Health insurance law covers a broad range of legal issues. In our final module, we’ll discuss several special topics that involve policy holders, health insurers, employers and government agencies. These special topics include how group health insurance operates, coordination of health insurance benefits when more than one policy covers a single person, subrogation, COBRA and the rise and legality of wellness programs.
Group Health Insurance Coverage
Group health insurance coverage refers to a single policy purchased by an employer and issued to a group that covers all eligible employees and their dependents. These are also known as employer-sponsored or job-based health insurance plans.
Most Americans who are covered by health insurance have group coverage through their own employers or those of their family members. Group plans offer advantages to both employees and employers. The first advantage for employees is that their employer contributes towards the cost of the premiums (or, in some cases, pays the whole premium). Second, the premiums can often be paid with pre-tax money. If the same funds were paid to the employee as salary, it would be subject to payroll and income taxes.[1]
Let’s also look at employer advantages. First, a group health insurance plan helps attract and retain employee talent. In one survey, 80 percent of respondents said that a comprehensive benefits package is one of the primary influencers on their decisions to stay at companies. In fact, “four out of five companies surveyed by MetLife said that employee retention is one of their top goals when offering health insurance.”[2] Tax advantages also help the employer. Expenses that employers incur related to health insurance are tax-deductible as ordinary business expenses on both the state and federal levels. Additionally, the Affordable Care Act grants small employers- that is, employers with fewer than 25 full-time employees[3] -tax credits which can reduce the employer’s tax liability dollar-for-dollar.[4]
Coordination of Health Insurance Benefits
People can sometimes be covered by more than one plan at the same time. For instance, an adult child may be covered under his parents’ plan and have health insurance through his employer. Alternatively, an employee may enroll in his employer’s health plan while also enrolled under a spouse’s plan.[5]
If two insurance policies cover the same person, concurrent coverage exists and the two health insurers providing the two policies are coinsurers.[6] A person covered by coinsurers may receive claims payouts and payment under both plans in a process known as “coordination of benefits.”[7]
Policies typically include coordination of benefits clauses that establish that the total paid for medical and hospital care will not exceed the benefits receivable from all combined sources of insurance.[8] Thus, benefits will be paid by an insurance company only for amounts that are not already covered by a second health insurer to ensure that benefits from all eligible sources will not exceed 100 percent of the medical expenses. Additionally, this clause prevents the insured from profiting from duplicate health care coverage, referred to as “double dipping.”
Certain guidelines recommended by the National Association of Health Insurance Commissioners (which have become law in several states) determine which health insurer is the primary payer and which is secondary when a person is covered by two plans. Designating a health insurer as the primary or secondary payer establishes the order a medical provider will bill each health insurer.[9] The insurer designated as the secondary payer pays any unpaid balance after the deductible and primary payments are made.
In some states, the prevailing law is the “dependent/nondependent rule” where the health insurer that covers the patient as an employee is the primary payer, while a health insurance plan that covers the patient as a dependent of another person is a secondary payer. Other states follow the “birthday rule,” which applies to dependent children who may be covered by plans of multiple parents.[10] Here, the primary health insurance plan for the child is that of the parent whose birthday falls first in the calendar year.
A federal law, called the Medicare Secondary Payer Act of 1980, applies to people covered both by private plans and Medicare. This law makes Medicare the secondary payer for a Medicare beneficiary who has selected his other health insurance plan as the primary payer.[11]
Subrogation and Health Insurance
Imagine you’re in a grocery store and you injure your back after slipping on a wet floor. You visit a doctor who provides medical care and treatment. Since the accident wasn’t your fault, your health insurance provider will contact the store’s insurance company to get it to help pay for your care. The process of getting the store’s health insurance company to pay for your care is called subrogation.
Subrogation describes those situations in which the insurance company acquires rights of the insured with respect to a legal remedy against the party that caused the injury.[12] Subrogation allows the subrogee (the health insurer) to step into the shoes of the subrogor (the insured) to recover from the party that is primarily liable for the subrogor’s injuries.[13]
Subrogation has several effects. First, it lowers health insurance premiums because premium rates are set based on historical net costs. By transferring the costs to the party who caused the injury, the insurance company can charge lower premiums to those it insures.[14] Second, subrogation prevents “double recovery.”[15] Without it, an insured person could recover once from the tortfeasor and once from her own health insurer. This would result in an unfair windfall to the injured party.
