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					Legal Update: Health Care Reform
How the Presidential Election Affects
       Upcoming Legislation -
   What’s New on the Horizon?

        Adam V. Russo, Esq.
         The Phia Group, LLC
  The Law Offices of Russo & Minchoff
          February 7, 2008
                     The Uninsured
   Some 47 million Americans don’t have health insurance - 15% of population

   Includes 10 million illegal immigrants who wouldn’t be covered under proposed
    national care.

   Fails to take account of Medicaid as it includes millions who are eligible but
    haven’t applied.

   The number includes many who could buy insurance but haven't.

   18 million of the uninsured have an annual income of more than $50,000, which
    puts them in the top half of income distribution.

   25% of uninsured have been offered employer-provided insurance but declined.

   17 million people under 65 are covered by individually purchased insurance,
    about 10% as many as the 164 million covered under employer plans.
  Increasing Health Care Costs
 Over the last 6 years, premiums have skyrocketed 5
  times as fast as general inflation.

 Premiums are 4 times workers’ earnings and twice the
  growth of business income.

 Combined premium and out-of-pocket costs for an
  American family of four now average $14,500.

 Consider this number in light of the fact that one quarter
  of US workers make less than $20,000/year, and one-
  third of households earn less than $37,000.
       Workforce Connections
   There are numerous people whose livelihoods depend on the
    current health care system.

   According to researchers at Pricewaterhouse Coopers, one in eight
    US residents has a job connected to the health care system.

   It currently comprises 16% of the gross national product.

   What would be the impact of massive health care reforms on the
               Self-funded Plans
   Self-funding, stimulated by the Employee Retirement Income
    Security Act (ERISA) of 1974, is a product of health care inflation.

   Although the intent of ERISA was to protect pension benefits, it also
    provided pre-emption of state laws for self-insured plans.

   ERISA pre-emption makes it cheaper for employers to offer health
    coverage since self-insured plans are not required to cover all of the
    benefits state mandates require insured plans to provide, such as
    chiropractic care or alternative medicine.

   53% of employers self-insure their health benefit programs,
    according to a KFF/HRET survey.
     State Mandated Changes
   For serious health care reform, keep an eye on the states.

   No state’s proposed plan for universal coverage is the same, although there are
    similar strategies for covering the uninsured.

   Under state mandates, innovation and consensus can be easier to achieve
    because there are fewer people involved.

   However, a state-based system can be more complex to understand because
    there are so many differences among states.

   Illinois has developed a program designed to insure all children and 27 other
    states such as CA, PA, and NY are exploring to achieve state-wide coverage.

   Massachusetts has been receiving much attention because of its efforts to
    achieve universal health coverage.
Maryland – A New Approach
   Bill to extend coverage to 140,000 people puts Maryland among a number
    of states attempting to lower the number of uninsured at state level.

   By expanding Medicaid to 100,000 adults and subsidies to the smallest
    companies (2 to 9 workers), the state focuses on those who turn up in
    emergency rooms that provide free care for routine & catastrophic illnesses.

   Firms and their employees would get annual subsidies to cover the cost of
    health insurance.

   The new law has a provision not included in similar programs offered by
    other states: workers must be offered plans with wellness programs.

   By signing up for free gym memberships, weight management, smoking
    cessation, and agreeing to control chronic conditions such as diabetes,
    workers are eligible for cash rewards or lower deductibles.

   Lawmakers said this bill is aimed at the very poor and lays the foundation
    for more ambitious moves in the future.
           Golden Gate Restaurant
         Association v. San Francisco
   9th Circuit Court of Appeals reversed District Court for N. District of CA, permitting
    San Francisco’s new health care ordinance to go into effect.

   9th Circuit’s reasoning does not persuasively implement the ERISA preemption case
    law of US Supreme Court.

   Opinion puts 9th Circuit in direct conflict with 4th Circuit, which held Maryland’s “Wal-
    Mart” Act, a similar employer mandate, preempted by ERISA. 4th has the better
    argument as its opinion reflects US Supreme Court holdings.

