Health Care Law

What is Medicare?

Single-payer federal health insurance

Who is eligible for Medicare?

• AGE: 65+ years old AND paid 40 quarters (10 years) of Medicare payroll taxes, paid by beneficiary or spouse

• DISABILITY: SSDI recipients + 2 year waiting period

• DIAGNOSIS: ESRD or ALS

Part A Original Medicare Benefits

• Inpatient hospital care, post-hospital extended care, short-term stays in skilled nursing facilities, post-acute home health care, hospice care, and pints of blood received at a hospital or skilled nursing facility.

• Covers skilled nursing facility care if there is medically necessary stay of 3 consecutive midnights in a hospital, not including admission/discharge days

Part A Original Medicare Enrollment

• Automatic enrollment (w/ paperwork) upon age 65+, no premium if beneficiary/beneficiary’s spouse has paid 40 quarters of Medicare payroll taxes

• Can also buy Part A coverage by paying a premium if 40 quarters of Medicare not already paid for

• Requires coinsurance for extended inpatient hospital and SNF stays

• Free choice of provider, provider autonomy provisions apply

Part B Original Medicare Benefits

• Outpatient services such as physician visits, outpatient hospital care, and preventative services (e.g. mammography and colorectal cancer screening), among other medical benefits

• Physician services and outpatient care. Some medical supplies, preventative services

Part B Original Medicare Enrollment

• Voluntary, opt-in

• Must pay premiums based on financial means

• Some benefits subject to deductible and coinsurance

Medicare Part C - Medicare Advantage

• Offers beneficiaries an alternative to the traditional Medicare system → Beneficiaries who opt into Medicare Part C choose a private insurance company that delivers their benefits.

  • Insurance companies that offer plans through Medicare Part C (or “MA Plans”) are reimbursed by the federal government for doing so.

• Types of Medicare+Choice plans

  • Managed care organizations, e.g. HMO, PPO

  • Medical savings account w/ medicare+choice

  • Private fee for service

Medicare Part C - Medicare Advantage Benefits

• Substitutes for Parts A and B

• Some plans include dental, vision, and prescription drug coverage

• Private plans, contracted with CMS

• Often covers things that traditional Medicare does not, so you wouldn’t need a Medigap policy if you have Part C. Premiums are often lower than traditional Medicare Part B.

Medicare Part C - Medicare Advantage Enrollment/Eligibility

• Medicare beneficiaries are eligible for Medicare Advantage if entitled to receive benefits under Part A and pays Part B

• Voluntary as an alternative to Parts A and B, and sometimes Part D

  • Often have to pay a penalty if you start off here and then change to default Medicare

• Meets Part A eligibility requirements and enrolled in Part B

• There are Medicare Advantage Special Needs Plans that limit enrollment to people with specific conditions, including ESRD.

Medicare Part D Benefits

• Outpatient prescription drug coverage

• CMS (federal government) contracts with private companies who provide the coverage

Medicare Part D Eligibility

• Not enrolled in Part C

• Voluntary

  • Can opt out or choose a Part C plan w/ prescription drug coverage

  • Can choose it with Parts A and B

  • Penalty for late enrollment: “Anyone opting out upon their initial enrollment in Medicare cannot later join Part D unless they pay a 1 percent late enrollment penalty for each month that they refused Part D.”

• Premium amount is based on financial means

Medigap Insurance

• Health insurance sold by private insurance companies to fill the “gaps” in Original Medicare Plan coverage

• Medigap policies help pay some of the health care costs that the Original Medicare Plan doesn’t cover

  • If you are in the Original Medicare Plan and have a Medigap policy, then Medicare and your Medigap policy will each pay its share of covered health care costs.

Medigap Insurance Eligibility

• Generally, when you buy a Medigap policy you must have Medicare Part A and Part B.

• You will have to pay the monthly Medicare Part B premium. In addition, you will have to pay a premium to the Medigap insurance company.

• As long as you pay your premium, your Medigap policy is guaranteed renewable. This means it is automatically renewed each year.

Medigap Insurance Restrictions

• Insurance companies can only sell “standardized” Medigap policies

  • Must follow Federal and state laws.