Almost every health insurance policy includes a subrogation clause, so it’s rare for a person to enter a relationship with an insurer without agreeing to subrogation.[16] Despite the prevalence of subrogation, some states limit the amount that health insurance companies can collect from the parties liable for the insured’s injury. For example, Texas law limits the amount a health insurance company can collect to half of the claimant’s total recovery in a subrogation action.[17]
COBRA
When a person leaves a job, the question of how to access health insurance often arises. A group health insurance policy typically provides that termination of employment causes the employee’s coverage to terminate either immediately or after the expiration of a given time.
However, the Consolidated Omnibus Budget Reconciliation Act of 1985, known as COBRA, allows employees and dependents to temporarily keep their health coverages after employment ends or if another qualifying event takes place.[18] COBRA “applies to private-sector group health plans maintained by employers that have at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. Both full- and part-time employees are counted to determine whether a plan is subject to COBRA.”[19]
A person and his dependents are eligible for COBRA coverage if a group health insurance plan covered him the day before the qualifying event occurred. Most people can keep COBRA coverage for up to 18 months,[20] and sometimes, they may be able to extend it, depending on the qualifying event.[21] Examples of qualifying events include employment termination, reduction of hours, divorce and death.[22]
COBRA is designed to be a temporary solution, as it’s an expensive option relative to the cost of a standard health insurance plan.[23] It’s expensive because the premium for COBRA coverage equals the full cost of the person’s group health coverage, including the employer and employee share, plus up to two percent to cover administrative costs.
Employees fired for gross misconduct are not entitled to COBRA benefits.[24] Still, mere “negligence or incompetence” does not rise to the level of gross misconduct. One federal court in Massachusetts considered whether a former university professor committed gross misconduct. The former professor was convicted of student aid fraud and providing fraudulent credentials to obtain employment. Here, the conduct was outrageous and extreme enough to constitute gross misconduct and his eligibility for COBRA was denied.[25]
Health Care Fraud
Healthcare fraud, or health insurance fraud, is a catchall term that criminalizes several illegal acts. It’s committed when a dishonest insurer or insured person intentionally submits false or misleading information for use in determining the amount of healthcare benefits payable.
Some examples of health care fraud committed by an insurer are:[26]
- “billing for services not actually performed;”
- “falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary;” and
- “billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.”
Examples of healthcare fraud also include filing claims for services or medications not received or using another’s coverage or insurance card. State and federal laws criminalize this illegal activity. Under the federal healthcare fraud statute, a person who “knowingly and willfully executes” a healthcare fraud can face up to ten years in prison, and if the violation results in a death, the fraud can carry a sentence of life imprisonment.[27]
Wellness Programs
The integration of wellness programs into health insurance plans is a modern trend in health insurance law. In the last few years, the number of employers adopting workplace wellness programs has risen dramatically due to two reasons. The first is that there are regulatory incentives for such programs. The second is that wellness programs and preventive medicine can stem the increasing costs of health insurance.
The term “wellness program” broadly encompasses numerous types of services and activities that an employer offers to promote health or prevent disease. These typically include “health risk assessments, biometric screenings, disease management programs, weight loss programs, gym membership discounts, smoking cessation programs, nutrition classes and web-based resources for healthy living.”[28] One 2015 survey found that 81 percent of employers with 200 or more employees offered programs that help employees stop smoking, lose weight or make other behavioral changes.[29]
The Affordable Care Act divides wellness programs into two categories: health-contingent and participatory. A health-contingent program provides a reward or conditions obtaining a reward on the satisfaction of a standard related to a health factor. For example, a program may reimburse the cost of a gym membership if the insured goes to the gym an average of at least 3 times per week or continues to cover a weight loss program if the insured loses weight pursuant to provided benchmarks. A participatory program covers the benefit without regard to achievements or conditions.[30]
Alongside the national rise of wellness programs, several questions have emerged regarding the compatibility of a wellness program with existing federal laws. For example, Title I of the Americans with Disabilities Act prohibits an employer from denying an employee access to a wellness program based on disability.[31] This law also generally restricts an employer from obtaining medical information from employees but allows the employer to inquire about an employee’s health or conduct medical examinations that are part of a voluntary employee wellness program. Moreover, the Equal Employment Opportunity Commission implemented a rule that allows employers to impose incentives or penalties of up to 30 percent of the cost of an employee’s coverage to encourage the employee to disclose ADA-protected information.[32]
A second pertinent law, the Genetic Information Nondiscrimination Act, prohibits an employer from discriminating against any employee with respect to employment privileges based on “genetic information,” which includes family medical history. An employer may not reward an employee for providing such genetic information when participating in a voluntary wellness program.[33] Like the ADA rule though, the EEOC implemented a similar rule allowing an employer to impose a 30 percent incentive or penalty based on disclosure of certain genetic information.
