Insurance arrangement that could end-run ACA goes before federal appeals court
At issue is an arrangement allowing individuals to become "working owners" and eligible for a group health plan--just for downloading software.
What if you could enroll in a group health plan just by downloading a software program? Sounds a bit fishy, doesn’t it? But that’s the heart of an issue currently being considered by a federal appeals court, and the outcome could deal a devastating blow to the Affordable Care Act and state insurance regulations.
The U.S. Labor Department is fighting a decision from a federal judge in Texas that allowed two companies to offer health plans to individuals who agree to have their internet activity tracked and sold. Under the arrangement, individuals who agree to become “limited partners” of Data Marketing Partnership LP can join an employee health plan–just by downloading the company’s tracking software.
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The district court ruled these individuals are “working owners” and compelled the Labor Department to deem the insurance plan they are joining a single-employer health plan under the Employee Retirement Income Security Act. That’s an important distinction–though the ACA set up a broad framework for health insurance plan requirements, regulation and enforcement are by and large done on the state level–except for large-group plans, which are preempted by ERISA.
If upheld by the U.S. Court of Appeals for the Fifth Circuit, companies would be able to offer plans that are stripped of federal and state insurance protections, said Kris Haltmeyer, vice president of legislative and regulatory policy for the Blue Cross Blue Shield Association. “Importantly, they would also be deprived of state authority to regulate these entities and to ensure they can pay the claims that they promised to,” he said.
In an amicus brief in support of the DOL’s lawsuit, BCBSA wrote, “These arrangements would also be free to drop coverage if the individual becomes sick; they are not required to, and generally do not, provide robust benefits,” the association writes. ”Perhaps most importantly, many consumers that enroll in these kinds of arrangements are unlikely to know that they do not receive the benefit of these kinds of regulatory oversight and protections.”
That could cause problems not just for plan participants but for the wider health insurance market, BCBSA noted in its brief. “The design and marketing of products that selectively drain state insurance markets of the healthier, lower-cost individuals needed to keep premiums affordable will result, along with fraud, impacting millions of Americans enrolled in legitimate health care plans regulated by state law and the Affordable Care Act.”
The brief notes that “schemes” such as this should not be confused with association health plans, which draw on traditional employer-employee relationships. But what, exactly, is it, then?
What’s being offered is a company health plan for a startup data company that’s trying to be the next Google or Facebook, said Jonathan Crumly, an attorney who represented the companies in the district court proceedings. “The structure is 100 percent legal within the bounds of ERISA,” he said.
Randall Johnson, a representative of L.P. Management Services, said the companies needed to provide a benefit to attract individuals to work to grow its user base and reach profitability. L.P. Management Services, which is named in the litigation, is the general partner that’s responsible for the business operations of the partnership between Data Marketing Partnership and the individuals who sign on as limited partners.
“To do this, we turned to a group of health benefit experts to build out group health plans that provide a full menu of coverages that are all subject to ERISA regulation and are fully reinsured,” he said. “Our companies are equal opportunity employers, and we do not discriminate in who can be employed or join as a partner, nor do we discriminate in who is eligible to participate in the group health plans.”
But the DOL says these “limited partners” are not employees under ERISA. The National Association of Insurance Commissioners, which filed a friend-of-the-court brief in support of the Labor Department, argues the companies are trying to exploit the provisions in ERISA that exempt self-insured employee benefit plans from state insurance regulations.
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