Fox Insurance Co. v. CMS | Medicare Part D

• Facts: CMS investigated Fox Insurance’s Medicare Part D plan after complaints that it delayed or denied critical cancer, seizure, and HIV drugs. Audit confirmed improper denials, improper invasive procedure requirements for medication, and a total lack of compliance procedures. Fox claimed remedial steps, but they’d only started after the audit.

• Holding: CMS may immediately terminate a Medicare Part D contract if delay would pose an imminent and serious risk to enrollees’ health. May terminate if the plan sponsor (1) failed to substantially comply with the contract, (2) is not carrying out the contract in a way that is consistent with effective and efficient administration, OR (3) no longer substantially meets applicable conditions.

  • Plan sponsor bears burden of proving substantial compliance, meaning that the risk of harm posed by deficiencies is minimal

    • Some steps = insufficient to show compliance

    • Nonemergency: CMS must give reasonable notice, hearing opportunity, and opportunity to cure defects before terminating contract.

    • Imminent and serious risk to enrollees’ health: CMS may immediately terminate contract.

• Outcome: Fox’s contract immediately terminated.

Prospective Payment Systems (PPS)

Medicare primarily uses PPS, paying providers a fixed, predetermined rate per case (like Diagnosis-Related Groups for hospitals) instead of paying for each individual service, incentivizing efficiency.

PPS Reimbursement under Federal Rate

• Federal rate calculated by taking standardized amount, based on national data, and multiplying by weight associated with a particular diagnostic-related group (DRG)—a category of inpatient treatment

  • DRG weight based on hospital resources utilized w/ respect to discharges in that group

  • Adjustments for Alaska & Hawaii, disproportionate share hospitals, and approved teaching hospitals

  • Applies to everyone other than those who qualify for reimbursement under Hospital-Specific Rate

PPS Reimbursement under Hospital-Specific Rate

• Hospital-specific rate based on actual historical operating costs of subject hospital, multiplied by relevant DRG weight.

• Hospitals in this category typically serve the underprivileged, so can choose between the higher of the federal rate or the hospital-specific rate

• Applies to sole community hospitals (SCHs) and long-term care hospitals (LTCHs)

Power of Government Reimbursement to Change Provider Behavior

• Definition of types of care that are/are not covered

• Limiting coverage or adjusting rates based on the setting

• Imposing “conditions of participation” (e.g. minimum compliance and quality of standards, EMTALA)

• Rewarding value over quantity of care

• Leveraging Medicare funding for compliance with anti-discrimination laws

Medicare Appeals Process | Who appeals?

Patients, providers, and suppliers.

• Patients appeal eligibility, coverage, or validity of rule

  • Providers appeal reimbursement or validity of the rule

Medicare Appeals Process | Who oversees appeals?

• Medicare administered for the federal government by regional Medicare Administrative Contractors (Contractors or MACs), who can deny care for the same reasons in Medicare that they do in private insurance, i.e., lack of medical necessity or failure to obtain preapproval.

• Payment appeals overseen through five-step process in which the Office of Medicare Hearings and Appeals (OMHA) plays prominent role.

Medicare Appeals: 5 Step Process

1. Level 1: Redetermination.

   1. Your Health Plan (MAC). If you disagree with a Medicare coverage decision, you may request your health plan to redetermine your claim.

   2. By MAC staff not involved in initial determination.

2. Level 2: Reconsideration.

   1.  An Independent Organization. If you disagree with the decision in Level 1, you may request a reconsideration by an independent organization.

   2. Panel of physicians, other professionals may review Medical necessity issues.

3. Level 3: Administrative Law Judge 

   1. Office of Medicare Hearings and Appeals (OMHA). If you disagree with the Level 2 decision, you may request that OMHA review your claim through an Administrative Law Judge.

   2. ALJ or attorney adjudicator; Amount in controversy req.

4. Level 4: Departmental Appeals Board Review

   1. The Medicare Appeals Council. If you disagree with the Administrative Law Judge’s decision, you may request the Medicare Appeals Council review the decision.

   2. MAC has authority to adopt, modify reverse, or remand ALJ/atty adjud’s decision.

5. Level 5: Judicial Review. 

   1. Federal Court. If you disagree with the Medicare Appeals Council decision, you may seek a review of your claim in Federal District Court.

   2. Appellant has exhausted admin. remedies; may seek judicial review. Amount in controversy req.

Medicare Appeals | Limited Judicial Review

Must exhaust administrative remedies first to give the agency greater opportunity to apply, interpret, or revise policies, regulations, or statutes without premature judicial interference.

