Lawsuits Galore! A dozen states sue Trump Admin over "Ass" part of #ShortAssPlans

2019 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

Regular readers may have noticed that while I've written plenty about non-ACA compliant Short-Term, Limited Duration (STLD) healthcare policies (the "Short" part of my #ShortAssPlans hashtag), I've written far less about the "Ass" part...namely, Association Health Plans (AHPs)

The main reason for this is that I simply don't undertand AHPs as well and don't want to misinform people about them. The other reason is that they sort of have one foot each in the worlds of the Individual and Small Group markets, and I write mostly about the Individual market.

In fact, the only major entry I've written about Association Health Plans specifically was mostly cribbed from a report by Avalere Health:

The report that follows estimates the premium and coverage impact of the DOL proposed rule over a 5-year period (2018-2022). If the rule is finalized as proposed, we estimate the following impacts on the individual and small-group markets:

  • Higher premiums in both the individual and small-group markets. If the proposed AHP rule is finalized, Avalere projects premiums would rise in the current individual (2.7% to 4.0%) and small group (0.1% to 1.9%) markets relative to current law, largely due to healthier enrollees shifting into AHPs. This trend will lead to the individual and small group market risk scores rising.
  • Increase in the number of uninsured Americans. The proposed rule is projected to lead to 130,000 - 140,000 additional individuals becoming uninsured by 2022, compared to current law. The increased number of uninsured is largely caused by premium increases in the individual market as healthier enrollees shift into AHPs.

...While AHPs will likely offer lower premiums for many enrollees, the largest premium differences assume AHPs offer less-generous benefits than current markets, which could expose some enrollees to high out-of-pocket costs, particularly those that have significant healthcare needs.

In other words, junk plans.

Well, today a dozen state attorneys general struck back:

A group of 11 states and Washington, D.C., are suing the Trump administration in an attempt to roll back a regulation that allowed for the expansion of certain health plans that skirt ObamaCare regulations.

The lawsuit, led by New York Attorney General Barbara Underwood (D) and Massachusetts Attorney General Maura Healey (D), alleges that the Department of Labor violated the Administrative Procedures Act when it wrote a rule expanding access to association health plans.

Association health plans allow small businesses and other groups to band together to buy health insurance. The rule allows more groups to join together to form associations.

The move is part of a broader Trump administration effort to open up skimpier, cheaper plans as an alternative to ObamaCare plans.

...Democrats strongly oppose the rule as allowing for “junk” insurance that will not meet people’s needs and that will cause premiums to rise for those remaining in ObamaCare plans, once some healthier people are siphoned off into the new plans.

The complaint alleges the final rule “increases the risk of fraud and harm to consumers, requires states to redirect significant enforcement resources to curb those risks, and jeopardizes state efforts to protect their residents through stronger regulation.”

Aside from New York and Massachusetts, the other states signing onto the lawsuit are California, Delaware, Kentucky, Maryland, New Jersey, Oregon, Pennsylvania, the District of Columbia, Virginia and Washington.

Here's a taste of why AHPs are so dangerous, from New York Times reporter Robert Pear last fall:

But these health plans, created for small businesses, have a darker side: They have a long history of fraud and abuse that have left employers and employees with hundreds of millions of dollars in unpaid medical bills.

The problems are described in dozens of court cases and enforcement actions taken over more than a decade by federal and state officials who regulate the type of plans Mr. Trump is encouraging, known as association health plans.

In many cases, the Labor Department said, it has targeted “unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations.” In several cases, it has found that people managing these health plans diverted premiums to their personal use.

Fraud? Abuse? Unscrupulous promoters? Default on obligations? Diverting funds for personal use?

No wonder Donald Trump loves these so much.

The department filed suit this year against an association health plan for 300 small employers in Washington State, asserting that its officers had mismanaged the plan’s assets and charged employers more than $3 million in excessive “administrative fees.” Operators of the health plan violated their fiduciary duty by using its assets “in their own interest,” rather than for the benefit of workers, the government said.

Marc I. Machiz, who investigated insurance fraud as a Labor Department lawyer for more than 20 years, said the executive order was “summoning back demons from the deep.”

...But Mila Kofman, a former insurance superintendent in Maine who has done extensive research on association health plans, said they also often falsely claimed to be exempt from state insurance laws, as a way to explain how they could offer premiums lower than those charged by licensed insurance companies.

...But history shows the risks of an expansion of association health plans. If a plan becomes insolvent, the impact on consumers can be devastating.

...when they went to the doctor, they found out all of a sudden that their insurance company, their perceived insurance company, was in receivership and that they had no coverage.”

...The defendants concealed the plan’s financial problems from plan participants and left more than $3.6 million in unpaid claims, the department said in court papers.

In another case, a federal appeals court found that a health plan for small businesses in New Jersey was “aggressively marketed but inadequately funded.” The plan collapsed with more than $7 million in unpaid claims.