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Two
new laws affecting health care coverage for dependent students: SB 1168
and HR 2851
On September 27, 2008 the State of California passed legislation requiring health plans providing coverage for a dependent child over age 18 and enrolled at a secondary or postsecondary educational institution to extend coverage if the child takes a medical leave of absence. Amending California legislation §1373 of the Health & Safety Code, and §10277 and §10278 of the Insurance Code, the new legislation
(SB
1168) follows the precedent set in New Hampshire to extend coverage to students suffering from a severe illness or injury. This law went into effect on January 1, 2009.
A similar federal law (HR
2851) was passed on October 9, 2008. Known as “Michelle’s Law,” it is named after Michelle Morse, a New Hampshire college student who was diagnosed with cancer but maintained a full course load so she could stay on her parents’ health insurance.
The federal law will become effective at renewal for plan years beginning after October 9, 2009, amending the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code.
About SB 1168 and HR 2851
SB 1168 and Michelle’s Law outline the following provisions for health plans providing coverage for dependents over the age of 18:
- Continue coverage when a student takes a medical leave of absence from school for up to 12 months or until the coverage would have otherwise terminated under the terms of the policy, whichever comes first. Any break in the school calendar does not disqualify the dependent from this coverage.
- Obtain written certification by a treating physician stating that the leave of absence (or other change of enrollment) is medically necessary; and
- Include a description of the terms for a medically necessary leave of absence with any notice regarding a certification of student status for over-age dependents.
Covered Employers
An employer is required to comply with California’s SB 1168 if the company offers fully-insured health plan(s) sitused in California. The federal law, which will go into effect in October of this year, will apply to both fully-insured and self-insured health plans. Both SB 1168 and Michelle’s Law apply to all group health plans, regardless of size.
What Employers Need To Do
If student status verification is administered by the insurance carrier: Employers should be aware of the new legislation in order to answer questions from employees. Insurance carriers will administer the contracts according to the state and federal laws.
If student status verification is administered by the employer: Employers should ensure that the terms for a medical leave of absence are included with the student status verification notice. A physician certification should be kept on file when granting a medically necessary leave under SB 1168 or HR 2851.
Litigation
related to reimbursement for out-of-network medical services: UnitedHealth
Group and
Aetna
Reach Agreement with New York Attorney General
On
January 13, 2009, UnitedHealth Group announced it had reached an
agreement with New York Attorney General Andrew Cuomo regarding an
investigation into two database products used to determine
out-of-network reimbursements for certain health plan members. The
existing databases are operated by Ingenix, a UnitedHealth Group
subsidiary. Ingenix data is
used by a number of health plans and employers as tools to help
determine the amount to reimburse members who receive physician services
outside their managed care networks.
The
agreement commits UnitedHealth Group to pay $50 million to fund a
not-for-profit entity that will develop a new database to replace the
two in use today. When the new
database is ready, Ingenix will close the existing databases.
While the settlement is specifically with the State of New York,
the closure of the Ingenix databases and the creation of a new one will
impact all health plans in the country using Ingenix data.
Aetna
also relies on Ingenix
data for out-of-network reimbursement data and has announced they
reached a similar settlement.
Aetna
will pay $20 million to help fund the new database.
The $20 million from
Aetna
is in addition to the $50 million being paid by United.
Other Ingenix clients, including CIGNA and WellPoint, are likely
to reach similar settlements although the scope of any such settlements
remains unclear at this time.
The
long-term financial impact to the health insurance industry remains to
be seen. It is unclear what
these settlements will mean to other insurers that use their own
proprietary data rather than Ingenix data.
Historically, Ingenix reimbursement figures have been greater
than those developed by other insurers’ proprietary systems.
While members who receive services from out-of-network providers
may initially see their out-of-pocket costs decrease, insurers are
likely to pass their increased costs back on to employers in the form of
higher insurance premiums. The net
effect to the insurance industry may prove to be minimal if the funds
are also used to educate participants and promote the utilization of
network providers.
Neither
UnitedHealth Group nor
Aetna
has admitted any wrongdoing in their settlements.
UnitedHealth Group Settles Class Action Litigation
In
a separate statement on January 15, 2009, UnitedHealth Group announced
that it had reached an agreement to settle class action litigation
related to reimbursement for out-of-network medical services.
The agreement resolves class action litigation filed on behalf of
the American Medical Association (AMA), health plan members, health care
providers and state medical societies.
According
to the terms of the agreement, UnitedHealth Group will pay a total of
$350 million to fund a settlement for health plan members and
out-of-network providers in connection with out-of-network procedures
performed since March 15, 1994. Parties
eligible to participate in the fund will receive notice of the process
for submitting claims in a form approved by the court.
Funds will be distributed by a third-party administrator
according to a plan that is still subject to court approval.
The notices will provide contact information for the claims
administrator, which will be able to answer questions upon request.
Distribution under the terms of the agreement will not be handled
through UnitedHealth Group.
The Insight newsletter is not intended to provide legal advice but perspective on recent regulatory issues,
trends and standards affecting employee benefits. Please consult your own legal counsel for further information on the topics discussed in this issue of Insight.
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