What is Medicaid?

Providing free or low-cost health coverage to millions of low-income Americans, including families, children, pregnant women, the elderly, and people with disabilities, covering essential services like hospital care, doctor visits, and long-term support, with specifics like eligibility and benefits varying by state

Medicaid in CA Income Requirement

Medicaid coverage in CA stops at 138% of FPL

§ 1915 Waiver - Medicaid Managed Care

• (a)  Managed care - authorizes state to contract with managed care organizations to deliver Medicaid via managed care

• (b) Managed care with restrictions on choice of providers - waives free choice of provider requirement

• (c) Home and Community Based Services - Alt for people w/ long-term, serious health needs who would otherwise be in facility

  • Allows them to receive kind of care needed at home

  • Family members providing care can get certified as home health care providers &  get paid to provide care at home

  • Gives flexibility to maximize $$ and provide care needed

§ 1115 Waiver - Demonstration Projects (Medicaid)

• Requires a notice & comment process

• Allows state to try something different, like an experimental, pilot, or demonstration project which Secretary judges to be likely to assist in promoting objectives of the Medicaid Act

• Secretary can waive compliance w/ any reqs of Sec 1396(a)

• Project that would impact eligibility, enrollment, benefits, cost-sharing, or financing

• Secretary shall promulgate regulations providing for public notice & comment at state level

Requirements for Medicaid State Plans

1. Statewideness

2. Comparability

3. Freedom of choice/free choice of provider

Medicaid Eligibility | Mandatory Groups

• Poverty-related infants, children, and pregnant newborn women and deemed newborns**

• Low-income families

• Families receiving transitional medical assistance

• Children with Title IV-E adoption assistance, foster care, or guardianship care and children aging out of foster care

• Elderly and disabled individuals receiving SSI and aged, blind, and disabled individuals in 209(b) states

• Certain working individuals with disabilities

• Certain low-income Medicare enrollees

Medicaid Eligibility | Optional Eligibility Groups

• Low-income children, pregnant women, and parents above federal minimum standards

• Elderly and disabled individuals with incomes above federal minimum standards or who receive long-term services and supports in the community 

• Medically needy

• Adults without dependent children

• HCBS and Section 1115 waiver enrollees

• Enrollees covered only for specific diseases or services, such as breast and cervical cancer or family planning services

CHIP: Children’s Health Insurance Program

• Public health insurance for uninsured, low-income children above Medicaid eligibility levels.

• Block grant program. Each state receives a fixed amount of $$.

• Congress must reauthorize and fund periodically.

• States can create a CHIP program that is separate from Medicaid, use the CHIP funds to expand Medicaid for children, or combine the first two options.

• States can use CHIP to cover pregnant people who are above the Medicaid income eligibility levels.

Mechanisms for Flexibility in State Plans

• Optional benefits

• Optional eligibility groups

• Waivers

• Medicaid managed care

• Medicaid expansion

Medicaid Managed Care

• States contract with private managed care organizations (MCO)

• States have several pathways to using managed care organizations to deliver services to beneficiaries

• Voluntary or mandatory basis

• Most are capitated plans (a healthcare payment model where providers get a fixed, per-person fee (per member per month - PMPM) for a set period, rather than being paid for each service)

Medicaid | Determining Eligibility

1. Category—does the person fit into the population categories included in their state’s plan (mandatory or optional)?

2. Income eligible?—Dif. categories may have dif. income eligibility criteria

   • Two possible measures of income

     • Modified adjusted gross income (MAGI) uses federal poverty levels (FPL); OR

     • Non-MAGI uses other financial criteria

       • Can use resource (asset) limits

   • Income eligibility criteria can be changed by state or federal law

3. Resources—some types of population groups don’t use modified adjusted gross income; for those states can impose resource limits

4. Citizenship/Immigration status

   • A few states have reduced the waiting from 5 years to 0, and some states have created a state funded Medicaid for undocumented people.

   • Lawful residency, must be a state resident.

   • CA had expanded eligibility for full-scope Medicaid regardless of immigration status to those who met other eligibility criteria; Jan 1 2026 = freeze on enrollment

5. Residency—must be a resident of the state.

Stewart v. Azar | Standard for Approving Demonstration Projects

• Facts: In 2010, Congress enacted the ACA to provide universal health coverage, allowing states to expand Medicaid. Kentucky expanded its coverage and sought approval for a demonstration project with community-engagement requirements. The HHS secretary approved the project without considering its impact on medical coverage, leading several Medicaid recipients to challenge the approval as arbitrary and capricious.