   The law was successfully challenged in District Court by Golden Gate Restaurant
    Association, representing over area establishments, which argued that the law would
    violate ERISA - conflicting local, state and federal benefit plans.

   Court’s attitude makes it likely that a proposed state health care law, which CA
    Assembly and Gov. Schwarzenegger support, will survive any legal challenge.

   Like SF, state measure depends in part on funding from employers. The Senate has
    yet to take up the bill.
           Golden Gate Restaurant
         Association v. San Francisco
   The decision allows the city to require businesses with over 20 employees to pay a
    fee to help cover employees’ health care costs and will help about 20,000 people
    without insurance.

   In SF, program to provide care for 73,000 uninsured adults.

   Estimated $200 million annual cost to be covered by state and local taxes and by
    payments from patients based on their income.

   The rest, less than 20%, would come from fees paid by employers who don't offer

   About 7,350 residents were enrolled in the program in 2007, when eligibility was
    limited to those making less than the federal poverty level of $10,310.

   That left 26,000 uninsured out of the program. Some are among an estimated
    20,000 employees in San Francisco whose companies provide no insurance.

   Ordinance provides coverage for those employees - some of them nonresidents -
    either in the city program or in a new health plan offered by their employers.
    Presidential Election Guide

   Every front-runner has proposed reforming healthcare.

   The primary differences among candidates are the level of financial
    responsibility of paying for care and whether coverage is mandatory.

   None of the candidates want to reduce the role that states play in financing,
    regulating, monitoring, and administering the nation’s health care system.

   Republican candidates favor a system that relies more on the individual and
    private insurers rather than employers or government to purchase/manage care.

   Democratic candidates propose building on the employer-based system and
    expanding public programs.
    Presidential Candidates and
         Their Health Care
 NPR's Julie Rovner decided to uncover the type of care the
  candidates had.

 Rovner stated that it was “like pulling teeth” to get info from
  candidates even though health care is one of the top issues in the

 Candidates in the US House and Senate are eligible for taxpayer-
  subsidized coverage through the Federal Employee Health Benefits
  Plan (FEHBP).

 Marilyn Moon, health director for the American Institutes for
  Research, said the FEHBP is OK, but not "gold-plated.“
    Presidential Candidates and
         Their Health Care
 Most Democratic candidates offer their campaign workers health

 Republicans were more reluctant to talk about their coverage -
  Huckabee, and Romney wouldn't say.

 McCain offers health insurance to his campaign staff.

 Huckabee and Romney wouldn't say if they cover their staffs.

 McCain gets coverage in three ways - veterans' care (served in the
  military), the Senate health-insurance program, and his wife's
  supplementary insurance.
        Overall Democratic Plan

   Democratic candidates call for mandates on individuals and/or businesses to
    obtain coverage and fund their proposals, in part by rolling back Bush’s tax cuts
    for Americans earning over $250,000.

   Democrats are competing amongst themselves over who has the better plan to
    control costs and approach universal coverage.

   The candidates would require insurers to guarantee coverage, by limiting or
    subsidizing premiums.

   The candidates would allow insurers to sell individual policies nationally instead
    of state by state.

   All democratic candidates support a form of universal healthcare.
          Hillary Rodham Clinton -
   Wants universal health-care coverage by the end of her second term.

   Establish the "American Health Choices Plan" to ensure all Americans have
    portable, affordable, quality care allowing employees to keep current plans.

   Give income-related tax credits to working families to make coverage affordable.
    Offer a tax credit to small businesses to begin or continue coverage.

   The choice to buy insurance as part of the FEHBP or a choice of private insurers
    offering the same benefits.

   Allow states to band together, if desired, to offer similar plans.

   Ensure that insurance companies doing business with the federal government
    cover high-priority preventive services.

   The plan doesn’t include details on whether illegal immigrants will be covered.
    Barack Obama - Democrat

   Requires children to get insurance now & aims for universal coverage by 2012.

   Plan includes affordable, comprehensive and portable health coverage for all,
    modernizing the system to contain costs, and improve the quality of care.

