offering health insurance, while others are passing along more of the cost to their employees, said Gould. As a result, some workers are abandoning their employer’s plans because the premiums have become too expensive, she said.

The average health insurance premium for family coverage has more than doubled over the past decade to $13,770 a year, according to the Kaiser Family Foundation, a non-profit which focuses on health care policy and issues.

With fewer Americans receiving health care coverage through their employers, government-funded programs like Medicare, Medicaid, military health care, the Children’s Health Care Program (CHIPS) and coverage offered by various states have had to pick up the slack.

In 2010, 31% of Americans relied on the government for health insurance, up from 24.2% in 1999.

Many of the new government beneficiaries are children, according to Gould. Still, Census reported that 9.8% of children under age 18 are uninsured despite the government programs targeting them like CHIPS and Medicaid, which is also open to their parents.

Adults without dependent children, however, are not eligible for Medicaid in most states under federal rules, said Rachel Garfield, a senior researcher on the Kaiser Commission on Medicaid and the Uninsured. It’s this group that accounts for a large portion of the increase in the uninsured.

Nearly one-in-four working-age adults are uninsured, said Gould. She said it won’t be until 2014, when Obama’s Affordable Care Act fully kicks in, that more people will be able to find affordable health care coverage.

What health care reform is (and isn’t) doing now
Kathleen Sebelius, the Secretary of Health and Human Services, said the report is evidence that the Obama administration’s health care reform is already starting to work.

Citing a provision that went into effect last year that allows parents to keep their children on their health insurance policy until they are 26 years old, Sebelius noted that the percentage of young adults ages 18 to 24 who were insured increased to 72.8% in 2010 from 70.7% in 2009.

“We expect even more will gain coverage in 2011 when the policy is fully phased in,” wrote Sebelius on HealthCare.gov, a web site run by the federal government.

Among the states, Texas had the highest percentage of uninsured; at 24.6%. Still, it was an improvement from the 26.1% who were uninsured in 2009. New Mexico had the second highest rate of uninsured people with 21.6%. Nevada was third at 21.3% and Mississippi’s rate jumped to 21.1% from 17.3% in 2009.

Despite being home to a high percentage of retirees, many of whom are covered by Medicare, Florida had an uninsured rate of 20.8% down from 21.7% in 2009.

In Massachusetts, where former governor Mitt Romney instituted his controversial state-wide health insurance plan in 2006, only 5.6% of the population lacks coverage, the lowest rate of uninsured of any state.

Other states that boasted a smaller percentage of uninsured included Hawaii (7.7%), Wisconsin and Maine (both 9.4%) and Vermont (9.5%).

On September 8, 2011, the U.S. Court of Appeals for the 4th Circuit in Richmond, Virginia issued rulings on two appeals. They dismissed lawsuits by the State of Virginia and Liberty University that challenged the constitutionality of the Patient Protection and Affordable Care Act’s (PPACA) individual mandate.

Both cases were dismissed on procedural grounds, so the court did not consider the constitutional challenges to the individual mandate in the PPACA.

In the State of Virginia case, the court ruled that the state did not have the legal right to challenge the constitutionality of the individual mandate. Virginia was challenging the individual mandate on the grounds that Virginia has a state law that individuals cannot be forced to buy health insurance.

In the Liberty University case, the court ruled that a federal tax law prevented them from considering the case because the mandate imposes a tax that has not yet been collected.

In June, the 6th Circuit Court of Appeals in Cincinnati upheld the constitutionality of the individual mandate. In August, the 11th Circuit Court of Appeals in Atlanta ruled it unconstitutional. This issue is expected to eventually be decided by the Supreme Court.