• Standard of review by Secretary:

  • Whether the project is an “experimental, pilot, or demonstration project”;

  • Whether the project is “likely to assist in promoting the objectives” of the Act

• Holding: Before approving a demonstration project, the secretary must adequately consider the project’s impact on the state’s ability to furnish medical assistance. In deciding whether to approve a demonstration project, the secretary must determine whether the project is likely to further Medicaid’s objectives. 

  • Here, the secretary did not consider that approximately 95,000 citizens would lose coverage within five years. One of Medicaids primary objectives is to enable states to furnish medical assistance to individuals whose incomes and resources are insufficient to cover the expense of necessary medical services. The secretary acted arbitrarily and capriciously by failing to consider the program’s impact on Kentucky’s ability to furnish medical assistance. The secretary’s approval of the program is vacated, and this matter is remanded to the department.

Medicaid State Plans

Formal agreements between each state and the federal government defining how that state runs its Medicaid program, covering eligibility, benefits, and provider payment methods, ensuring compliance with federal rules to receive matching funds, with changes made via State Plan Amendments (SPAs) approved by CMS. 

Medicaid Mandatory Services

• Inpatient and outpatient hospital services

• Physician, midwife, and nurse practitioner services

• Early and periodic screening, diagnosis, and treatment for children up to age 21

• Laboratory and x-ray services

• Family planning services and supplies

• Federally qualified health center and rural health clinic services

• Freestanding birth center services

• Nursing facility services for individuals age 21+

• Home health services for individuals entitled to NF care

• Tobacco cessation counseling and pharmacotherapy

Medicaid Optional Services (examples, non-exhaustive)

• Prescription drugs

• Dental care

• Durable medical equipment

• Personal care services

• Home and community-based services (HCBS)

Statewideness (Medicaid Requirement)

• A state plan for medical assistance must—

  • Provide that it shall be in effect in all political subdivisions of the state, and, if administered by them, be mandatory upon them;

  • Provide that the medical assistance made available to any individual described in subparagraph (A) shall not be less in amount, duration, or scope than the medical assistance made available to any other such individual.

Comparability

The plan must specify the amount, duration and scope of each service that it provides for (1) the categorically needy; and (2) each covered group of medically needy

Categorically Needy (Medicaid)

• Patients are those who: 

  • a) Receive parents/caretaker relatives medicaid; or 

  • b) Receive SSI payments; or 

  • c) Adults who are between 19-64 years of age; or 

  • d) Are pregnant women, children, aged, blind or disabled persons whose income eligibility is based on the federal poverty level 

Medically Needy (Medicaid)

• Recipients are those who would be eligible for categorically needy except that their income and/or assets are too high. However, even though their resources are too high for categorically needy medicaid eligibility, they cannot afford to pay their medical bills. These people are allowed to spend down their excess income to the medically needy income level by incurring medical expenses

  • Ex.: If monthly income is $3,000, and income limit is $2,829 ($171 over the limit) → To qualify for Medicaid, must first spend $171 on medical bills and prescriptions, then will meet income requirements.

  • This category is optional. When a state opts for this category, the Medicaid Act mandates coverage of some coverage groups. Other groups are optional

Medicaid Enforcement | § 1983

§ 1983 provides a cause of action against any person acting under color of state law who deprives a person of “rights, privileges, or immunities secured by the Constitution and laws” of the United States.

Blessing/Gonzaga Test

• SCOTUS test to be used to determine when a specific Medicaid provision can be enforced by a private right of action (through § 1983).

  • (1) Whether Congress intended for the provision to benefit the plaintiff (Medina says express ‘rights-creating’ language with an ‘unmistakable focus on the benefited class’?);

  • (2) Whether the plaintiff can show that the right in question is not so “vague and amorphous” that its enforcement would “strain judicial competence”; and

  • (3) Whether the statute unambiguously imposes a binding obligation on the states.

• If yes to all three questions, then plaintiff can enforce the provision and go to court.

