Barry Senterfitt is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP in the firm's Austin, Texas, office.

Barry Senterfitt

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The definition for "genetic information" is quite broad. As defined, the term includes information about an individual's genetic tests, the genetic tests of family members, or the manifestation of a disease or disorder in family members, which would include family medical history.  

The regulations also clarify the act by providing further analysis for the term "underwriting purposes." The act's prohibition on collecting genetic information for underwriting purposes extends to prohibit collecting the information for the purpose of: 1) changing deductibles or cost sharing; 2) providing discounts, rebates and payments in kind; or 3) providing other premium differential mechanisms in return for activities such as completing a health risk assessment or participating in a wellness program.  

Group health plans may request a minimum amount of genetic information to make determinations regarding payment. Thus, when an individual seeks a benefit under a group health plan and coverage will be based on whether the benefit is medically appropriate, the determination of medical appropriateness is not within the meaning of "underwriting purposes." In such a case, the plan may collect the relevant genetic information and condition the benefit on that information; however, a plan may request only the minimum information necessary. 

Examples provided in the regulations are also helpful: 

As the examples demonstrate, group plans should review use of health risk assessments, removing financial incentives or penalties when genetic information is requested. Also, refrain from collecting genetic information for underwriting purposes.  

This column is written for informational purposes only and should not be construed as legal advice.

Barry Senterfitt is a managing shareholder at Greenberg Traurig, LLP, Austin, Texas.

Janet Farrer is an associate at Greenberg Traurig LLP, Austin, Texas.

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At the same time, private sector companies must bear all of these costs, yet somehow compete in the marketplace with the public option exempted from the costs and from any need to return a profit.  

Other aspects of the structure, while not immediately identifiable as having a potential to increase private-sector costs, could have a significant effect on the way the private sector conducts the business of insurance. For instance, policies currently being debated might drastically alter provisions in antitrust regulation.   

Currently, the private sector health plans and the business of insurance are regulated on a state-by-state basis, with the insurance industry benefitting from an antitrust exemption via the McCarran-Ferguson Act.   

All of that may change, however. For instance, as of presstime, President Obama had indicated that Congress should revisit the McCarran-Ferguson Act and, specifically, provisions in that act exempting insurance companies from antitrust exposure.   

There have also been discussions that a federal charter should be drawn up under which the federal government, not the individual states, should regulate insurance.   

Finally, one aspect of the healthcare debate that has received less national attention, but is of great interest to the private sector, is the extent to which states may enact their own healthcare reforms.   

Some states, for instance, have recently entertained vigorous debates related to regulation of minimum payments to doctors and hospitals and reforms to the small group and individual markets. And with all this activity, there is very little attention to the factors driving healthcare costs and almost nothing to address that in the proposed legislation.  

Most proposals involve a provision prohibiting exclusions for enrollees' pre-existing conditions, which would essentially provide guaranteed issue insurance coverage. This too has the potential to increase costs. 

 is a partner in the insurance industry practice of Akin Gump Strauss Hauer & Feld LLP in the firm's Austin, Texas, office. 

 is an associate at Greenberg Traurig LLP, Austin, Texas. 

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On November 23, 2008, the National Conference of Insurance Legislators (NCOIL) adopted model legislation aimed at regulating silent PPOs. Some states, such as Ohio and Florida, have already passed legislation restricting the use of silent PPOs and others may consider passing legislation similar to the model legislation in the next legislative session. 

Texas may ultimately revisit the manner in which to regulate silent PPOs when the next legislative session convenes in 2011. 

Because of increased regulatory attention in this area, contracting parties, including PPOs and providers, should consider monitoring any developments with respect to the regulation of silent PPOs. 

Silent PPOs are many times described as arrangements whereby organizations access discounted rates for healthcare services from healthcare providers without contractual authorization from the providers.   

Further, in an attempt to provide transparency, the model legislation contains certain disclosure requirements. For example, a contracting entity that grants access to a  provider's services and  discounts must identify and provide to the provider, upon request, a list of all third parties to which the contracting entity has executed contracts or will grant access to the provider's services and discounts, thereby allowing providers to determine if the networks and the discounts have been properly accessed. 

Among other requirements, the model legislation also sets forth obligations for third parties that have been granted access to a provider's healthcare services and discounts, and provides that unauthorized access to provider network contracts is an unfair insurance practice. Because the regulation of silent PPOs has received national attention as well as increased scrutiny in many states, contracting parties should continue to monitor any new developments.  			

Model legislation adopted by NCOIL provides that the third party accessing the contract must comply with contacting terms

Silent PPOs under scrutiny

This case challenges the employer-mandated spending requirement in San Francisco's Health Care Security Ordinance on the basis that the Ordinance is preempted by ERISA. The employer-mandated spending requirement requires covered employers to contribute to their own programs for their employees' healthcare or to contribute required amounts to the city, which are used to finance San Francisco's Health Access Program or HRAs for employees of covered employers.  