Broker and Employer ALERT
Employers utilizing HRAs to purchase individual policies for their
employees may be violating Federal law

CONTRIBUTING TO OR REIMBURSING EMPLOYEES FOR INDIVIDUAL POLICIES THROUGH AN HRA
MAY CAUSE THE INDIVIDUAL POLICY TO BE VIEWED AS PART OF A GROUP HEALTH PLAN
SUBJECT TO THE REQUIREMENTS FOUND IN ERISA, COBRA, HIPAA AND OTHER FEDERAL
MANDATES.
Background
Colorado Insurance Regulation 4-6-8 has generally prohibited the sale of individual health insurance policies to small
employers except under very specific and restrictive circumstances. Under DOI Bulletin B-4.32 (prior to its withdrawal
in December 2010), small employers were effectively prohibited from paying for any portion of the employee’s
premium for an individual policy through a Health Reimbursement Arrangement (HRA) because such individual
policies were required to be compliant with Colorado’s small group insurance requirements.
As a result of DOI Order Number 0-11-064, issued November 16, 2010, (resulting in the withdrawal of Bulletin B-4.32) and the recent passage of Senate Bill 11-19, there is quite a bit of confusion regarding the rules and regulations surrounding small employers offering individual coverage to their employees. SB 11-19 allows employers in Colorado to utilize HRAs to fund individual health insurance plans for their employees (unless the employer had a small group insured health plan in effect during any portion of the prior 12 months). Unfortunately, there are additional Federal and State laws and regulations that should be considered by employers before taking action under the November 2011 DOI Order as well as SB 11-19.
Since no individual insurance policy in Colorado is required to comply with Federal laws mandating coverage for group health plans (such as ERISA [1] and HIPAA [2]), with the possible exception of CoverColorado, the employer may be creating unexpected liability for themselves. The underlying concern is that the combination of the HRA and individual policies funded by the HRA may be considered together as a group health plan for certain Federal law purposes. Under these circumstances an employer may be liable for medical costs for benefits that an individual policy does not pay for that are mandated under and covered by Federal laws concerning a group plan. In addition, an applicant may be declined enrollment in CoverColorado when an HRA replaces a group health plan. Unfortunately, the narrow focus of SB 11-19 fails to acknowledge the numerous issues of employer compliance and liability that still exist after opening the possibility of funding individual insurance policies of employees through an employer-sponsored HRA.
Why Individual Policies May Form a Group Health Plan When the final HIPAA regulations on special enrollment and other portability requirements were published in 2004, the preamble introducing those regulations specifically stated: “If an employer provides coverage to its employees through two or more individual policies, the coverage may be considered coverage offered in connection with a group health plan and, therefore, subject to the group market provisions under HIPAA.” [69 Fed. Reg. 78719, 78733 (Dec. 30, 2004)(emphasis added).] The HIPAA preamble went on to state that whether an arrangement is a “group health plan” for HIPAA purposes depends on the particular facts and circumstances. Significant considerations include:
• Whether the employer makes contributions to health insurance premiums;
• The policy that provides the coverage does not have to be considered a ‘‘group’’ policy under State law;
• The employer need not be a party to the insurance policy.
[1] Employee Retirement Income Security Act of 1974, as amended
[2] HealthInsurance Portability and Accountability Act of 1996, as amended
Similarly, ERISA regulations provide a safe harbor rule under which a “group-type insurance program” will not be considered subject to ERISA, provided an employer’s involvement is carefully limited so that the employer:
• DOES NOT make employer contributions towards insurance premiums
• DOES NOT become involved in any employee decisions
• DOES NOT restrict insurance or carrier choices
• DOES NOT communicate that the policies are employer provided or part of an employer benefit
• DOES NOT assist with any negotiations with insurers
• DOES NOT execute any policy documents on behalf of your employees
• DOES NOT answer any questions regarding the policy
• DOES NOT maintain any claim forms, documents or copies of policies
• DOES NOT assist with claims disputes, claims submissions or any other claims issues
[DOL Reg. 2510.3-1(j)]
These concerns suggest that individual health insurance policies purchased with funds from an employer’s HRA may be subject to a variety of Federal laws that are not bound by State law characterization of benefit plans as “group” or “individual.” Employers considering such arrangements need to be aware of the potential violations such a program may face under Federal laws containing group health plan mandates.
Federal HIPAA Rules HIPAA applies to any employer sponsored health plan covering two or more current employees. If the individually billed premium plan is viewed as employer sponsored under HIPAA, those policies will most likely not meet HIPAA’s health status nondiscrimination rules.
Discrimination Based on Health Status: Among other things, HIPAA prohibits a group health plan from
discriminating with regard to eligibility, premiums or contributions based on specific health status related factors.
Because individual health insurance is not guarantee issue, many employees may be declined coverage based
on their health status. On average, 30% of all applicants are declined for coverage. In addition, individual