Sources of Private Insurance Coverage

• Employer-sponsored plans

• Direct purchase (Marketplace/Exchange or off-marketplace plans)

• Other private plans (e.g., student plans)

Indemnity Insurance

• Fee for services

  • Based on pre-negotiated rates

  • Providers use “balance billing”

    • Billing patient for difference that insurance didn’t pay (of what the provider thinks they should be paid)

• Free choice of provider

• Risk-pooling

• Cost-sharing

Managed Care

• Umbrella term for different types of plans, including HMOs and PPOs

  • Highly variable & ever evolving

  • Provider networks

  • Risk-shifting

    • Individual subscriber to employer

    • Employer to HMO

    • From HMO to providers

  • Managed care has mechanisms aimed at—

    • Promoting coordination of care;

    • Promoting efficient use of care; and/or

    • Cost containment

      • Examples: preventive care incentives (making it free for checkups), networks, utilization review; formularies with tiers for prescription drugs; capitated rates for providers

Health Maintenance Organization (HMO)

• Staff Model (HMO employs physicians and care provided in an HMO owned facility. Kaiser)

• Group Model (structured around multi-specialty medical group. Care delivered in facilities owned either by the physician groups or the HMO)

• IPA Model (HMO contracts an independent practice association. Members can treat non-HMO patients. Primary care physicians cna refer members to medical services outside the network, but HMO may not provide as much coverage as it would for members who stay in-network)

• Network Model (contracts with many IPAs and other provider groups to form a physician network)

• Prepaid comprehensive coverage.

Preferred Provider Organization (PPO)

Referrals required, providers must be in-network. Reimbursement only with proper preauthorization

Point of Service (POS)

• Flexibility and choice in providers and facilities. No requirement for PCP

• Looks like fee for service

• Reimbursement rates are usually lower

Exclusive Provider Organizations (EPO)

No referrals required, but the provider must be in network

Lubeznik v. HealthChicago Inc. | State Regulation of Managed Care, Contract Law

• Facts: Dr. recommended patient undergo a specific bone marrow transplant and chemotherapy for Stage III ovarian cancer. HealthChicago, Inc. denied pre-certification for the treatment, deeming it experimental. Patient sued for injunctive relief, and the circuit court ruled in her favor. HealthChicago appealed.

  • Exclusionary Clause: “[e]xperimental medical, surgical, or other procedures as determined by the [Insurance] Plan in conjunction with appropriate medical technology assessment bodies,” are excluded from coverage.”

• Holding: If an insurer seeks to deny coverage based on an exclusionary clause, the clause must be clear and unambiguous.

  • Reasoning: Exclusionary clause in the policy was ambiguous bc it lacked a clear definition of an appropriate medical technology boards. Decision also made w/o proper documentation.

  • Puts burden on insurer to use clear and unambiguous language

Affordable Care Act Provisions for Private Insurance

• Individual Mandate (no teeth)

• Employer Mandate/Employer Shared Responsibility - Pay or Play

ACA Employer Mandate/Employer Shared Responsibility

• Regulates large employers (50+ full time, calculated by including [total monthly part time hours] ➗ 120)

• Pay or Play

Employer Mandate: Play Option

• Offer health insurance to full-time employees that is adequate/of minimum value, affordable, minimum essential coverage

  • Of Minimum Value: Equivalent to bronze rating on marketplace plan

  • Affordable: Employee premium payment can’t exceed 9.5% of taxpayer’s W-2 wages

  • Minimum Essential Coverage: Must satisfy individual mandate

Employer Mandate: Pay Option

Employer pays tax penalty if

1. Do not offer health to all full-time employees OR they offer health insurance that is inadequate or unaffordable,

AND

2. At least one full-time employee qualifies for the premium tax credit and buys insurance in the marketplace.

ERISA

Employee Retirement Income Security Act

What does ERISA apply to?

1. Employee benefit plans, both employee pension plans and employee welfare benefit plans. Health benefits/health insurance are a type of employee welfare benefit plan.

   • Does not apply to individual insurance, only group insurance

   • Does not apply to Government Plans or Church Plans

ERISA § 502 Civil Enforcement | What is it?

Enables claims about breach of fiduciary duty with respect to management of pension fund. Limited private right of action and list of remedies.

