The outcome of an ongoing appellate battle over data-for-insurance schemes could threaten a careful balance between state and federal health insurance regulation, several states say in a brief filed in that case.
The U.S. Department of Labor is appealing a 2020 district court decision that vindicated the low-cost health coverage two Georgia-based companies offer participants in exchange for monitoring their internet usage.
Government attorneys called that proposition “a sham” in the DOL’s opening brief March 31, and state insurance departments and trade groups said the plans could serve to undermine the Affordable Care Act by “cherry-picking” healthy participants out of state-run marketplaces. Twenty-one states and the District of Columbia filed their own joint, friend-of-the-court brief Wednesday saying that the case raises fundamental questions about state versus federal regulation under the Employee Retirement Income Security Act.
Even plans covered by ERISA remain subject to state regulation to protect residents from fraud, financial insolvency, and substandard insurance coverage, they argued.
“The history of ERISA enforcement, however, reveals a surfeit of schemes calculated to cloak the sale of health coverage to employers and individuals in the costume of an ERISA plan in order to evade the consumer protections of state insurance regulation,” the states say in their brief.
Data Marketing Partnership LP and LP Management Services LLC call insurance recipients “limited partners” in that venture. U.S. District Judge Reed O’Connor for the U.S. District Court for the Northern District of Texas ruled them “working owners” eligible for employer-sponsored coverage subject to federal regulation—not state oversight.
That interpretation could subvert a historical power-sharing agreement among Congress, the U.S. Supreme Court, and the Department of Labor to consider ERISA’s preemptive reach without crowding out states’ ability to enforce insurance policing powers, they said.
Patients at Risk
The novel limited-partnership business model threatens to undermine a major tenet of the Affordable Care Act, or Obamacare, by steering enrollees away from state-sponsored insurance exchanges. That could subvert the law’s goal of keeping health-care costs affordable by grouping healthy and sick people together.
Randall Johnson of LP Management Services said in a statement late Thursday the intent of the partnership—and others like it—is to encourage participation in a technology-based project.
“To do this, we turned to a group of health benefit experts to build out group health plans that provide a full menu of coverages that are all subject to ERISA regulation and are fully reinsured,” he said.
Wednesday marked the end of a seven-day deadline to receive amicus briefs in this case. The companies’ opposition brief is due at the New Orleans-based U.S. Court of Appeals for the Fifth Circuit on April 30.
In a separate filing late Wednesday, the Blue Cross Blue Shield Association argued that data marketing schemes could damage insurance markets, destabilizing risk pools and causing premiums to increase.
Another filing by the Leukemia & Lymphoma Society, the American Cancer Society and its action network, the Cystic Fibrosis Foundation, and the National Organization for Rare Disorders argued that companies such as Data Marketing Partnership and LP Management Services put their own policyholders at risk because they lack the experience or oversight to stay in business. Allowing the companies to “masquerade” as employers harms patients, they said.
“It stands to reason that Data Marketing will not be the last ‘partnership’ to spring up with promises of unregulated, bargain-basement health insurance,” the patient groups said. “Yet, without robust oversight from state insurance authorities, there is little to ensure that the tens of thousands of people buying into these arrangements are not throwing their premiums away into a fraudulent enterprise or an insolvency-in-waiting.”
Alex Renfrow, principal benefits consultant for LP Management Services, first submitted a DOL request in 2018 to recognize data marketing partnerships as employee benefits. The department denied that request, which resulted in the district court battle. The company, he said, has never denied coverage for lack of funds and every legitimate claim has been paid.
“These are fully operational plans that have provided tremendous benefit to thousands of Americans who need access to good health-care,” he said by email. “We are proud of our efforts and frankly disappointed that the DOL, along with 21 states, fail to see the significant benefit these plans have provided fellow Americans, particularly throughout this pandemic.”
The case is Data Marketing Partnership v. Dep’t of Labor, 5th Cir., No. 20-11179, 4/7/21