premiums can vary based on the health condition of the applicants. As a result, many applicants who are in fact
approved for coverage may end up paying more than someone who is healthy.
Medical Underwriting: HIPAA prohibits the use of medical underwriting for determining eligibility or individual
premiums within a group. In addition to the above, HIPAA requires that in small groups of 2-50 employees, the coverage must conform to specific parameters (several of which apply to large groups as well) including:
• Guarantee issue
• Limitations on pre-existing conditions
• Specific exclusion of pregnancy as a pre-existing condition
• Continuing coverage guarantees related to prior creditable coverage, including conversion coverage following
the expiration of COBRA
• Limitations on premium ratings due to such factors as medical and claims history
• Mental health parity provisions
• Provisions of the Women’s Health and Cancer Rights Act; Newborns and Mother’s Rights Act
None of these parameters apply to individual plans, and thus such requirements could create liability for
employers who fund individual plans.
See HCFA Insurance Standards Bulletin 00-06 (Nov. 2000) for more information on when an individual health
insurance policy may be subject to HIPAA’s requirements.
COBRA
HRAs sponsored by employers meeting the 20 employee criteria for application of COBRA are subject to COBRA continuation coverage requirements. In addition to sorting out how COBRA applies to HRAs in general, to the extent individual policies offered under an HRA are considered as part of the group health plan, those policies would also be potentially subject to COBRA’s continuation rights.
Discrimination Testing under PPACA Under the Federal health care reform legislation (the Patient Protection and Accountable Care Act, or PPACA), all employers offering an insured group health plan are subject to discrimination testing unless they have maintained a “grandfathered” plan. It is unlikely that a plan that does not provide guarantee issue of coverage and uniform benefits for all employees, such as the case may be with separately issued individual policies, will pass the discrimination testing guidelines. W-2 Reporting under PPACA PPACA requires that beginning in 2012 (2013 for small employers) employers report the value of employer sponsored health plans on the employees W-2 form. Because the plans funded through an HRA may be considered employer sponsored plans, the values for individual policy coverage would have to be determined and reported for each employee.
Employee Notification Requirements
Federal laws such as ERISA, HIPAA and COBRA require employers to ensure that numerous notices are
provided to participants of an employer sponsored group health benefit plan. There are substantial penalties for non-compliance.
Potential Employer Liability Related to Mandated Benefits As an employer sponsored group plan, many Federal mandates for group health insurance benefits may be required for each individual policy purchased through the employers HRA. Typically, individual policies do not cover the following Federally mandated benefits, to name a few:
• Newborn & Mothers Health Protection Act
• Mental Health Parity & Addition Equity Act
• Women’s Health and Cancer Rights Act
Employers may have liability to provide mandated benefits that are not covered under the individual medical
policy purchased by the employees through the employer sponsored HRA. Potential Employer Fines and Penalties-Federal The Department of Labor, the IRS, and the Department of Health and Human Services are involved in the regulation of health benefit plans. If an employer is found to be in violation of certain ERISA or other requirements within the jurisdiction of these agencies, the penalties and fines can be substantial. As an example; failure to provide certain employee notifications can result in a fine of $110 per employee, per day.
CoverColorado
Under certain conditions, Colorado law provides that individuals who are declined for individual health insurance may apply to Cover Colorado, a high risk pool formed in response to the federal HIPAA law). Colorado Revised Statutes Section 10-8-513 (2)(f) states that individuals shall not be eligible for coverage under the CoverColorado program if the employer “payer” is “financially benefiting” from the coverage of an individual in CoverColorado. As a result of this limitation and SB 11-19, the current CoverColorado application asks, “If your employer does not currently offer group health insurance, did your employer terminate the group health insurance plan within the past 12 months?” If CoverColorado determines that the employer terminated their group health insurance plan within the past 12 months (of the application to CoverColorado), the application for individual coverage will be declined unless the individual qualifies as “HIPAA eligible” (that is, they can prove 18 months of credible coverage under a Federal group health
plan and meet certain other criteria). Employers need to be very careful they are not placing their employees in a position of being denied coverage under the last resort program offered by CoverColorado when terminating a small group health plan and replacing it with a HRA used to fund individual insurance policies.
There are a number of questions beyond the scope of this Alert regarding the viability of SB 11-19’s apparent attempt to make room for a HRA design for small employers in Colorado while protecting the integrity of CoverColorado.
Regardless of the outcome of those issues, employers and their brokers need to be cognizant of the risks involved with HRA designs and protect against them in a prudent manner.

