Rhode Island proposes the highest health insurance readability standards in the nation

Rhode Island has proposed a new rule that would require all health insurance policies to be readable at the eighth-grade level.

Scholarship suggests that health care-related information is among the least comprehensible type of information and that this lack of comprehension can lead to poor overall health, less use of preventative care, and inflated health care costs.

No doubt, health insurance forms contribute to this problem. Although health insurance forms contain critical consumer information, they contain complex and highly technical language. This creates a barrier to comprehension by consumers with low literacy skills and can often be incomprehensible to high-level readers. For example, can YOU understand the following passage from an approved Rhode Island policy?

The following rules determine which is the “primary” program:
a) If the other program is not primarily a dental program, this program is primary.
b) If the other program is a dental program, the following rules are applied:
1. The program covering the patient as an employee or group member is primary over a program covering the patient as a dependent.
2. The plan covering the patient as a dependent child of a person whose date of birth occurs earlier in the calendar year shall be primary over the plan covering the patient as a dependent of a person whose date of birth occurs later in the calendar year provided. However, in the case of a dependent child of legally separated or divorced parents, the plan covering the patient as a dependent of the parent with legal custody, or as a dependent of the custodial parent’s spouse (i.e. step-parent) shall be primary over the plan covering the patient as a dependent of the parent without legal custody. If there is a court decree which would otherwise establish financial responsibility for the health care expenses with respect to the child, the benefits of a plan which covers the child as a dependent of the parent with such financial responsibility shall be determined before the benefits of any other policy which covers the child as a dependent child.
c) If neither (a) nor (b) applies, the program that has covered the patient longer is primary, except that a plan covering the patient as a laid-off or retired employee or the dependent of a laid-off or retired employee shall be determined after those of a plan covering the patient as an employee or the dependent of an employee. However, if the other plan does not have a provision similar to this provision, then this exception shall not apply.

According to the Flesch-Kincaid readability formula, this provision is written at the 20th grade level. 20TH GRADE!!!

Another contributing factor is the problem of low adult literacy rate. According to the Providence Journal, forty-seven percent of Rhode Island’s adult population reads at the sixth-grade level or below.

The purpose of this regulation is to protect the interests and improve the health of health insurance consumers by making health insurance policies easier to read and understand.

Recommendations for readability standards for health-related legal documents generally range from fourth to eighth grade levels.* A readability standard of the seventh- to eighth-grade level to certain health coverage-related documents has already been required in other jurisdictions.** Balancing the high level of adult illiteracy in Rhode Island and the burden of implementing a readability standard, the Office of the Health Insurance Commissioner has chosen to require a readability standard no higher than the eight-grade level for all health insurance policies.

The hearing on the proposed regulation is scheduled for April 30, 2009.
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*See, e.g., Michael K. Paasche-Orlow, Holly A. Tayor & Frederick L. Brancati, Readability Standards for Informed-Consent Forms as Compared with Actual Readability, 348 NEW ENG. J. MED. 721, 725 (2003) (suggesting that a fourth- to sixth-grade reading level is a suitable target for consent forms for institutional review boards); Sharona Hoffman, Symposium on Bioethics: Thinking About Biomedical Advances: The Role of Ethics & Law: Regulating Clinical Research: Informed Consent, Privacy, and IRBs, 31 CAP. U.L. REV. 71, 89 (2003) (recommending that informed consent documents be written at an eighth grade reading level); State Children’s Health Insurance Program (SCHIP) Renewal Process, U.S. Dep’t Health & Human Servs., Office of Inspector General, Rep. No. OEI-06-01-00370, at 3 (Sept. 2002) (noting that “[m]aterials written at the 7th to 8th grade reading level are the standard for what is readable by and suitable for the general public.”); Martha Williams-Deane & Linda S. Potter, Current Analysis of Oral Contraceptive Use Instructions: An Analysis of Patient Package Inserts, 24 FAM. PLAN. PERSP. 111, 114 (1992) (concluding that patient labeling should be drafted at the fifth or sixth grade level); T. M. Grundner, On the Readability of Surgical Consent Forms, 302 NEW ENG. J. MED. 900, 901 (1980) (suggesting that adult consent forms should be at a maximum of a seventh or eight grade level).

**See, e.g., Minn. R. 9506.0400 (MinnesotaCare) (“A health plan shall provide each enrollee a certificate of coverage approved by the commissioner, a health plan identification card, a list of participating providers, and a description of the health plan complaint and appeal procedure. All written information provided enrollees must be understandable to a person reading at the seventh grade level . . . .”); Tenn. Comp. R. & Regs. R. 1200-13-1-.10 (requiring sixth-grade reading level notifications to Medicaid nursing facility residents); Centers for Medicare & Medicaid Services, Medicare Program; Criteria and Standards for Evaluating Intermediary, Carrier, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Regional Carrier Performance During Fiscal Year 2004, 68 FR 74613, 74615 (Dec. 24, 2003) (noting that letters, decisions, or correspondence that go to Medicare beneficiaries from a Medicare contractor should be written below the 8th grade reading level “unless it is obvious that an incoming request from the beneficiary contains language written at a higher level”); Minn. Stat. § 144.056 (“To the extent reasonable and consistent with the goals of providing easily understandable and readable materials and complying with federal and state laws governing the program, all written materials relating to determinations of eligibility for or amounts of benefits that will be given to applicants for or recipients of assistance under a program administered or supervised by the commissioner of health must be understandable to a person who reads at the seventh-grade level . . . .”). See also section 2.05.14.01 of the RIte Care contract, which specifies that the RIte Care member handbook must be written at no higher than a sixth-grade level.