   Those who have insurance through their employers or who qualify for Medicaid
    or SCHIP would be able to keep that coverage.

   A new public insurance program would be created for those without coverage.
    You could not be turned away because of illness or pre-existing conditions.

   The federal public health insurance program would be similar to the health care
    program for federal employees.

   Participating insurers to offer benefits similar to those in the new public plan.
       Overall Republican Plan

   Republicans focus on tax incentives to encourage Americans to obtain
    coverage and avoid new or expanding government programs.

   Republicans want to avoid federal regulation that would tell insurers whom
    they have to cover and how much they may charge.

   Their Achilles' heel is the dependence on the private market, which often
    rejects applicants with health problems – they do not support univeral
    health care coverage.

   The self-employed and others seeking individual coverage would be subject
    to a marketplace in which insurers generally pick the healthiest applicants.

   Federal tax breaks don’t solve the problem people in less than perfect
    health have finding coverage.
    Mitt Romney - Republican

   Wants expansion of Health Savings Accounts, allowing tax-free savings for
    medical expenses, if you buy a high-deductible plan to be used for catastrophic
    medical situations.

   Encourages states to develop market based health care programs.

   Opposed to a national version of the plan he supported for Massachusetts while
    Governor, which requires all to have insurance.

   Would extend coverage to all Americans through the power of the market, not
    through taxes or government reforms.

   Calls for tax deductions allowing individuals to deduct out-of-pocket expenses
    and costs for insurance not provided by an employer.

   Wants states to individually reform health care by expanding and deregulating
    their own marketplaces.
Mike Huckabee - Republican

   Believes the health care system in the US is irrevocably broken.

   Advocates market-based health care, making private insurance affordable
    through tax deductions and cost control measures.

   A strong advocate of preventive care (he lost over 100 pounds), proposes
    overhaul of system with input from private sector, providers, & Congress.

   Supports move to a consumer-based, not employer-based, system, as well
    as make health insurance more portable from one job to the next.

   Proposes insurance tax deductions - credits for low-income families.

   Use the states as labs for new market-based strategies and a complete
    reform of medical liability.

   Broaden HSA to include more than just accounts with high deductible limits.
    John McCain - Republican

   Has pledged affordable care for every American without a Federal mandate.
    Insurance policies would be portable, following the individual, not the job.

   Believes that controlling costs is the key to making care affordable, saving
    Medicare and Medicaid, and protecting health benefits for retirees.

   3 primary goals: paying only for quality care, offering diverse insurance choices,
    and restoring a sense of personal responsibility.

   He believes individuals should have a variety of plans to choose from and would
    offer tax credits and HSAs to help pay for them.

   Tax credit of $2,500 ($5,000 for families) to anyone who buys insurance.

   Favors allowing safe prescription drugs to be imported and more generic drugs
    to be on the market to control drug costs.
    Issues for Health Care Improvement
           Lack of Accountability For Public Funds
   Problems of uninsured population are ill-served when public dollars are
    spent on unneeded or non-existent medical equipment under Medicare

   Largest area for fraud is the southern district of Florida. Feds visited
    companies that charged Medicare for prosthetics, costly AIDS drugs, air
    mattresses, etc. Only a few products were purchased/delivered to patients.

   Cash went into pockets of company operators - one purchased a Rolls
    Royce valued at $200,000. Many offices are little storage closets.

   Examples include a $2 million ankle brace for a patient whose foot had
    been amputated and payment of bills for a new hospital style bed, at the
    rate of one per month, for a single patient.

   Officials say that it’s easy to win a provider billing number from Medicare.

   Companies continued to bill $400,000 even after Health and Human
    Services’ inspector general determined that the businesses did not exist.
     Outpatient Treatment Centers and
         Physician Self-Referrals
   According to McKinsey Global Institute, a significant cost driver in health
    care system is found in the emergence of out-patient treatment centers.

   The treatments include ambulatory surgery centers, diagnostic imaging
    centers, drug rehab clinics, mental health clinics and non-physician offices.

   US spends 37% more than other countries - The practice of referring
    patients to facilities in which physicians have a financial interest has
    provided a significant loophole.