The court held that the funding requirement of the Ordinance was preempted by ERISA because it had an impermissible connection with employee welfare benefit plans.   

After the federal district court decision was issued, the City of San Francisco appealed the decision to the Ninth Circuit Court of Appeals. In an opinion published on September 30, 2008, the Ninth Circuit overruled the lower-court decision holding that ERISA does not preempt the employer-mandated spending requirement contained in the Ordinance.  

The restaurant association then filed a petition for rehearing en banc, which was ultimately denied. The dissent to the denial for the petition for rehearing, however, notes that the decision puts the Ninth Circuit in conflict with the Fourth Circuit decision, 

, 473 F. 3d 180 (4th Cir. 2007), which struck down a comparable law in Maryland in 2007 on the grounds that such law was preempted by ERISA.  

Seeking to present the City of San Francisco from implementing the employer-mandated spending requirement, the restaurant association filed an emergency motion with the Supreme Court in March 2009, which was later denied, meaning that the employer spending requirement continues to be in effect. In response to the Ninth Circuit's decision, the restaurant association filed a Petition for Writ of Certiorari on June 8, 2009, asking the Supreme Court to overturn the Ninth Circuit's ruling holding that the Ordinance was not preempted by ERISA.   

Barry Senterfitt is a managing shareholder at Greenberg Traurig, LLP, Austin, Texas. 

Janet Farrer is an associate at Greenberg Traurig LLP, Austin, Texas. 

The Golden Gate Restaurant Association argues that contributions to San Francisco's Health Access Program under a 2006 ordinance are preempted by ERISA

Employer-mandated spending requirement challenged

In the midst of the current U.S. financial turmoil, there are many uncertainties with respect to the future of our nation's financial institutions. A significant upgrade in the monitoring powers and examination authority of regulatory agencies is going to be unleashed. The enhancement of regulatory powers is going to trickle down to other government entities that are supposed to protect the public trust. 

Health insurers and MCOs, primarily regulated at the state level, fall under the jurisdiction of state health and insurance departments, with the latter being charged with oversight of the financial component. The size of the insurance department staffs vary from state to state. 

The financial well-being of these companies is measured and evaluated primarily by monitoring their capitalization, the investment of their assets, their transactions with affiliated entities, and their risk-sharing and reinsurance arrangements. The standards required with respect to each of these functions are set by each state and are conditions for doing business in each state. We are seeing more uniformity in regulation, due in large part to the National Association of Insurance Commissioners (NAIC) promoting greater consistency. 

The required capitalization of regulated entities is set at a specific dollar amount by statute in each state. This minimum statutory capital and surplus amount ranges from as low as $1 million in some states to as high as $10 million in others. However, as an additional measure, most states have now adopted a complicated formulaic approach to determining a company's required capital-the NAIC Risk-Based Capital (RBC) regulation. This law looks at several factors, including the risk and diversification of assets and the volume of business underwritten, to come up with an individualized calculation of required minimum capital for each regulated entity. As a general rule, the regulated entity should have total capital and surplus that is no less than 25% of its annual premium volume (on a net basis). 

Each regulated entity, whether public or privately held, is required to submit financial statements each quarter, with the year-end statement being audited. These financial reports must set forth the RBC calculation and include several exhibits that provide detailed analyses of the company's liquidity, profitability and underwriting activities. 

Each regulated entity also is limited in the way that it invests its assets. Each state has regulations to limit the types of assets that may be invested in as well as the percentage that may be invested in any one asset. Furthermore, the regulated entity is prohibited from pledging its assets to secure its debts or the debts of any other person, and generally it may not guarantee the debts of any other person. 

The Insurance Holding Company Act, adopted in each state, regulates the activities that an insurer or an HMO may engage in with its unregulated affiliates. These laws prevent the unregulated activities of affiliates from dragging down the regulated entity.  

In the midst of current financial turmoil, the industry entrusted with the greatest accumulation of funds is the insurance industry. MCOs and HMOs should expect greater scrutiny of their finances.

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Current federal and certain state laws require certain healthcare companies to take steps to safeguard protected health information. For instance, the Privacy Rule, a federal regulation under HIPAA, imposes restrictions on the use and disclosure of protected health information. Under the rule, a health plan, clearinghouse, or provider that transmits health information in electronic form in connection with specified financial and administrative transactions may not use or disclose the protected information unless the individual authorizes the use or disclosure, or unless the rule explicitly permits or requires the use or disclosure. State laws that parallel the rule may, in some cases, apply more broadly or impose additional requirements.  

Companies should not only ensure that they are in compliance with HIPAA and related state laws, they should monitor this proposed legislation as well.   