An interesting practice by some of insurance industry members came to the attention of our office. Affordable Care Act (also known as “Obamacare”) includes a provision, under § 1341 (see pp. 226-227), which mandates “insurance issuers, and third party administrators” to pay fees for a project called Transitional Reinsurance Program. The fee is determined by the Department of Health and Human Services and is set to be $63 for 2014. See 78 Fed. Reg. 15,410, 15460 (March 11, 2013). While Congress specified the parties who pay the transitional reinsurance fee – insurance issuers, and third party administrators – the ambiguity still remains as to whether the insurance issuers, and third party administrators can shift that fee on others (as opposed to coming up with the funds from their own corporate coffers and bringing less value to their shareholders). A letter addressed by one such member of insurance business community suggests that fee shifting is an option. Below is a partial reproduction of the letter (with specific identities being redacted):
2014 Affordable Care Act (ACA) Fee Notice
Dear Jane Doe,
As part of the Affordable Care Act (ACA) new fees will impact you beginning January 1, 2014. These new fees are ACA mandated and will impact all medical plans in the United States. The new ACA fees will be deducted from your paycheck starting with your first check date in January 2014. These cost increases are statutory changes and do not create a Qualifying Event. Therefore, you will not be able to change your Health Plan elections as a result of the additional fees.
What can you do if you, as an individual policyholder, have received a similar notice that forces you to fund the Transitional Reinsurance Program out of your own pocket? Perhaps, you can disagree. The disagreement may focus on the language spoken by Congress and voiced to insurance issuers, and third party administrators or your employer who agrees with them.
The Fee Notice language is problematic as it affects substantive rights of healthcare recipients as an individual beneficiaries. Department of Health and Human Services will collect contributions from health insurance issuers and self-insured group health plans, not the individual policy holders. See 77 Fed. Reg. 73,118, 73,149 (Dec. 7, 2012). The goal of Affordable Care Act is to decrease cost of health insurance on individuals and to keep “insurance companies honest by setting clear rules that rein in the worst insurance industry abuses.” See Quality, Affordable Health Care for All Americans published by U.S. Dept. of Health and Human Services. The Fee Notice circumvents goals set forth by the Congress and the President because it results in unjustified increase in out-of-pocket healthcare payments. Cited transitional reinsurance fee justification is not valid because Congress directed the fee to “health insurance issuers, and third party administrators.” Fee Notice further circumvents the legislative mandate by requiring to pay fees that Congress specifically established only for “health insurance issuers, and third party administrators.” ACA § 1341(b)(A). Congress did not establish “insurance issuers and third party administrators” as nominal sponsors for the Transitional Reinsurance Program, where these entities simply collect payments from individual beneficiaries and forward them to the Government. Congress clearly makes “insurance issuers and third party administrators” the real payees and sponsors of the Transitional Reinsurance Program pursuant to ACA § 1341.
Besides disagreeing with insurance issuers, and third party administrators or your employer directly, one may ask for the opinion from the competent authorities. Once such authority is the HHS Office of Inspector General (P.O. Box 23489, Washington, DC 20026-3489) and for those living in the New York City area, the United States Attorney’s Office (Southern District of New York, Civil Division’s Civil Frauds Unit, One St. Andrew’s Plaza, New York, NY 10007). These are federal authorities who oversee the healthcare administration and inquire about federal violations such as federal laws governing healthcare fraud (e.g. 18 U.S.C. § 1347), as well as false statements relating to healthcare matters (e.g. 18 U.S.C. § 1035). These authorities may have an interest in voicing their opinion because President Obama made “the elimination of fraud, waste and abuse a top priority in his administration.” New York City area residents may also wish to have opinion of New York City Department of Consumer Affairs (Consumer Services Division, 42 Broadway, 9th Floor, New York, NY 10004) in light of New York’s broad public nuisance laws and various codes administered by the department. New York State takes an extremely broad view of what constitutes a public nuisance: “It consists of conduct or omissions which offend, interfere with or cause damage to the public in the exercise of rights common to all, in a manner such as to offend public morals, interfere with the use by the public of a public place or endanger or injure the property, health, safety or comfort of a considerable number of persons.” City of New York v. Smart, 39 Misc.3d 221 (2013), citing Copart Indus., v Consolidated Edison Co. of N.Y., 41 NY2d 564, 568 (1977). Liability under city, state, and federal laws may rest upon trier of fact finding that the Fee Notice attempts to evade Transitional Reinsurance Program payment responsibilities by requiring individuals to finance the Transitional Reinsurance Program out of their own pockets. It is irrelevant if such evasion is in whole or in part, direct or indirect; the law is clear: Affordable Care Act § 1341 requires insurance issuers and third party administrators – not the individual beneficiaries – to finance the Transitional Reinsurance Program. Trier of fact may also establish that letters such as Fee Notice, that are distributed by means of the U.S. Postal Service, contain information that would lead reasonably prudent person to believe Fee Notice claim that financing of Transitional Reinsurance Program is the responsibility of the individual policy holders, rather than “insurance issuers and third party administrators.”