Robert R. PohlsPohls & Associates
Walnut Creek, California
HEALTH INSURANCE LAW UPDATE
Health Insurance Regulation and LitigationAfter NFIB v. Sebelius
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HEALTH INSURANCE LAW UPDATE
Agenda
- PPACA Litigation
- PPACA Scorecard
- Future Changes- Insurance Practices- Insurance Marketplace- Health Care Delivery Systems
- Litigation Hot Spots
- Questions
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HEALTH INSURANCE LAW UPDATE
PPACA: The Basics
- Passed on 3/23/2010
- Effective on 3/30/2010
- Primary Goal:
Increased Access to Affordable Health Care
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HEALTH INSURANCE LAW UPDATE
PPACA: The Basics
Accessibility: - Insurance Practices - Insurance Marketplace - Expansion of Medicaid
Affordability: - Promoting Public Health - Health Care Delivery Systems - Revenue Provisions
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HEALTH INSURANCE LAW UPDATE
PPACA: The Basics
Accessibility: - Insurance Practices - Insurance Marketplace - Expansion of Medicaid
Affordability: - Promoting Public Health - Health Care Delivery Systems - Revenue Provisions
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Insurance Practices
- Community rating
- individual or family coverage
- geographic rating area
- age (3:1 ratio)
- tobacco use (1.5:1 ratio)
- Guaranteed-issue
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
“Congress’s insurance industry reforms . . . will encourage individuals to delay purchasing private insurance until an acute medical need arises.”
Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
“The reforms also threaten to impose massive new costs on insurers, who are required to accept unhealthy individuals but prohibited from charging them rates necessary to pay for their coverage.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
The “Individual Mandate”
- All individuals must have “minimum essential coverage” by January 2014 (unless exempt).
- Anyone without minimum essential coverage must make a “shared responsibility payment.”
- Tax Year 2014: $95 (or 1% of HHI) - Tax Year 2015: $325 (or 2% HHI) - Tax Year 2016: $695 (or 2.5% of HHI)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Adverse Selection
“. . . unless the individual mandate forces individuals into the private insurance pool before they get sick or injured, Congress’ insurance industry reforms will be unsustainable by the private insurance companies.”
Florida v. HHS, 648 F.3d 1235 (11th Cir. 2011)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Adverse Selection
“. . . without full market participation, the financial foundation supporting the health care system will fail, in effect causing the entire health care regime to ‘implode’.”
Virginia v. Sebelius728 F.Supp.2d 768 (E.D. Va. 2010)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
The Commerce Clause
“The Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”
U.S. Const., Art. I, §8, cl. 3
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Not Authorized by The Commerce Clause
“The power to regulate commerce presupposes the existence of commercial activity to be regulated.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
“The individual mandate forces individuals into commerce precisely because they elected to refrain from commercial activity.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
The Necessary and Proper Clause
“The Congress shall have the power . . . To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”
U.S. Const., Art. I, §8, cl. 18
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Not Valid Under The Necessary and Proper Clause
“Each of our prior cases upholding laws under that Clause involved exercises of authority derivative of, and in service to, a granted power.”
“The individual mandate, by contrast, vests Congress with the extraordinary ability to create the necessary predicate to the exercise of an enumerated power.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
But: Authorized by the Taxing Clause
“The . . . requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax.”
“Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Expansion of Medicaid
States must cover anyone from a family with an income below 133% of the federal poverty level.
- From 2014 to 2016, the federal government will pay 100% of the increased fees.
- The federal government’s percentage will then drop each year until reaching 90% in 2020.
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Expansion of Medicaid
Congress may attach appropriate conditions to federal taxing and spending programs.
If a state does not comply, DHHS may declare that “further payments will not be made to the State.”
42 U.S.C. §1396c
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Coercion Doctrine
When “power turns into compulsion,” the legislation runs contrary to our system of federalism.
Steward Machine Co. v. Davis301 U.S. 548, 590 (1937)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Held: Unconstitutionally Coercive
“The threatened loss of over 10 percent of a State’s overall budget . . . is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.”
“§1396c is unconstitutional when applied to withdraw existing Medicaid funds from States that decline to comply with the expansion.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Held: Unconstitutionally Coercive
“The Court today limits the financial pressure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical matter, that means States may now choose to reject the expansion; that is the whole point.”
NFIB v. Sebelius, 567 U.S. ___ (2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Employer Mandate
Large employers: 50 or more full-time employees
Annual fees:
- $2,000 per FTE (in excess of 30) if do not offer “minimum essential coverage.”
- $3,000 per FTE with income below 400% of federal poverty level who opts out of the employer’s plan.
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Employer Mandate
Commerce Clause gives Congress the power to “regulate the terms of the employment contract.”
Liberty University v. GeithnerW.D.Va. (November 30, 2010)
4th Circuit: Anti-Injunction Act
SCOTUS: Certiorari denied
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Preventive Care Coverage Mandate
Certain preventive services must be covered without co-payments, co-insurance or deductibles.