   Additional procedures are driven by financial incentives both to support the
    lease, purchase and operation of equipment and by the profitability of the
    procedures, the use of which depends on subjective clinical judgment.

   Using 2004 data from a CA insurer billed for advanced imaging, 33% of
    providers who submitted MRI bills and 22% who submitted CT scan bills
    were classified as “self-referral.”

   Among them, 61% who billed for MRI and 64% who billed for CT were
    involved in lease or payment-per-scan referral arrangements.
          Cost-Shifting To Health Plans
   When a WC carrier denies payment of claims, the injured party’s
    health insurance is responsible for payment.

   One of the worst ways that health care costs are elevated for plans
    takes place when WC carriers refuse to pay legitimate claims and
    direct the claimants to their health plans.

   If suit is filed, and the WC carrier settles, the carriers never inform
    the health plan and leave those funds unrecoverable.

   When a potentially liable third party, say WalMart, refuses to pay a
    claim by a customer claiming injury on the premises, who picks up
    the bill? Again, its the customer’s health insurance.

   As long as health insurance is viewed as the default payer of claims
    for every accident, the cost of health care will always be inflated.
    What Can Be Done? Plenty!
   Review & Revise plan language – specifically COB, exclusions and

   Be aggressive with recoveries from WC, auto carriers and responsible

   Better identify recovery/exclusion opportunities through focused claim
    review. What claims are you reviewing? Diag codes, dollar amounts?

   Understand State and Federal laws relating to Plan rights.

   Update your procedures and investigations – ask the right questions and
    obtain the correct info.

   Just because a liable third party denies responsibility, doesn’t mean you
    have to close your file and pay – you have rights.
New DOL Proposed Rules on Disclosing
        TPA Compensation
 Broker Fees Must Be Disclosed Separately From TPA Fees Upfront.

     TPAs who attended the SPBA 2007 Spring Meeting conveying
      concerns about hidden broker fees in the TPA's compensation to
      the DOL gave rise to a proposed rule from the DOL requiring
      broker commissions to be disclosed separately from TPA fees.

     If a broker requests the TPA to include their fee in the TPA fee
      and not list their portion independently, you can say that DOL
      regulations require the broker commission to be disclosed as a
      unique item.

     This provision is a part of a much broader rule on plan service
      provider fee disclosure to plan sponsors and was not designed to
      specifically target brokers of TPAs.

 The broker issue is buried in an exception to reporting aggregate
  plan service provider fees. The exception can be found at §
New DOL Proposed Rules on Disclosing
        TPA Compensation
   The DOL's Employee Benefits Security Administration (EBSA) proposed rule
    requires plan service providers (TPAs) to disclose compensation they will
    receive and any conflicts of interest in connection with services to the Plan.

   The new rule sets forth the items that must be in writing and disclosed to
    the Plan Fiduciary (i.e., plan sponsor) before the contract begins.

   Some TPAs already disclose compensation arrangements in contracts but
    others are not as explicit in disclosure as will be required under proposal.

   Any contracts that are based solely on a handshake or meeting of the
    minds will no longer be allowed.

   While this rule is proposed, the rule is clarifying an already existing
    regulation and courts may apply this proposal to existing contracts.
New DOL Proposed Rules on Disclosing
        TPA Compensation
   Motivation for the Proposal - DOL recognizes that the increasing
    complexity in the way service providers are compensated makes it
    challenging for plan sponsors to understand what the plan actually
    pays for specific services and whether compensation arrangements
    pose any potential conflicts of interest.

   The goal of the proposal is to provide comprehensive and useful
    information to plan sponsors when entering service contracts.

   This is not a new concept or change of policy. This was the intent
    of ERISA from the start.

   This issue will be discussed further at the SPBA Spring Meeting in
    April 2008.
    Contact Info – Adam V. Russo, Esq.

 The Phia Group
Phone: 781-535-5678

 The Law Offices of Russo & Minchoff
Phone: 781-535-5660

   Visit my blog at for articles,
    news, and current issues affecting the self-insured