PA 08-181—sHB 5157
Insurance and Real Estate Committee
AN ACT CONCERNING THE MARKETING OF MEDICAL DISCOUNT PLANS, THE ISSUING OF SMALL EMPLOYER PLANS AND ARRANGEMENTS BY THE COMPTROLLER AND ASSOCIATION GROUPS, AND AN OFFSET OF THE ANNUAL STANDARD PREMIUM REQUIRED OF WORKERS' COMPENSATION SELF-INSURANCE GROUPS
SUMMARY: This act explicitly permits a licensed medical discount plan organization (MDPO) to market plans directly or through a marketer with which it has a written agreement. Prior law implied this. The act includes operating restrictions for marketers and requirements for MDPOs. It permits the insurance commissioner to (1) take specified actions against an MDPO if its marketer uses unapproved marketing material and (2) in the absence of a court order for financial restitution, order a person convicted of larceny for collecting membership fees without providing the promised benefits to pay restitution.
The act prohibits the insurance commissioner from requiring that a marketer obtain a license. It specifies that an MDPO that contracts with a marketer is bound by, and responsible for, the marketer's activities done on its behalf. It requires an MDPO to provide the commissioner a list of its Connecticut marketers operating under a different name from its own and to update the list as necessary. By law, anyone who violates the MDPO law is subject to a fine of up to $2,000 ($3,000 effective October 1, 2008 (PA 08-178, § 52)).
This act permits health insurers to issue “specified disease” policies in Connecticut; prohibits group or individual health insurance plans from coordinating benefits with these policies; and requires the insurance commissioner to adopt regulations by January 1, 2009 to establish minimum standards for group policies. Prior law prohibited insurers from issuing specified disease policies, except as the commissioner allowed in regulations adopted to establish minimum policy standards, or as provided for in statute. (Regulations are in effect for individual policies (Conn. Agencies Regs. § 38a-505-13). )
The act lowers, from 10,000 to 3,000, the number of people needed to be covered in order to exempt small employer groups purchasing health insurance through the Municipal Employer Health Insurance Plan (MEHIP) or an association group plan from the existing small employer rating law and adds additional requirements for an association to avail itself of this option. It requires the 3,000 people to be employees. Prior law required them to be eligible individuals, which presumably included employees and dependents.
The act permits a proposed workers' compensation self-insurance group to offset or reduce its annual standard premium, which the law requires to be at least $1 million, by depositing equivalent liquid assets in an interest-bearing claims reserve account set up in the group's name. It prohibits the group from pledging, hypothecating (e. g. , using as collateral), or otherwise encumbering its assets to secure debt, guaranty, or obligations.
The act also makes technical and conforming changes.
EFFECTIVE DATE: October 1, 2008, except for the provisions regarding specified disease policies, which are effective upon passage.
MEDICAL DISCOUNT PLAN ORGANIZATION (MDPO)
By law, an “MDPO” is an entity that establishes a medical discount plan, contracts with providers or other MDPOs to provide discounted health care services to members, and sets the membership fee. Connecticut-licensed health insurers, HMOs, hospital or service corporations, and fraternal benefit societies, or their affiliates, are not MDPOs, but can offer medical discount plans.
The act defines “marketer” as a person that markets, advertises, or sells a medical discount plan, including an entity that markets, advertises, or sells such a plan under its own name.
Written Agreement with Marketer Required
The act permits an MDPO to market plans directly or to contract with marketers. Before a marketer can conduct business on an MDPO's behalf, an MDPO must (1) have a written agreement with the marketer and (2) add the marketer to its list of authorized marketers on file with the commissioner. The act requires that the written agreement between an MDPO and a marketer prohibit the marketer from using any advertising and marketing material, including brochures and plan identification cards, without the MDPO's prior written approval.
It specifies that an MDPO that contracts with a marketer is bound by, and responsible for, the marketer's activities done on its behalf within the scope of the contractual relationship. It requires an MDPO to cooperate in any investigation of a contracted marketer as the commissioner orders.