ERISA § 502 Civil Enforcement | Persons Empowered to Bring a Civil Action

• Participant or beneficiary

  • For the relief provided for in subsection (c) or

  • § 502(a)(1)(B): To recover benefits due to him under the terms of his plan, to enforce his rights under the plan, or to clarify his rights to future benefits under the plan

• By the secretary, or by a participant, beneficiary, or fiduciary for appropriate relief under section 1109

• By a participant, beneficiary, or fiduciary

  • To enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or

  • To obtain other appropriate equitable relief

    • “Other appropriate relief”: equitable remedies outside declaratory judgment. Anything that is a traditional equitable remedy (including surcharge remedy that would make the plaintiff entitled to money)

What kind of claims can participants/beneficiaries bring under ERISA § 502(a)(1)(B)?

To recover benefits due to him under the terms of his plan, to enforce his rights under the plan, or to clarify his rights to future benefits under the plan

POV: A state law creates a remedy for π trying to recover benefits under an employer benefit plan.

Outcome: Preempted by ERISA § 502. Go to federal court.

POV: π brings a state-law based cause of action seeking coverage under an employer benefit plan. Discuss.

• First test to determine ERISA § 502 preemption.

• Ask whether the state law cause of action duplicates, supplements, or supplants the § 502 causes of actions and remedies.

• If yes, preempted. Go to federal court and reframe as § 502 claim.

POV: π pursues state law-based cause of action, claiming coverage denials under employer benefit plan caused them harm. Not obviously a claim for benefits. E.g., malpractice-like cause of action against health insurers. Discuss.

Davila two-part test for ERISA § 502 preemption.

Davila Test | ERISA § 502

1. Could the participant/beneficiary, at some point in time, have brought the claim under § 502(a)(1)(B); AND

2. Is there an independent legal duty to support this claim or does interpretation of the benefit plan form an essential part of the claim?

Pegram | ERISA § 502 Preemption

• Treating physician had ownership stake in HMO. Made patient wait for appointment at in-network facility 50 miles away rather than receive immediate care at local hospital. Caused harm.

• Court says mixed treatment and eligibility decisions are not fiduciary in nature, so not preempted by § 502.

ERISA § 514 Express Preemption

ERISA preempts any state laws that relate to any employee benefit plan.

Purpose of Congress in Enacting ERISA § 514?

• Ensure that plans and plan sponsors would be subject to a uniform body of benefits law

• Minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal government

• Prevent conflict in substantive law requiring tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction

“Relate to” within meaning of ERISA § 514 (Travelers)

• State law relates to employee benefit plans if:

  1. Directly affects the relationship among traditional ERISA entities (employer, plan, eligible employees)

  2. Indirectly, but substantially, affects the relationship among traditional ERISA entities

  3. Governs a central matter of plan administration or interferes with nationally uniform plan administration; OR

  4. Acts immediately and exclusively on ERISA plans or existence of an ERISA plan is essential to the laws’ operation.

Metropolitan Life Insurance Co. v. Massachusetts (1985)

• State Law Provision: Required insurers to include minimum mental-health-care benefits for its residents.

• “Related to”?: Yes. Affects the structure and content of benefits offered through employee plans.

• NOTE: Saved by Savings Clause b/c regulates insurance

Pilot Life Insurance Co. v. Dedeaux (1987)

State Law Provision: π alleged common law claims and bad faith.

Facts: Failure to pay permanent disability benefits after work-related injury.

Holding: The common law causes of action asserted in respondent's complaint, each based on alleged improper processing of a benefit claim under an employee benefit plan, "relate to" an employee benefit plan, and therefore fall under ERISA's preemption clause. The preemption clause is not limited to state laws specifically designed to affect employee benefit plans.

Kentucky Ass’n of Health Plans v. Miller (2003)

• State Law Provision: Kentucky statutes prohibited any health insurer from discriminating against healthcare providers and chiropractors who were willing and able to meet the terms and conditions for participation in the insurer’s health-insurance plan. (Any Willing Provider statutes)

• “Related to”?: Yes.

• NOTE: Saved by Savings Clause:

  • Specifically directed toward the insurance industry b/c restrict insurers’ ability to operate in Kentucky

  • Substantially affect risk-pooling arrangement between insurers and the insured, b/c expand the number of providers available to the insured, thus affecting the scope of permissible bargains.

DOL Letter to E Scalia

Advisory Opinion re. applicability of preemption provisions in ERISA § 514

• State Law Provision: Requirement that employers obtain written consent before withholding amounts from an employee’s wages for contribution to an ERISA-covered group health/welfare benefit plan.