CONCLUSION

Absent additional guidance from the various Federal agencies charged with enforcing HIPAA, ERISA, COBRA and
other laws governing the health benefits provided to employees, an employer would appear to be assuming potentially
significant risk in adopting HRAs for the purpose of funding their employees’ purchase of individual health insurance
policies. Despite the purported benefits of this approach, the fact that those vendors willing to administer the program
will inevitably not protect the employer from the liabilities outlined above (in fact, in at least one case, employers are
required to indemnify the HRA administrator against any such liabilities), should indicate that employers need to be
extremely cautious about establishing such plans. Brokers are well advised to ensure that their clients are made
aware of these matters insofar as employers will often expect to be alerted to such risks by their trusted advisors.
Brokers should also recommend their clients seek legal counsel with any questions concerning the above.
This Alert is for general information only. It should not be construed as, and does not constitute, legal
advice on any specific matter, nor does this Alert create an attorney-client relationship.

2012 HSA Contribution Limits

The Department of the Treasury has announced the HSA contribution limits for 2012. The 2012 limit for HSA contribution is $3,100 for single coverage, and $6,250 for family coverage. Catch up amounts for individuals 55 years of age or older are $1,000 per year.

A consumer group called for a member of the new state health insurance exchange board to resign Monday, and the author of legislation creating the exchange said she was unhappy with the board’s makeup, casting shadows over a first meeting.

Long-anticipated federal rules released Monday call for boards to be dominated by consumer and small-business representatives, a bar Colorado’s board doesn’t seem to clear.

“I would like to see more consumer representation,” said state Sen. Betty Boyd, D-Lakewood, who co-sponsored legislation for the exchange.

The exchange will be an Internet portal for consumers comparing insurance rates and will funnel hundreds of millions of dollars in federal subsidies to individuals and small businesses if they have trouble finding policies.

The exchange board includes nine members, five appointed by Gov. John Hickenlooper. The majority and minority leaders of the state House and Senate each appointed one member.

The Colorado board includes the heads of three of the largest state health insurers — Anthem Blue Cross, UnitedHealthcare and Rocky Mountain Health Plans; a leader of a mental- health managed-care company; and a fifth, whose information-technology company contracts with the major health insurers.

The last executive, Eric Grossman of TriZetto in Greenwood Village, was asked to resign by the Colorado Public Interest Research Group. CoPIRG noted that Grossman recently wrote an article for insurance executives on the “good, bad and ugly” of exchanges and that the “bad” meant insurers would have to cut costs and increase efficiency.

“The intent of Colorado’s health exchange board is to do just that — create a competitive marketplace to increase affordability and choice for Colorado individuals and small employers when shopping for health insurance,” said CoPIRG director Danny Katz.

Grossman, appointed by Hickenlooper, said he would defer to state officials on the CoPIRG statement, but he attended Monday’s first board meeting as a full member.

State officials said they had no plans to alter the governor’s selections for the board.

Boyd and others called for more transparency from the board, saying the heavy presence of insurance and managed care guarantees conflicts of interest in designing the exchange.

“It appears a majority of the board may be conflicted out of voting” on frequent occasions, said Colorado Center on Law and Policy attorney Elisabeth Arenales.

During a public-comment period, Dede de Percin of the Colorado Consumer Health Initiative said the board lacks consumer or business influence. Two small-business owners and an advocate for the uninsured are on the panel.

Facilitators hired to help organize the board said conflict-of-interest and transparency issues would be on the Aug. 25 agenda.