- Preventive services include contraception
- Regulations exempt certain religious employers.
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Preventive Care Coverage Mandate
Most cases: Dismissed (not ripe)
Two cases: Injunctive relief denied forinsufficient likelihood of success
Eight cases: Injunctive relief granted to prohibit enforcing preventive care coverage mandate
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HEALTH INSURANCE LAW UPDATE
PPACA: Litigation Update
Preventive Care Coverage Mandate
Updated Regulations
- Employers who morally object to providing coverage for contraception may omit it from their health insurance plans.
- Insurers must inform employees they are eligible for separate plans that cover contraceptives.
- Insurers must pay cost of additional coverage.
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Dependent Coverage
Parents may keep children on family coverage until age 26.
- Before PPACA: 13 million uninsured (ages 19-29)
- After PPACA: 10.5 million uninsured (as of 2011)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Pre-Existing ConditionsCoverage for children (under 19) cannot be denied or limited because of pre-existing conditions.
- Before PPACA: 10% - 13.3% uninsured (under 18)
- After PPACA: 7% uninsured (as of 2011)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Small Business Tax CreditSmall employers (<25 employees) can offset as much as 35% of employee health insurance costs.
- Before PPACA: 4.4 million eligible employers $2 billion reserved for tax credits
- After PPACA: 309,000 employers claimed $416 million in tax credits
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Early Retiree Reinsurance
ERRP reimburses employers up to 80% of early retirees’ medical claims costs.
- Effective June 1, 2010
- $5 billion in funding
- February 2012: $4.73 billion in claims processed
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Early Retiree Reinsurance
Problem: How to manage the rising cost of insuring retirees.The analysis may depend on “the language of the relevant documents, considered against the background of employee benefits law and labor law precepts.”
Aldo v. Raytheon Corp. (9th Cir. 2012)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Lifetime / Annual Limits
No lifetime limits.
Annual limits:
- 9/23/2010: Not less than $750,000
- 9/23/2011: Not less than $1.25 M
- 9/23/2012: Not less than $2 M
- 1/1/2014: Unlimited
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Lifetime / Annual Limits
- Individual mandate?
- Stop loss?
- Stop loss sold to a self-funded plan is not reinsurance, but direct insurance subject to state regulation.
Texas DOI v. American National Ins. Co. (Texas 2012)
- State law may set “attachment points.”
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Rescissions
No rescissions without fraud . . . but what is material?
- Guaranteed-issue
- Community rating: - individual or family coverage - geographic rating area
- age (0-20; 21-63; 64+) - tobacco (cannot rescind)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Internal Appeals
Group: 29 C.F.R. 2560.503-1
Individual: State law
DHHS Standards (for plan years after 1/1/2012):
- Includes rescissions- Decision-makers must have no conflict of interest- “Culturally and linguistically appropriate” notices
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Internal Appeals
Group: 29 C.F.R. 2560.503-1
Individual: State law
DHHS Standards (for plan years after 1/1/2012):
- Any new evidence or rationale must be shared - Reasonable opportunity to respond- Coverage must be provided pending outcome
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Independent External Review
Required if claim involves medical judgment or rescission.
As of January 1, 2014: Applies to all benefit determinations that do not relate solely to eligibility.
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Independent External Review
Self-funded ERISA: federal
All others:- state external review program (if it includes consumer protections found in NAIC’s Model Act).
- If not, choose between federal program run by DHHS or federal program run by DOL and Treasury.
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Independent External Review
Independent 3rd Party
Decision is “binding”
“Binding” means the plan or insurer must provide benefits pursuant to the external reviewer’s final decision, regardless of whether the plan or insurer intends to seek judicial review.
76 Fed. Reg. 37217 (June 24, 2011)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Medical Loss Ratiosand Rebates
Individual: 80%Group: 85%
- 80 million people insured by plans subject to MLR
- 12.8 million (14%) received rebates
- $1.1 billion in rebates (average of $151)
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Premium Rate Increases
Review increases over 10%
Unreasonable if:
- Excessive - Unjustified - Unfairly Discriminatory45 CFR §154.205(a)
CMS Reviews: 20 of 28 increases “unreasonable”State Reviews:
- 27 of 35 states reduced or rejected increases- 2 states approved only decreases
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HEALTH INSURANCE LAW UPDATE
PPACA: Scorecard
Premium Rate Increases
Judicial review?