• “Related to”?: Yes. Provision has prohibited connection with ERISA plans b/c it prohibits automatic enrollment arrangements in such plans and regulates decisions on how the benefit plan provides employee medical coverage and plan funding.

  • Consider ERISA purpose: To ensure that plans and plan sponsors would be subject to a uniform body of benefits law; minimize administrative and financial burden of complying with conflicting directives among States/between States and Federal government; prevent potential conflict in substantive law

RILA v. Fielder (2007)

• State Law Provision: Required employers with 10,000 or more employees in the state to spend at least 8 percent of their total payrolls on health insurance costs or pay the difference to the State. The Act was intended to force Wal-Mart stores to increase health insurance benefits for its 16,000 Maryland employees.

• “Related to?”: Yes. Employers must restructure their ERISA plans to meet the Act’s requirements regarding the minimum spending threshold. Because the Act dictates that an employer must provide certain benefits, it has an obvious “connection with” ERISA and is thus preempted.

Debuono

• State Law Provision: Taxed receipts for patient services at diagnostic and treatment centers.

• “Related to”?: No. Alters incentives but does not dictate the choices facing ERISA plans. Too ancillary.

Golden Gate Restaurant Ass’n

• State Law Provision: City health care coverage ordinance with pay or play provision for covered employers, had to make certain level of healthcare expenditures on behalf of their covered employees.

• “Related to?”: No! Does not dictate what benefits a plan must provide or who is eligible, or any changes to any existing ERISA plans.

What is the ERISA § 514(b)(2)(A) Savings Clause?

Saves state laws regulating the business of insurance from preemption under ERISA § 514(a). Use Miller test.

Miller Test for ERISA § 514 Savings Clause

• (first, to get to Savings Clause analysis must do § 514(A) analysis—is it related to employee benefit plans? If yes, expressly preempted under § 514(A) and can check to see if saved by § 514(b)(2)(A).)

• For a state law to be deemed a “law which regulates insurance” under § 514(b)(2)(A), it must satisfy two requirements:

  1. The state law must be specifically directed toward entities engaged in insurance.

  2. The state law must substantially affect the risk pooling arrangement between the insurer and the insured.

     1. Does law increase risk for insurer and decrease risk for insureds?

ERISA §514(b)(2)(B) Deemer Clause

Exception to Savings Clause (exception to exception)

• Self-funded plans are not saved from preemption by the Savings Clause.

• Prohibits states from regulating self-funded plans.

Rush Prudential HMO v. Moran

• Facts: State law provision guaranteeing independent medical review of denied claims.

• Holding: The state law does relate to employee benefit plans within the meaning of ERISA, but is not subjected to preemption since it regulates insurance practices. Requiring independent medical review does not affect contract interpretation or evidentiary litigation. Regulates insurance practices.

COBRA | Coverage Continuation Period

Covered employees (and their beneficiaries) may continue getting benefits from employer-sponsored health plan for limited time after a qualifying event (causing loss of coverage). Optional enrollment, notice w/in 90 days of enrollment to plan from either employee or beneficiary or employer. Coverage continuation may be very expensive, employer no longer required to pay share of premium.

HIPPAA Insurance Portability

Addresses job lock (staying in bad job for benefits). Limits exclusions for pre-existing conditions. Made irrelevant by ACA.

Direct Purchase Insurance | Health Insurance Exchange (Marketplace)

Online platform created under the ACA that helps individuals, families, and small businesses shop, compare, and enroll in affordable, qualified health insurance plans, often providing access to subsidies, Medicaid, or CHIP, and ensuring consumer protections like coverage for pre-existing conditions.

Affordable Care Act Requirements/Changes

1. Guaranteed issue

2. Guaranteed renewability

3. Annual limits on OOP costs

4. Community rating instead of experience rating

5. Coverage requirements EHBs

Guaranteed availability of coverage (guaranteed issue)

Health insurance issuers cannot deny insurance coverage in the individual or group market to those who are eligible. Cannot deny coverage to people with pre-existing conditions.

Guaranteed renewability of coverage

If already enrolled, insurers cannot refuse to renew your policy, even if you gain a higher risk condition/cost a lot of money before/etc.