Two years after these rules were first published, the AARP filed suit seeking a ruling that the regulations were invalid because the wellness programs weren’t “voluntary.” It argued that a 30 percent incentive or penalty rendered an employee’s disclosure of protected information involuntary, in that employees who could not afford to pay such amounts would effectively be forced to provide the information.[34] The reviewing court agreed and vacated the EEOC’s regulations on wellness programs, holding that the EEOC must clarify the term “voluntary” starting in 2019. Though the ruling didn’t impact wellness programs providing gym memberships or smoking cessation classes to employees, it did call into question the viability of wellness programs that involve biometric screenings, family medical history questions or genetic information tests.[35]
[1] “Consumer Guide to Group Health Insurance,” National Association of Health Underwriters, (Sept. 1, 2017),https://nahu.org/looking-for-an-agent/helpful-guides/consumer-guide-to-group-health-insurance.
[2] Lauren Fifield, “Top 5 Reasons to Consider Group Health Insurance,” GUSTO, https://gusto.com/framework/health-benefits/top-5-reasons-to-consider-group-health-insurance/ (last visited Aug. 16, 2018).
[3] “Small Business Health Care Tax Credit and the SHOP Marketplace,” Internal Revenue Service, https://www.irs.gov/affordable-care-act/employers/small-business-health-care-tax-credit-and-the-shop-marketplace(last visited Aug. 16, 2018).
[4] “Briefing Book,” Tax Policy Center, https://www.taxpolicycenter.org/briefing-book/whats-difference-between-tax-deductions-and-tax-credits (last visited Aug. 16, 2018).
[5] Amy Danise, “Primary vs. Secondary Coverage When You Have Two Health Plans,” Insure.com, (June 17, 2014), https://www.insure.com/health-insurance/primary-health-plans.html.
[6] 44A Am. Jur. 2d Insurance § 1750.
[7] Bobbie Sage, “Coordination of Benefits: Using Two Health Plans to Your Advantage,” The Balance, (Aug. 15, 2018), https://www.thebalance.com/coordination-of-benefits-2645754.
[8] Black’s Law Dictionary (10th ed. 2014).
[9] “Dual Coverage,” Lifetime Healthcare Companies, https://www.excellusbcbs.com/download/files/cob (last visited Aug. 16, 2018).
[10] “What’s the Birthday Rule All About?,” 360 Degrees of Financial Literacy, https://www.360financialliteracy.org/Life-Stages/Couples/What-s-the-birthday-rule-all-about (last visited Aug. 16, 2018).
[11] “Medicare Secondary Payer,” Centers for Medicare & Medicaid Services, https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html (last visited Aug. 16, 2018).
[12] Brendan Maher & Radha A.Pathak, “Understanding and ProblematizingContractual Tort Subrogation”, 40 Loy. U. Chi. L.J. 49, 50 (2008).
[13] 44A Am. Jur. 2d Insurance § 1771.
[14] Gary L. Wickert, “The Societal Benefits of Subrogation,” SelfFunding Magazine, (Aug. 6, 2010),https://www.selffundingmagazine.com/article/the-societal-benefits-of-subrogation-.html.
[15] Id.; Jeffrey M. Baill, “Confessions of an Insurance Subrogation Attorney,” Property Casualty 360, (Nov. 22, 2013), https://www.propertycasualty360.com/2013/11/22/confessions-of-an-insurance-subrogation-attorney/?slreturn=20180701132103.