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Can a state Cafeteria Plan mandate work? Only with some help from the Feds

The Rhode Island Office of the Health Insurance Commissioner (OHIC) just issued notice that it intends to adopt a regulation that interprets and applies Rhode Island’s so-called “cafeteria plan” mandate. There is a problem, however. In the course of developing the regulations, OHIC has concluded that implementation of HITI may conflict with certain federal statutes, including the Employee Retirement and Income Security Act of 1974 (ERISA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA).

What is a cafeteria plan?

A cafeteria plan is a tax-qualified plan under Section 125 of the Internal Revenue Code that allows employers to give their employees the opportunity to pay for benefits, such as health insurance, on a pretax basis. Pretax benefits lower payroll-related taxes for both the employer and employees. Reportedly, its name comes from the fact that it allows employees to choose between different types of benefits, similar to the choices available in a cafeteria.

Why does Rhode Island have a cafeteria plan mandate?

Employees who participate in group health plans through their employer already enjoy the tax benefits of a Section 125 plan. However, employees whose employer does not offer a group health plan, or employees who are not eligible for their employer’s group health plan, must purchase their health insurance in the individual market. Health insurance purchased by these employees in the individual market does not qualify for any tax subsidy. Thus, in 2007, the Rhode Island General Assembly established R.I. Gen Laws § 27-70-1 et seq., the Health Insurance Tax Incentive statute (HITI) to try to give these employees the opportunity to enjoy the same tax subsidy for their health insurance as those employees who participate in group health plans.

HITI requires employers with more than 25 employees to adopt and maintain a cafeteria plan through which employees and their dependents may purchase health insurance in the individual market. While HITI requires certain employers to establish a cafeteria plan, it neither requires employers to pay for or otherwise contribute to the cost of any health insurance purchased through the cafeteria plan, nor requires employers to set up or maintain a group health plan or take any action that affects an existing group health plan. The HITI implementation deadline for Rhode Island employers is July 1, 2009.

What is the problem with HITI?

In the course of developing its regulations, OHIC has concluded that implementation of HITI may conflict with several federal statutes. For example, HITI may be viewed as preempted by ERISA either because it creates an “employee welfare benefit plan” within the meaning of ERISA or because it “relates to” employers’ ERISA employee welfare benefit plans within the meaning of ERISA. Section 514(a) of ERISA states that ERISA preempts “any and all State laws insofar as they . . . relate to any employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). If applicable, the ERISA preemption would render HITI unenforceable. While some researchers have opined that ERISA preemption is not likely, preemption remains an open question because the U.S. Department of Labor has not provided any direct and formal guidance or opinion as to whether a state law that mandates a cafeteria plan would be subject to ERISA preemption and no court has directly addressed the issue.

Also, COBRA may be an issue. COBRA requires employers with 20 or more employees offering health coverage to allow employees and their dependents who experience a “qualifying event” (e.g., job termination, employee death, dependent child aging out of group eligibility) to continue in the group health plan for 18 to 36 months by paying the full premium (plus up to 2 percent for administrative costs). The IRS definition of “group health plan” under COBRA is much broader than the common understanding of group health insurance and likely includes cafeteria plans, even cafeteria plans that only provide employees the opportunity to fully pay for individually purchased health insurance with pre-tax dollars and involve no employer subsidy of the health insurance premium (See Treas. Reg. 26 C.F.R. §54.4980B-2 (Q&A-1), (Q&A-8)(a)). This may mean that an employer that sets up a cafeteria plan for its employees so that they can purchase health insurance in the individual market may be subject to COBRA’s requirements for its employees’ health insurance, even thought the employee did not get its health insurance through the employer.

HIPAA also may cause problems. HIPAA shares COBRA’s definition of a group health plan. Thus, Title I of HIPAA, which among other things includes restrictions on preexisting condition limitations and prohibits premium differentials within a group based on health status, could also apply to individual insurance purchased through a cafeteria plan. Such restrictions and limitations would make the purchase of individual insurance through a cafeteria plan unworkable.

Other states, like Missouri, have expressed similar concerns. As a result of these potential problems, OHIC was forced to take a “wait and see” approach with respect to implementing HITI. OHIC has construed the requirements of HITI very narrowly so as to minimize the possibility of conflicts with federal law and has proposed a regulation consistent with its narrow construction. This means that the mandate does not apply to self-funded plans or plans that do not already have an employee benefit plan. This interpretation effectively guts the intent of the law--to make health insurance available on a pre-tax basis to those who must buy in the individual market. Unfortunately, OHIC had little choice. If it interpreted the law as broadly as possible, employers might have been forced to choose between violating the state law or possibly violating a federal law.

What can be done?

Only the federal government can fix this problem by either (1) telling the states formally that state cafeteria plan mandates will not conflict with ERISA, COBRA and HIPAA or (2) passing a law that expressly allows for the purchase of health insurance in the individual market with cafeteria plan dollars, with an express ERISA, COBRA and HIPAA exemption. This would be an excellent way for the Obama administration to start its push for health insurance reform.

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