Top court sides with Priority Health

May 20, 2011
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Priority Health won an important legal case last week in the state’s premier courtroom. The Michigan Supreme Court overturned an appellate court ruling that upheld a decision made by the state Office of Financial and Insurance Services regarding employer contributions to health insurance policies.

The Supreme Court sent the issue back to OFIS, now known as the Office of Financial and Insurance Regulation, for reconsideration.

“We certainly are very happy with the Supreme Court ruling because it’s going to allow us to help keep health care costs competitive, especially for small businesses in this market,” said Rob Pocock, associate vice president of communications for Priority Health.

“Why this is good news is because it’s really going to work at keeping health care affordable, and it theoretically should be able to increase competition and choice for employers to which health plans they offer and for employees to which products they can select,” he added.

The case revolved around whether state law prevents an insurer from requiring that small employers — those with two to 50 workers — pay a minimum percentage of employees’ health-insurance premiums. In 2006, then-OFIS Commissioner Linda Watters said it did and ruled that an insurer couldn’t refuse to renew a policy because an employer decided not to contribute to a plan. Watters said the contribution provision found in Priority Health’s polices was unreasonable and inconsistent with the Insurance Code of 1956.

The Michigan Court of Appeals later agreed by ruling that the act doesn’t allow a carrier to require an employer contribution as a condition for issuing or refusing to renew a policy, even if the contribution was part of the agreement in the previous policy.

But Priority Health successfully argued that the state statute, PA 218 of 1956, did give insurers the right to include a contribution requirement in a policy renewal when the original policy contained one and it was reasonable to include one. Priority went on to argue that without employers paying a portion of a plan’s premiums, the cost for employees would rise and higher premiums would make healthy workers less likely to participate in a plan.

“If employees have to pay the full freight, common logic says the only people who are going to pay the full freight are those who really access a lot of health care,” said Pocock.

Supreme Court justices said last week that Watters and the appellate court “improperly relied on the guaranteed-renewal provisions” of the state code “to conclude that minimum employer contribution requirements are impermissible in small-employer policies.” The justices said their reading of the law “persuades us that minimum employer contribution requirements are not inconsistent” with the act.

The Supreme Court concluded that if a minimum contribution from an employer is included in an initial policy, it also can become a provision in a renewal policy. “An insurance carrier is not prohibited from including a provision in plans offered to small employers simply because it is not listed” in the statute, said the court. The justices offered that if a provision doesn’t directly conflict with the code it can be included in a plan as long as it’s “reasonable and not inconsistent” with the law.

Pocock said Priority Health also took the case to the state’s top court for a philosophical reason. He said if the agency’s decision hadn’t been overturned, Priority could have been prevented from imposing other reasonable requirements that the firm feels is necessary to keep health care affordable.

“The real importance of this ruling is it makes sure that OFIR can’t prevent us from taking other reasonable steps, and that’s the key: other reasonable steps that will keep health care affordable in our community,” he said.

“We work with the regulatory agency all the time and we have a very, very good working relationship with them. So the key decision here is, there was never any discussion about what is reasonable here. There was never that discussion. The discussion was, do we have to renew them or not? Now we’ve gotten the decision that we don’t have to renew them, and I can’t imagine that we’re going to be very far apart, if at all.”

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