This provocative conclusion requires the connection of
several dots, so we’ll lay them out for your consideration.
As this blog has reported previously, federal regulators
have been asking lots of questions about self-insured group plans since the
passage of the ACA. More specifically,
they are trying to determine whether smaller self-insured employers that
purchase stop-loss insurance with “low” attachment points constitute a
“loophole” to the health care law and that these employers are somehow “gaming”
the system.
We’ve methodically discredited these assertions multiple
times, but it’s important to set the stage as new developments are reported and
additional context is provided.
Since insurance is largely regulated at the state level,
the obvious question arises regarding how the feds can regulate stop-loss insurance
should they wish to do so? This can
clearly be done through federal legislation or potentially through
regulation.
The regulatory route is more complicated as the ACA does
not provide any explicit statutory authority for such action. But regulators can be a creative bunch,
especially under the current Administration.
The creative theory is that federal agencies with
jurisdiction over the Public Health Services Act (PHSA) and the Employee
Retirement Income Security Act (ERISA) may rely on the their general
rule-making authority given to them under their respective laws to argue that
the federal government may indeed need to regulate stop-loss insurance and
re-characterize stop-loss policies with “low” attachment points as “health
insurance” through regulations separate and apart from the new law.
While this action would be controversial and subject to challenge
by Congress and private citizens, it is possible that a rule-making process
could be initiated to achieve this policy objective.
Based on discussion with key regulators as recently as
last week, such a rule-making process is unlikely to occur this year. This blog speculates that the primary
consideration for inaction at this point is that regulators are simply
overwhelmed with finalizing all of the rules and related guidance required for
full ACA implementation at the end of this year.
Once these deadlines pass, however, the regulators will
have more bandwidth to circle back on ancillary areas of interest. Here’s where we connect the dot with Mr.
Perez’ name on it.
While the career professional staffers within DOL
(non-political appointees) are competent and at least reasonably objective in
most cases, the new agency head is anything but.
Mr. Perez comes with baggage from his tenure within the
Justin Department where evidence strongly suggests that at least some of his civil rights
enforcement decisions were influenced by political considerations. In short, he a “social justice” guy who fits
nicely into the Administration’s template for policy-making.
His resume also includes a stint with HHS under the
Clinton Administration and a senior staff position with the late Senator Ted
Kennedy. Rounding out his big government
pedigree, he is a graduate of Harvard Law School and the George Washington
Public School of Health.
All of this background suggests that Mr. Perez will be
inclined to position DOL as a more activist agency with regard to health care
reform issues, including stop-loss insurance regulation. This motivation will likely be particularly
acute if the SHOP exchanges run into early problems with lack of enrollment as
many experts predict.
For the sake of discussion, let’s assume this analysis is
correct. In this case, then Secretary
Perez could push for a rule-making process as described earlier, or perhaps
lead an effort to close the self-insurance “loophole” through federal
legislation. Let’s connect another dot.
As a technical matter this would a “cleaner” approach and
not subject to legal challenge. Congress
could simply enact legislation amending the definition of “health insurance”
under the PHSA, ERISA and the Code to include, for example stop-loss policies
with a “low” attachment point.
Given that Republicans control the House right now and
are generally supportive of self-insurance, the politics do not support this
potential strategy. But if you believe recent
public commentaries that the Administration’s grand political plan is focused
on the objective of Democrats winning back control of the House in 2014, the
legislative pathway becomes clearer.
Und this scenario, it’s hard to imagine that a Secretary
Perez would not push for a legislative “fix.”
After all, it’s not fair that some citizens are saved from the exchanges
in favor of receiving quality health benefits from their employers, right? Social justice, indeed.
And the last dot is connected.