List of Authorized Marketers
The act requires an MDPO to provide the commissioner a list of its Connecticut marketers operating under a different name from its own. The list must include the marketers' names, addresses, and telephone numbers. The MDPO must submit the list (1) with its license application, (2) with each license renewal fee, and (3) electronically when the list changes. A marketer cannot begin working on behalf of an MDPO until the MDPO gives the commissioner the marketer's information. The act authorizes the commissioner to adopt regulations establishing an electronic filing and acknowledgement process for this purpose.
Advertising and Marketing Material
By law, medical discount plan advertising and marketing material, among other things, must (1) use plain language that does not lead to a misleading, deceptive, or fraudulent representation of the discounts; (2) provide a clear and conspicuous disclosure that the plan is not insurance; and (3) generally not use the following terms: insurance, health plan, coverage, copay, copayments, preexisting conditions, guaranteed issue, premium, PPO, preferred provider organization, or any other term that could lead a person to believe the plan is insurance.
The act permits the commissioner to order an MDPO to (1) immediately remove from its list of authorized marketers a marketer that violates these requirements and (2) refund membership fees paid by state residents harmed by the violation. When the commissioner is investigating a marketer's alleged violation, the act requires MDPOs to make available to him, upon request, a copy of its contract with the marketer and the marketer's advertising and marketing material.
The act prohibits a marketer from marketing, advertising, or selling to Connecticut residents under a name that is different from the MDPO's name unless (1) the MDPO has a license to operate from the insurance commissioner; (2) the MDPO includes the marketer on its list of authorized marketers and electronically filed an updated list with the commissioner; (3) the MDPO's name, address, and telephone number appear on plan material; and (4) the marketer does not contract directly with providers or provider networks.
The act prohibits a marketer from marketing, advertising, or selling on an MDPO's behalf after the MDPO's license has been surrendered, not renewed, or revoked.
Restitution when Convicted of Larceny
By law, anyone who collects medical discount plan membership fees but fails to provide the promised benefits is guilty of larceny. The act authorizes the commissioner, in the absence of a court order for financial restitution, to order a person convicted of larceny for the above reason to reimburse membership fees collected from state residents harmed by the offense.
COORDINATING BENEFITS WITH SPECIFIED DISEASE POLICIES PROHIBITED
Prior law allowed health insurance plans to coordinate benefit payments when two or more plans covered the medical expenses a person incurred. The act prohibits a group or individual health insurance plan from coordinating benefits, or otherwise reducing benefit payments, because a person covered under its terms is also covered by or receiving benefits from a group specified disease policy that was delivered, issued, renewed, amended, or continued in Connecticut. Thus, under the act, if a person is covered under both a group specified disease policy and another health insurance plan, each plan must adjudicate claims and pay benefits without considering what the other policy is paying.
An insurance policy's coordination of benefits provision (COB) is designed to avoid duplicate claim payments so that a person's benefits from all coverage sources do not exceed 100% of the person's incurred medical expense. For a person covered under more than one health plan, COB establishes the order, manner, and extent to which the plans will pay claims for benefits covered under each.
SMALL EMPLOYER RATING EXEMPTION
The act lowers, from 10,000 to 3,000, the number of people needed to be covered in order to exempt small employer groups purchasing health insurance through MEHIP or an association group plan from the existing small employer rating law, which requires adjusted community rating, at the comptroller's or association group plan administrator's option, under certain circumstances. The MEHIP or association plans offered or issued must cover small employer groups as a single group and insure at least 3,000 employees; each small employer must be offered the same premium rates for each employee and dependent (i. e. , rated using a pure community rating methodology); and the plans must be written on a guaranteed issue basis.
The act also requires such an association to be a bona fide group as set forth in the federal Employee Retirement and Security Act (ERISA). And it cannot (1) be a fictitious grouping (a grouping for rating purposes where a rate differentiation is based solely upon group membership) or (2) issue a plan that causes undue disruption in the insurance marketplace, as determined by the commissioner.
Medical Discount Plan
A medical discount plan is an arrangement or contract that allows people who pay a membership fee access to discounted health care services. It does not include a product (1) already subject to regulation or approval by the insurance commissioner or (2) that costs less than $25 annually.
