Feds Require Changes to Virginia Health Insurance Law

by James C. Sherlock

There are a couple of new issues between Virginia’s Bureau of Insurance (BOI) and the federal Centers for Medicare/Medicaid Services (CMS).

The problems were briefed today by a Board of Insurance representative to the Health Insurance Reform Committee.

CMS has told the BOI that the 2020 General Assembly passed a law (possibly without knowing the implications) that violated a federal statute. The Virginia law attempted to protect the state from having to spend money to fund a new health insurance mandate for Qualified Health Plan (QHP) holders. QHPs are small group and individual policies sold on the ACA exchange.

The feds are not amused. Virginia law apparently will need to be changed.

Julia Blauvelt of the BOI, a component of the State Corporation Commission, presented the background on those challenges today to the General Assembly’s Health Insurance Reform Commission (HIRC).

  • Benefits originally included in the state’s benchmark plan are essential health benefits (EHB), whether or not mandated.
  • State can require benefits “in addition to EHB” but if so, must make payments to defray the cost.
  • Any benefit required by state action taking place on or after January 1, 2012, other than for purposes of compliance with federal requirements, is considered in addition to EHB.
  • New federal rules require states to report all state-mandated benefits by July 1, 2022 and annually thereafter.

There is a little more to the background than that. The General Assembly passed two laws in 2020.

  1. The first was well intentioned. Code of Virginia § 38.2-3418.18. Coverage for formula and enteral nutrition products as medicine. That is judged by CMS to be an addition to EHB.
  2. The second law, Code of Virginia 38.2-6506 Certification of health benefit plans as qualified health plans apparently violated twin federal requirements:
    • that newly-mandated benefits be uniformly applied across all insurance plans regulated by the state; and
    • that the state pay any costs of the new benefit to Qualified Health Plan holders.

Indeed, CMS has told BOI that 38.2-6506 A 1 violates federal standards that prevent discrimination in coverage mandates among plans.

The formula and enteral nutrition bill is the only benefit mandate that the BOI has determined requires defrayal — state payment of all expenses — under its new understanding of the law. It estimates that the cost to the state will be between $300,000 and $700,000 annually.

The bigger impact is that any other new health insurance mandates that the General Assembly may pass in the future may also have to be 100% funded by the state for policies bought on the ACA exchange.

Code of Virginia 38.2-6506 A 1 and any other laws that require a different set of benefits for different plans in a market will have to be changed or risk federal pre-emption. Under pre-emption, federal penalties of up to 1% of payments otherwise due to Virginia could be assessed annually until corrective actions are taken.

The BOI notified the committee it will prohibit QHPs from including formula and nutrition benefits in 2023 plans unless Virginia law is changed.

I am not sure what the GA will do. But it appears to me that it got bad advice in 2020, and will have to clean it up.

Lessons:  Healthcare is maddeningly complicating. Legislating in that space is hard.

I am surprised there are not more issues like this.

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10 responses to “Feds Require Changes to Virginia Health Insurance Law”

  1. Nancy Naive Avatar
    Nancy Naive

    Not hard to understand. The ACA established standards of coverage for plans and federal dollars may cover some portion of premium and expenses associated with those plans sold on the MarketPlace.

    If the State mandates a coverage, it can’t discriminate based on how the plan is sold, and if it costs more for plans on the MarketPlace, the State must cover its share of that increase.

    Of course, the beauty of that notion is that its in the tax codes and, well, we all know what SCOTUS said of that.

    Kind of surprising that the crafters of the laws in question didn’t evaluate those changes.

    BTW, having worked tangentially in the government where one comes across a certain level of head scratching almost daily, one thing really bothers me. Shouldn’t it be CMMS.gov?

    1. James C. Sherlock Avatar
      James C. Sherlock

      Good analysis. See my response to Dick below about Virginia’s law- and rule-making process.

      1. Nancy Naive Avatar
        Nancy Naive

        Thank you. It was a spec job. “Don’t ‘spect much.”

        Unlike most of the BR persuasion, I love the ACA. It’s a wonderfully simple dovetail of the Schedule A medical deduction with a premium credit that saved the private medical system. It was 10,000 pages with 9,999 of it a waste of paper. That’s it. That’s all it is. Well, a lot of bitchin’ and screamin’, but simple.

        I could sum up the entire ACA in one page with examples.

  2. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Nice reporting, Jim. This is a complicated area. I don’t mind admitting that I did not understand much of what you reported.

    If anyone is to blame, it would be the SCC and its Bureau of Insurance. The bill gave the SCC the duty to implement the new exchange and SCC staff normally follow bills that affect that entity. They should have alerted the GA of the conflict with federal law.

    It will be interesting to see what happens next Session, when someone tries to clean it up. The state law authorizes the establishment of a state health exchange, which, I presume, Virginians can use to utilize Obamacare. Now, Republicans hate Obamacare and the vote on the bill in 2020 was a straight party line vote in the House of Delegates. I wonder if the House Republicans, who will be in the majority (I assume) in 2022, will agree to get rid of a conflict with federal law in the Virginia Code.

    Am I correct in interpreting your explanation as meaning that the state will have to pay penalties if it does change its law to conform with federal law?

    1. James C. Sherlock Avatar
      James C. Sherlock

      Thanks and you are correct.

      As a strategic observation, I have noted over the years that Virginia laws and regulations have thousands of more pages than necessary because they attempt to restate issues that are covered by federal law and regulation.

      That is a double- pronged mistake. It is not only a great waste of effort, but always exposes those laws and regulations to the supremacy clause as here and risks them being made obsolescent at the stroke of a federal pen.

      Healthcare is one of the clearest areas of vast federal control. Virginia law and regulations, in my view, should incorporate by reference any controlling federal laws and regulations using “and successors” to cover changes. Then scrupulously avoid attempting to restate what those federal guidelines are. If the federal laws require states to set various implementing policies, then do so. Otherwise, leave it alone.

      Virginia obviously needs its own laws and regulations, but lawmakers and rule makers make it way harder and riskier than it needs to be when the federal government has laws and policy that will preempt Virginia rules.

      I have made this argument before with reference to Virginia’s very extensive laws and regulations on nursing home requirements and inspections. The federal government has a complete set, and Virginia Department of Health inspectors actually conduct the inspections under federal rules. There are only six nursing homes in Virginia that are not CMS certified. Virginia DOH also insects those, but under Virginia rules.

      So Virginia takes up a very large section of the legal and administrative codes writing its own rules for nursing homes rather than just adopting the federal guidelines by reference.

      1. Nancy Naive Avatar
        Nancy Naive

        You’re right about one sure thing “Don’t duplicate the Federal law. Cite it, and add the State addendum.”

        Still, shouldn’t it be CMMS? Fix the small stuff first.

        1. James C. Sherlock Avatar
          James C. Sherlock

          Literally thousands of pages of state law and regulations are at best redundant.

          1. Nancy Naive Avatar
            Nancy Naive

            Department of Redundancy Department

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