Dear Reader,

Please enjoy this second issue of the PGC Quarterly!

Our goal is to provide you a quarterly update on the happenings within the healthcare industry, including news and feature articles.  We hope to provide insight to the challenges and successes of regulation and legislation for the healthcare industry.  Particularly since the first quarter of 2012 brought light to the controversy surrounding the health care reform arguments in the Supreme Court. 

In this issue we will be presenting a variety of healthcare reform articles and news.  Enjoy!

If you have any questions about the following information please feel free to contact me at jmccormick@phiagroup.com or our Director of Client Services, Andrew Milesky at amilesky@phiagroup.com.

Day one (3/26/12)

Day one arguments focused on one question:

• Is it too early to consider this case since the health law's penalties do not start until 2014?

The individual mandate requires most Americans to obtain health insurance or, starting in 2014, face a penalty.

The Anti-Injunction Act forbids challenges to tax assessments until the assessments are due. The Supreme Court has interpreted the term "tax" very broadly for the purposes of law, and it has suggested that the Anti-Injunction act is "jurisdictional," meaning that courts are powerless to hear suits barred by it even if both sides agree to process. If the Supreme Court considers the individual mandate a tax under the Anti-Injunction Act, it may conclude that it cannot hear a challenge until April 15, 2015, when the first penalties are due.

The United States Court of Appeals for the Fourth Circuit and a dissenting judge on the District of Columbia Circuit agreed that the Anti-Injunction Act requires courts to defer to consideration of the challenge to the individual mandate.

The federal government initially argued that the Anti-Injunction Act applied to bar the challenges, but it has since changed its mind and now asks that the suits be allowed to proceed. The states challenging the law say the Anti-Injunction Act applies only to individuals - not to states. Because all the parties involved agree that the Supreme Court may hear the case, the justices appointed a lawyer to argue that the Anti-Injunction Act applies.

Day two (3/27/12)

Day two arguments focused on one question:

• Is the individual mandate constitutional?

 The lower courts have issued conflicting decisions in the many challenges to the health care law. The Supreme Court agreed to hear an appeal from the United States Court of Appeals for the 11th Circuit in Atlanta. That decision struck down the mandate. The health care law was upheld by the Sixth Circuit in Cincinnati and the District of Columbia Circuit. The Fourth Circuit in Richmond said the constitutionality of the law is not yet ready for review.

The federal government argues that Congress was authorized to enact the individual mandate under two provisions of Article I, Section 8 of the Constitution - its power to regulate commerce and its power to tax.

Day three (3/28/12)

Day three arguments focused on two questions:

• If the individual mandate is struck down, what should happen to the rest of the law?
• Is the law's expansion of Medicaid constitutional?

The ruling issued by the 11th Circuit determined that while Congress had exceeded its constitutional authority in enacting the individual mandate, the rest of the law should stand.

The government argues that two provisions requiring insurance companies to accept all applicants at fixed rates (this is related to restrictions on pre-existing conditions) are intertwined with the mandate and must fall along with the mandate. Opponents of the law say the mandate is its keystone, meaning that no part of the law can survive without it. The justices have appointed a lawyer to argue that the mandate may be removed if the court holds it unconstitutional.

The Supreme Court agreed to hear a challenge by 26 states to a provision relating to Medicaid. The states argue that Congress exceeded its constitutional authority by expanding the eligibility and coverage thresholds that states must adopt to remain eligible to participate in the joint federal-state program the provides health care to poor and disabled people. The states believe that Congress did not tie the law's new conditions only to federal money but rather made the new terms a condition of continued participation in Medicaid, threatening states with the loss of all federal Medicaid funds. The federal government argues that such changes are routine and that the Medicaid program specified at the outset that the rules could change.

Source: http://www.nytimes.com/interactive/2012/03/19/us/guide-to-supreme-court-challenges-to-obama-health-care-law.html

Transcripts of the arguments are available here:

Day one: http://www.nytimes.com/interactive/2012/03/27/us/27scotus-transcript.html?ref=us

Day two: http://www.nytimes.com/interactive/2012/03/28/us/28scotus-transcript.html?ref=us

Day three: http://www.nytimes.com/interactive/2012/03/29/us/29scotus-transcript.html?ref=us

It was a first for Texas: a state office devoted to consumers struggling to find affordable health insurance coverage. With funds from the federal health reform law, the Texas Consumer Health Assistance Program was launched last January. A $2.8 million grant allowed the state to hire nine employees to staff a toll-free hotline. More than 6,000 Texans called in during the past year, seeking advice on how to find affordable coverage, or help filling out an insurance application, or fighting a denied claim. The new employees traversed the state, hosting more than 160 events aimed at making Texans - a quarter of whom lack insurance - more aware of coverage options.

But less than a year after it opened, the Texas Consumer Health Assistance Program is preparing to shut down, a victim of Congress's inability to agree on a federal budget for next year. The nine employees are likely to be dismissed in April. The events will stop and the toll-free hotline will redirect to a general consumer assistance number at the Texas Department of Insurance, which deals with all kinds of insurance and has less expertise in health coverage.