UNLESS: Nonpayment of premiums, fraud, violation of participation or contribution rates, termination of coverage.

Who runs the health insurance marketplaces?

Some are run by the state, others are run by the federal government (HHS) if the state chose not to establish a marketplace. ACA tax credits available The ACA’s tax credits are available in state-run and HHS-run marketplaces (Burwell).

Who can obtain insurance in the marketplace/exchange?

• Cannot

  • People eligible for public insurance

  • People who are not lawfully present (expanded by OBBBA in 2025)

  • People who are incarcerated

• Can

  • People eligible for employer-sponsored insurance

  • People not eligible for public insurance

• Subsidies are not available for people with incomes below 100% FPL because they would be eligible for Medicaid

Marketplace Plans: Metal Levels

Plan Type	Plan Pays % of Total Covered Expenses (on Avg) = Actuarial Value	Consumer Pays for Deductibles, Co-pays, & Co-insurance (on Avg)
Platinum	90%	10%
Gold	80%	20%
Silver	70%	30%
Bronze	60%	40%

Marketplace: Four Metal Levels Exception

• Catastrophic coverage-only coverage for individuals under age 30 or under hardship exemption

  • Low premium

  • High deductible equal to annual OOP (out of pocket) cost limit

  • Federal subsidies not available

ACA Premium Tax Credit (PTC)

A refundable tax credit established by the Affordable Care Act to help eligible individuals and families with low to moderate incomes afford health insurance purchased through a state's Health Insurance Marketplace. The size of your Premium Tax Credit is based on a sliding scale. If eligible, applies regardless of which plan is purchased.

Who can obtain the Premium Tax Credit?

• Individuals whose household income for the year is 100-400% of the federal poverty line for their family size; AND

  • “not be eligible for certain types of health insurance coverage, with exceptions;

  • “file federal income tax returns;

  • “and enroll in a plan through an individual exchange.”

Cost-Sharing Reduction Payments (Marketplace)

Federal subsidies under the (ACA) that lower out-of-pocket healthcare costs (deductibles, copays, coinsurance) for low-income individuals buying Silver health plans on the ACA Marketplace.

• Eligible income: 138-250% of FPL

Connecting PTC to Employer Mandate

If you are offered employer-sponsored insurance, and purchase in the individual marketplace and are deemed eligible for a premium tax credit (meet income requirements), employer pays a penalty.

ACA Coverage Requirements | Essential Health Benefits

ACA statute requires insurance to cover services from the categories of Essential Health Benefits (EHBs)

• Applies to plans sold inside and outside the exchanges, and to group insurance

• Exceptions: Large group plans, self-insured plans

10 Categories of Essential Health Benefits

1. Ambulatory (outpatient) services

2. Emergency services

3. Hospitalization (inpatient)

4. Maternity and newborn care

5. Mental health/substance abuse

6. Prescription drugs

7. Rehabilitative/habilitative services and devices

8. Laboratory services/X-Ray

9. Preventive and wellness services and chronic disease management

10. Pediatric services, including oral and vision care

ACA Coverage of Preventive Services (Rule)

ACA requires coverage of preventive services without cost-sharing. This rule applies to ALL private plans, including individual and small-group plans, on and off the Exchanges, as well as large-group and self-insured plans.

Preventive Care (Categories List)

1. Evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the U.S. Preventive Services Task Force.

2. Immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the CDC

3. With respect to infants, children, and adolescents, evidence-informed preventive care and screenings

4. With respect to women, such additional preventive care and screenings as provided for in the comprehensive guidelines supported by HRSA.

5. The current recommendations of the USPSTF regarding breast cancer screening, mammography, and prevention.

EHB Rulemaking Process

1. Statute sets out preventive care categories requiring coverage

2. Statute delegates “definitional work” to nongovernmental expert entities.

3. Proposed rule with expert-provided definitions published.

4. Notice and comment period.

5. Objections considered, either incorporated or not.

6. Rules may be challenged in court.

Burwell v. Hobby Lobby | Example of EHB Rulemaking

Facts: Hobby Lobby challenged rule requiring preventive care for women (contraceptive care) free of cost-sharing.

Outcome: Rule changed. Already had exemption for houses of worship, expanded to include accommodations for religiously affiliated nonprofit and closely-held for-profit corporations (must notify). Rule still mandatory for non-religious affiliation and for-profit that is not closely held.