The law prohibits marketing, advertising, or selling medical discount plans or using plan materials that do not:
1. provide a clear and conspicuous disclosure that the plan is not insurance;
2. include the plan administrator's name, address, and telephone number;
3. have a toll-free telephone number through which a member can obtain a complete and accurate list of the local participating providers and applicable discounted services;
4. promise that a printed copy of the provider list, which must be updated at least once every six months, is available upon request;
5. use plain language that is not misleading, deceptive, or fraudulent;
6. provide notice of the consumer's right to cancel the plan within 30 days of the discount health plan's receipt of membership fees for a full refund minus a reasonable processing fee; and
7. guarantee the refund within 30 days of receiving a member's timely cancellation.
The plan or plan material cannot use any term that could lead a person to believe the plan is insurance, except in a disclaimer that the plan is not insurance. It can offer only discounted health care services or products that a provider agreement authorizes.
The MDPO must issue at least one member discount card to each member and provide the names of the networks to members upon request.
Each MDPO must (1) give the commissioner at least 30 days advance written notice if it changes its name or address, (2) maintain an up-to-date list of its participating providers' names and addresses on an Internet website, and (3) include its website address prominently on all plan material.
Related Act – Penalty for Illegal MDPO
PA 08-178 (§ 51), effective October 1, 2008, increases the maximum fine, from $10,000 to $15,000, for a person who knowingly (1) operates as an MDPO in violation of the law or (2) aides or abets someone who he or she knew, or reasonably should have known, was operating as an MDPO illegally.
Small Employer Rating Law
Connecticut law requires insurers and HMOs to use an adjusted community rating process when developing premium rates for small employer groups. Community rating is the process of developing a uniform rate for all. An “adjusted” community rate is a rate the insurer or HMO develops by modifying the community rate by one or more classifications the law permits.
The law allows a small employer group's rates to be adjusted to reflect the group's demographics (age, gender, size, family composition, location, and industry) and the administrative cost and profit reduction savings resulting from administering or writing an association or MEHIP group plan.
MEHIP is a health insurance program that the Comptroller is authorized to sponsor. The legislature has expanded MEHIP eligibility over the years to include (1) certain nonprofit corporations, (2) community action agencies, (3) small employers, and (4) certain eligible individuals, including members of an association for personal care assistants and people eligible for a (a) federal health coverage tax credit or (b) retirement benefit from the Connecticut municipal employees' retirement system (CGS § 5-259(i)).
ERISA and Bona Fide Group
ERISA does not define a bona fide group. Rather, it defines “employee welfare benefit plan,” which includes “any plan…established or maintained by an employer…for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise…medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment…. ” ERISA defines “employer” as including “a group or association of employers acting for an employer…. (29 USCA § 1002). ”
The U. S. Department of Labor (DOL), the agency authorized to interpret and enforce ERISA, has used these definitions to determine, and explain in opinion letters, whether particular organizations or associations are bona fide groups for ERISA purposes. These administrative interpretations carry the force of law (Marcella v. Capital Dist. Physicians Health Plan, Inc. , 293 F. 3d 42, 49 (2d Cir. 2002) (finding that a group or association that contains non-employers cannot be an “employer” within the meaning of ERISA)).
The DOL has taken the view that a single “employee welfare benefit plan” may exist where a cognizable, bona fide group or association of employers acts in the interests of its employer members to establish a benefit program for the members' employees (Advisory Op. 94-07A and 2001-04A).
It has stated that whether there is a bona fide employer group or association must be determined based on the facts and circumstances involved, including how members are solicited; who is entitled to, and actually does, participate in the association; how and why the association was formed and what, if any, were the preexisting relationships of its members; the powers, rights, and privileges of employer members; and who actually controls and directs the benefit program. The employers that participate in a benefit program must, either directly or indirectly, exercise control over the program in order to act as a bona fide employer group or association with respect to the program (Advisory Op. 2005-25A).
Workers' Compensation Self-Insurance Group
Connecticut law permits private employers engaged in the same or similar types of businesses to establish workers' compensation self-insurance groups. The law defines a self-insurance group as a not-for-profit association consisting of 15 or more employers who enter into agreements to pool their liability for workers' compensation benefits and employers' liability claims. The employers must be members of the same bona fide trade or professional association and the association must have been in existence for at least five years (CGS §§ 38a-1000 to 38a-1023).
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