Insurance Now Subject to Federal Jurisdiction

/PRNewswire/ -- On December 9, 2009, the United States Court of Appeals, Tenth Circuit, affirmed the federal government's position that private insurance companies are "plans" and therefore subject to federal jurisdiction. (US vs. Frost)

Although other federal courts have held that contracts issued by insurance companies may be subject to federal jurisdiction under Title 18 Section 1347, US vs. Frost is the first case an insurance company itself has been held to be a "plan," because, as the government claimed in this case, all insurance companies are "plans." At trial and initially on appeal in this case, the government maintained the position that insurance contracts are "plans," but to avoid a constructive amendment, changed their theory claiming that all insurance companies are "plans" as a "matter of law" and the 10th Circuit agreed.

Ironically, the term "plan" was first adopted by ERISA in 1974. Although ERISA generally excluded insurance companies as "plans," the federal government now claims that health insurance companies are the private equivalent of Medicare and Medicaid which are "plans." Therefore, all insurance companies that make payments for the cost of medical services are "plans" under federal law. The 10th Circuit agreed and upheld the district court's finding that simply paying a medical claim qualifies an insurance company as a "plan."

Not only does this ruling open the door for the federal government to hold all insurance companies subject to ERISA, but it automatically and retroactively subjects all insurance companies to federal jurisdiction under Title 18, 669, 1035 and 1347 by qualifying them as "Health Care Benefit Programs" under 24(b).

If upheld by the Supreme Court, a quantum leap toward federal regulation of health insurance companies will be complete. Redcorn and Frost, the defendants in the case, stated they would ask the Tenth Circuit to reconsider the matter 'en banc' before they appeal to the Supreme Court.

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Save Flexible Spending Plans Applauds Amendment to Protect Flexible Spending Accounts

/PRNewswire/ -- Save Flexible Spending Plans, a national grassroots organization dedicated to protecting flexible spending accounts (FSAs), praised Sen. Charles E. Schumer (D-NY) for filing an amendment to the Patient Protection and Affordable Care Act that would help protect the future use and value of FSAs. The amendment, filed yesterday afternoon, would adjust for inflation the currently pending $2,500 cap on FSAs, helping to ensure that participants will be able to meet their out-of-pocket health care needs over time.

"We are encouraged that Sen. Schumer filed an amendment to protect FSAs, a benefit relied upon by more than 35 million working American families to manage and hold down their health care costs," said Joe Jackson, chairman of Save Flexible Spending Plans and CEO of WageWorks Inc., a benefits company based in San Mateo, CA. "Without indexing the $2,500 contribution cap for inflation, millions of participants, including those battling chronic illnesses, will see the value of their FSAs quickly erode. The Schumer amendment would solve this problem, ensuring that access to FSAs stays in line with increasing costs. Filing of the amendment further acknowledges the importance and support in the Senate for preserving FSAs as a valuable cost-saving benefit."

Failing to adjust the contribution cap for inflation, as had been crafted in legislation passed by the House of Representatives, will cause the value of a $2,500 FSA to plummet to less than half its worth within a decade.

"Following the September introduction of Sen. Baucus' (D-MT) health care reform legislation, Senate Finance Committee members from both parties offered amendments to protect FSAs," added Jackson. "We are hopeful that once again, Senators from both sides of the aisle will sign on in support of the Schumer amendment and his solution that is critical to protecting FSAs."

Beyond the need to adjust the contribution cap for inflation, there are still concerns about the unreasonably low amount of the cap, which has been proposed. The restrictions will force approximately 7 million hard-working Americans who use their FSAs to pay for out-of-pocket health care expenses greater than $2,500 to pay higher taxes and health care costs. Federal employees who currently enjoy a $5,000 limit on FSA contributions will see their access to FSAs cut in half. Additionally, state employees in 46 states who currently have FSA contribution limits set at $3,000 or more will be negatively impacted. Sadly, those with the highest out-of-pocket health care costs - the sickest - will be hit the hardest by restrictions on FSA use.

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