The ruling came in a case in which the Office of the Insurance Commissioner had rejected plans of three trusts over price issues. Insurance Commissioner Mike Kreidler said he will not appeal the ruling.
Thousands of Washington’s small businesses can feel confident their health-insurance coverage is here to stay, thanks to a decision issued Wednesday by a judge with the Office of the Insurance Commissioner (OIC).
The decision affects plans sold through health-insurance trusts and associations that state Insurance Commissioner Mike Kreidler had rejected as unfairly and illegally priced. The judge ruled there were no state or federal laws to support Kreidler’s opinion.
People covered by these plans “should have peace of mind today,” said Jonathan Hensley, president of Capital Benefit Services, which manages the program for three trusts that brought the legal challenge.
The trusts provide insurance for 65,000 people and 1,600 businesses affiliated with the Master Builders Association of King and Snohomish Counties, Building Industry Association of Washington Health Insurance Trust and Northwest Marine Trade Association.
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The decision was issued by George Finkle, an OIC administrative-law judge.
“While I am disappointed with the ruling, I will not appeal it,” Kreidler said in a statement. “My office took action based on our interpretation of the federal Affordable Care Act. We believed that federal law required my office to disapprove rates that were not fair to individuals and employers.”
In Washington, most small businesses that cover their employees purchase insurance through associations and trusts, which historically have offered better prices than the open market.
Kreidler has accused these groups of “cherry-picking” the healthiest, cheapest-to-insure workers and driving out businesses with sicker employees. He claims that some of the plans also charge much higher rates for older employees and women.
“I remain deeply concerned about the impact of this ruling on how rates are set for small businesses within associations. My office will remain vigilant in its review of all health-care plans,” Kreidler said.
Representatives of associations and trusts reject Kreidler’s characterization of their field.
“If we were being unfair, why do 90-plus percent of companies renew with us? They have choice,” said Hensley. “It’s good when you have more options, and the competition is good.”
Twenty years ago, the Legislature passed laws allowing employers with 50 or fewer workers to buy “large group” insurance through associations and trusts. It meant they didn’t have to follow small-group rules and allowed price variation from employer to employer.
Now there are more than 60 association and trust plans in the state covering hundreds of thousands of workers.
After passage of the Affordable Care Act, the OIC asserted it had the legal authority to regulate the trusts in two regards. First, the trust needed to be “bona fide,” which meant it did more than simply sell insurance, and its members needed to belong to the same field, such as technology or farming.
Second, they needed to price their plans in compliance with specific rules. The OIC claimed the prices could vary by age and geography, but not between businesses.
In reviewing 2014 insurance plans, the OIC ruled that only 11 trust plans were operating legally, while 23 failed the price test and 19 failed for pricing and their bona fide status. Nine trust plans are still being reviewed.
“We have lost business because of the uncertainty and the fear of loss of coverage that was created,” said Jerry Belur, chief executive of EPK & Associates in Bellevue, which administers the Master Builders Association Health Insurance Trust. “We’re very thankful to those companies that have hung with us.”
The OIC will again review the plans disapproved because of their prices, and expects to approve them based on the new ruling, said OIC spokesman Steve Valandra. The judge’s decision didn’t resolve questions over bona fide status, so those trusts will still need to take action to comply with the law.
The three trusts involved in the case had already been approved as operating legally, but were rejected over their prices.
Trusts and associations still have pending legal action against the OIC on the question of their bona fide status.
Jeff Gingold, an attorney representing association health plans including those offered by the Association of Washington Business, which are still under review, expects the groups to ultimately prevail.
“Commissioner Kreidler is as wrong in what he is doing on that issue [of bona fide status] as he was on the rating issue,” Gingold said. “It’s absolutely wrong.”
Finkle did affirm the OIC’s authority to review the association and trust plans. So should the Legislature or federal government issue new rules about pricing, the OIC could apply them. Valandra said there are no plans to ask state lawmakers to make changes.
“It is now up to the federal government to clarify this intersection of state and federal law,” said Kreidler.