Source: Sarah Kliff, January 1, 2012, www.washingtonpost.com Washington Post) (The

One of the most popular provisions of President Barack Obama's health care overhaul - consumer-friendly summaries of what your insurance plan covers - suddenly seems to be at risk. Consumer groups say it's not Republican opposition they're worried about, but a White House that doesn't want to be seen, in an election year, of churning out costly new regulations. At issue is the health care law's requirement that insurance plans provide simple, standard summaries of coverage and costs to help consumers pick benefits that are right for them - a sort of "CliffsNotes" version of the cryptic jargon. The rule is due to take effect in time for open enrollment season this fall and is undergoing final review by the White House. It would apply to all private and employer health plans, covering an estimated 180 million Americans. But consumer advocates say they fear the administration may heed industry complaints that the regulation, as proposed last summer, is too costly, burdensome and intrusive.

Source: Ricardo Alonso-Zaldivar, January 26, 2012, www.benefitspro.com (Benefits Pro)

Arizona initially introduced a bill that threatened to curtail subrogation and/or rights of reimbursement across all lines of insurance. Amended House Bill 2547 still allows the introduction of collateral source evidence by a defendant in a wrongful death or personal injury case. However, if the defendant introduces evidence of collateral source benefits or payments, the plaintiff may introduce the following:

1. 1.   Amounts the plaintiff paid to secure the benefits.
2. 2.   Plaintiff's recovery is subject to a lien.
3. 3.   Collateral Source provider has a statutory right to recover.
4. 4.   Collateral Source provider has a right of subrogation.

Importantly, the bill states nothing contained herein shall be construed to impair or affect a "healthcare provider or collateral source provider's" lien rights or right to reimbursement "pursuant to state or federal law or contract". The amended bill corrected the threat to subrogation and/or reimbursement rights.

This Oklahoma bill would increase the jurisdictional dollar limit for small claims cases, including subrogation cases, to $10,000, exclusive of attorney's fees and costs.  Oklahoma's current limit to bring a case in small claims court is $6,000.  If enacted, the law would become effective on November 1, 2012.

House bill attempts to change the law regarding joint and several liability.  Currently, any defendant, except the injured party's employer, who is less than 25% at fault, is only severally liable for the injured party's damages.  While any defendant, except for the injured party's employer, who is 25% or greater at fault is jointly liable for the injured party's damages.  This bill would eliminate the exception for the injured party's employer and make the rule applicable to not only all defendants, but also any party who could have been sued by the plaintiff.

Source: Update, www.subrogation.org

The Massachusetts Data Security Regulations (the "Regulations") became effective on March 1, 2010.

These Regulations were designed to reduce the rising tide of identity theft by requiring that all persons and entities which receive, store, process, maintain or have access to "personal information of a Massachusetts resident" adopt comprehensive written policies and procedures to protect that information. "Personal information" is defined as the names of Massachusetts residents "in combination with" social security numbers, driver's license numbers or financial account numbers (referred to below as "MPI").

When the Regulations because effective nearly two years ago, they included a requirement that contracts for services to be rendered directly to a person or entity covered by the Regulations must include a provision which requires the service provider to adopt and maintain security procedures to protect the client's or customer's MPI. These security procedures must comply with the Regulations and applicable federal law. This requirement applied to all contracts with service providers entered into on or after March 10, 2010. The Regulations provided a two year grace period for contracts with service providers which were entered into before the Regulations became effective (March 1, 2010) but that grace period expires on March 1, 2012.

Source: Eckert Seaman Attorneys at Law, February 22, 2012

Medical University Hospital Authority/Medical Center of the Medical University of South Carolina v. Oceana Resorts LLC, D.S.C., No. 2:11-cv-01522-DCN, 3/2/12)

A hospital that provided services to a health plan participant lacks standing to pursue benefits from the plan sponsor because an assignment of benefits it received from the participant was barred by an anti-assignment clause, the U.S. District Court for the District of South Carolina ruled March 2 in the above case.In so holding, Judge David C. Norton rejected the hospital's argument that the plan implied the assignment because it permitted payments to be made directly to a network provider, and thus a participant could also designate payments to be made directly to a network provider. "The fact that one party has specific rights under a contract does not necessitate that the other party to that contract has those rights also, especially when the parties specifically contracted to deny the second party those rights," the court said.

Medical University Hospital Authority/Medical Center of the Medical University of South Carolina (MUSC) provided services to plan participant Stephen Showers in 2010. As part of his admission to MUSC, Showers signed a consent form that assigned benefits from the plan to MUSC.

The court was also un-persuaded by MUSC's argument that plan intended to exempt network providers from the anti-assignment provision. While the provision did not typically apply to network providers, that did not mean the plan intended to exempt network providers, the court said. According to the court, MUSC was at best a third-party beneficiary, and ERISA does not provide statutory standing to third-party beneficiaries.

Source: My HealthGuide Newsletter for the Self-Funded Community (www.my healthguide.com), March 7, 2012