[16] Brendan S. Maher & Radha A.Pathak, “Understanding and ProblematizingContractual Tort Subrogation”, 40 Loy. U. Chi. L.J. 49, 85 (2008).
[17] Cal.Civ. Prac. & Rem. Code § 140.005.
[18] “COBRA,” HealthCare.gov, https://www.healthcare.gov/glossary/cobra/ (last visited Aug. 16, 2018).
[19] “An Employer’s Guide to Group Health Continuation Coverage Under COBRA,” Employee Benefits Security Admin., U.S. Dep’t. Labor, https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/publications/an-employers-guide-to-group-health-continuation-coverage-under-cobra.pdf (last visited Aug. 16, 2018).
[20] Brooke Tomlinson, “Chapter 3: Weakening the Sting of COBRA’s Bite”, 41 McGeorge L. Rev. 655, 657 (2010).
[21] “COBRA: Keeping Health Insurance After Leaving Your Job,” American Cancer Society, https://www.cancer.org/treatment/finding-and-paying-for-treatment/understanding-health-insurance/health-insurance-laws/what-is-cobra.html.
[22] “What Qualifying Events Trigger COBRA?,” UBA Compliance Advisor, https://www.lhdbenefits.com/wp-content/uploads/2017/06/What-Qualifying-Events-Trigger-COBRA-Print-5-31-17-1.pdf(last visited Aug. 16, 2018).
[23] Christopher Deubert, I. GlennCohen, & Holly F. Lynch, “ComparingHealth-Related Policies and Practices in Sports: The NFL and Other ProfessionalLeagues,” 2017 Harv. J. of Sports & Ent. Law 1 (2017).
[24] 29 U.S.C. §1163(2).
[25] Moore v. Williams Coll., 702 F.Supp.2d 19, 25 (D. Mass. 2010), aff’d, 414 F. App’x 307.
[26] “Health Care Fraud,” Cigna, https://www.cigna.com/reportfraud/ (last visited Aug. 16, 2018).
[27] 18 U.S.C. § 1347.
[28] Erica Che, “Workplace Wellness Programs and the Interplay Between the ADA’sProhibition on Disability-Related Inquiries and Insurance Safe Harbor”, 2017 Colum. Bus. L. Rev. 280 (2017).
[29] “2015 Employer Health Benefits Survey,” Henry J. Kaiser Family Foundation, (Sept. 22, 2015), http://kff.org/report-section/ehbs-2015-summary-of-findings/.
[30] “Health-Contingent Wellness Programs,” United Healthcare, https://www.uhc.com/content/dam/uhcdotcom/en/HealthReform/PDF/Provisions/WellnessHealthContingentPrograms.pdf (last visited Aug. 16, 2018).
[31] “EEOC’s Final Rule on Employer Wellness Programs and Title I of the Americans With Disabilities Act,” U.S. Equal Employment Opportunity Commission, https://www.eeoc.gov/laws/regulations/qanda-ada-wellness-final-rule.cfm(last visited Aug. 16, 2018).
[32] Jonathan E. O’Connell, “EEOC Wellness Regulations Vacated Effective Jan. 1, 2019,” Society for Huan Resource Management,” (Jan. 16, 2018), https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/court-report-eeoc-wellness-regulations-vacated.aspx.
[33] “Guide for Designing a Compliant Wellness Program,” Gallagher Benefit Services, Inc., (Jan. 2018), https://www.ajg.com/media/1274703/designing-a-compliant-wellness-program.pdf.
[34] Al Lewis, “Views Surprising Court Decision May Disallow Most Wellness Incentives,” Employee Benefits News, (Jan. 3, 2018), https://www.benefitnews.com/opinion/surprising-court-decision-may-outlaw-most-wellness-incentives
[35] Emily D. Zimmer & Lynne S. Wakefield, “Back to the Drawing Board: Employer Wellness Program Uncertainty in Light of AARP v. EEOC,” K&L Gates (Jan. 16, 2018), http://www.klgates.com/back-to-the-drawing-board-employer-wellness-prgram-uncertainty-in-light-of-aarp-v-eeoc-01-16-2018/.