- Reviewing entity may be entitled to deference.Kirsch v. Department of Consumer and Business Services (Oregon 2012)
- Can be difficult to challenge when making a profit.Anthem Health Plans of Maine, Inc. v. Superintendent of Insurance
40 A.3d 380 (Maine 2012)
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HEALTH INSURANCE LAW UPDATE
Future Changes
- Individual Mandate
- Employer Mandate
- Health Benefit Exchanges
- Expansion of Medicaid
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HEALTH INSURANCE LAW UPDATE
Future Changes: Individual Mandate
Exceptions:
- illegal aliens
- recognized Indian Tribes
- certain religious sects
- incarcerated people
- anyone with coverage gap of < 3 months
- income less than 133% of FPL
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HEALTH INSURANCE LAW UPDATE
Future Changes: Individual Mandate
133% - 400% of FPL:
- eligible for health benefit exchanges
- subsidies will cap premiums at 9.5% of HHI
- 400% FPL = $112,176 (family of 4)
- 9.5% of HHI = $10,657
- alternative: make shared responsibility payment of not more than $2,085
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HEALTH INSURANCE LAW UPDATE
Future Changes: Individual Mandate
Over 400% of FPL:
- exempt if cheapest plan in exchange is >8% of HHI
- 400% of FPL: $112,176
- 8% of HHI: $8,974
- “bronze” coverage:
- between $12,000 and $15,000/year
- $12,000 is 8% of $150,000
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HEALTH INSURANCE LAW UPDATE
Future Changes: Employer Mandate
Large Employers: 50 or more FTEs (or FTEEs)
Penalties:
- No coverage: $2,000/employee (over 30)
- Opt-outs: $3,000/employee (if <400% FPL)
Projected Impact:
- GAO: 2.5% decrease to 2.7% increase
- Employers: decrease between 2% and 20%
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HEALTH INSURANCE LAW UPDATE
Future Changes: Health Benefit Exchanges
Effective Date: January 1, 2014
- funding for states to establish and run
- DHHS will establish and run if state does not
Projected Impact:
- 24 states will establish and run
- 26 states will rely on DHHS
Open Enrollment: Begins in October 2013
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HEALTH INSURANCE LAW UPDATE
Future Changes: Health Benefit Exchanges
Impact on Agents:
- Individual mandate
- Employer mandate
- Exchanges
- Navigators
- 45 C.F.R. 155.210(d)
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HEALTH INSURANCE LAW UPDATE
Future Changes: Health Benefit Exchanges
Impact on Agents:
- Medical Loss Ratios
- NAIC: accommodate producer compensation in MLR regulations
- DHHS: states may seek waivers
- H.R. 1206 / S.B. 2288
NAIFA: 70% reported commissions decrease
53% of those reported decrease of >25%
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HEALTH INSURANCE LAW UPDATE
Future Changes: Expansion of Medicaid
Projections:
- increased enrollment by 24 million
- between $20B and $42B in new costs to states
SCOTUS: states may choose not to participate
- 26 states joined in constitutional challenge
- 13 states already have opted out
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HEALTH INSURANCE LAW UPDATE
Future Changes: Expansion of Medicaid
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
U.S. Healthcare Spending
1980: $256 Billion 2010: $2.6 Trillion
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
U.S. Healthcare Spending
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
U.S. Healthcare Spending
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
U.S. Healthcare Spending
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
U.S. Healthcare Spending
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HEALTH INSURANCE LAW UPDATE
Shifting the Focus: Affordability
Factors:
- technology and prescription drugs
- rise in chronic diseases
- administrative costs
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HEALTH INSURANCE LAW UPDATE
Healthcare Delivery Systems
Health Information Technology
- federal incentives for “meaningful use”
- significant implementation costs
Value Based Purchasing
- increased payments if meet quality measures
- reduced payments for “excess readmissions”
- reduced payments for HACs
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HEALTH INSURANCE LAW UPDATE
Healthcare Delivery Systems
Patient Centered Medical Homes
- prompt access to primary care provider
- primary care provider acts as “gatekeeper”
Accountable Care Organizations
- responsible for defined Medicare populations
- Medicare cost-savings shared if deliver quality care while reducing costs
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HEALTH INSURANCE LAW UPDATE
Healthcare Delivery Systems
Impact of Changes
- Small medical groups are being absorbed
- Hospitals are acquiring practice groups for ACOs
- Payment models are changing
- Medicare
- Insurance
- Other private financing
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HEALTH INSURANCE LAW UPDATE
Healthcare Delivery Systems
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Rescissions- Only for fraud - Guaranteed issue- Community rating
Question: Any other means of showing materiality?
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Rescissions
“Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.”
California Insurance Code §334
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Claim Denials- Exhaustion of remedies- Conflict of interest- Deference to decision-maker?- “Binding” external review
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Medical Loss Ratios and Rebates- Public reporting- Medical claims- Quality improvement measures
- Improve health outcomes- Prevent hospital readmissions- Improve patient safety; reduce medical errors- Wellness and health promotion activities
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Medical Loss Ratios and Rebates
What happens if a policy lapses for non-payment of premiums, but the insurer later gives a rebate?
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HEALTH INSURANCE LAW UPDATE
Litigation Hot Spots
Premium Rates
Sales Practices
Provider Relations
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HEALTH INSURANCE LAW UPDATE
Questions?
Robert R. PohlsPohls & Associates1550 Parkside Drive, Suite 260Walnut Creek, California 94596T: 925.973.0300 F: [email protected]
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