The Patient Protection and Affordable Care Act, Bill Number H.R. 3590, prohibits insurance companies from using pre-existing conditions to underwrite, reject, or rescind health insurance policies.  Yet, H.R. 3590 itself lacks an enforcement mechanism to deter and punish health insurance corporations for violations of the prohition on pre-existing condition exclusions and other discrimination.

Any health insurance corporation that violates the prohition on pre-existing condition exclusions and other discrimination in Section 2704 of the Patient Protection and Affordable Care Act, is subject to “civil money penalties” (e.g., fines) under 42 U.S.C. § 300gg–22(b)(2)(C)(i) of the Public Health Service Act (42 U.S.C. §§ 300gg et seq.), which stipulates that the maximum amount of financial penalty imposed under for violations is $100 for each day for each individual with respect to which such a failure occurs. (Notably, there are no criminal penalties and the statute enables health insurers to obtain administrative and judicial review before any civil money penalties can actually be collected.)

By way of explanation, Section 2704 of the Patient Protection and Affordable Care Act is the “Prohibition of Pre-Existing Conditions Exclusions or Other Discrimination Based on Health Status.”  However, the pre-existing conditions prohibitions established by H.R. 3590 are actually written to supplement the existing statutory language of the Public Health Service Act (42 U.S.C. §§ 300gg et seq.)  The Public Health Service Act is a United States federal law enacted in 1944. The full act is captured under Title 42 of the United States Code “The Public Health and Welfare”, Chapter 6A “Public Health Service”.

In general, a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual:

  • Health status
  • Medical condition (including both physical and mental illnesses)
  • Claims experience
  • Receipt of health care
  • Medical history
  • Genetic information
  • Evidence of insurability (including conditions arising out of acts of domestic violence)
  • Disability

If an insurance company is caught establishing rules for eligibility (including continued eligibility) based on any of the aforementioned health-status related factors, the company will be subject to punishment in the form of a civil penalty.  Indeed, the Patient Protection and Affordable Care Act (H.R. 3590) Section 2704 looks to 42 U.S.C. § 300gg–22 et seq. for enforcement.  Specifically, “Subtitle C – Quality Health Insurance Coverage for All Americans, PART I – Health Insurance Market Reforms, Sec. 1201. Amendment to the Public Health Service Act, Subpart i – general reform” provides that Part A of title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.), as amended by section 1001, is further amended by striking the heading for subpart 1 and inserting the following:

(2)(A) in section 2701 (42 U.S.C. 300gg), by striking the section heading and subsection (a) and inserting the following:

“SEC. 2704. PROHIBITION OF PREEXISTING CONDITION EXCLUSIONS OR OTHER DISCRIMINATION BASED ON HEALTH STATUS.

“(a) In General.–A group health plan and a health insurance issuer offering group or individual health insurance coverage may not impose any preexisting condition exclusion with respect to such plan or coverage.”

Thus, the enforcement of the pre-existing condition limitations of the Patient Protection and Affordable Care Act are delegated to 42 U.S.C. §§ 300gg, the Public Service Health Act.  The federal law 42 U.S.C. § 300gg–22 is the provision for enforcement which vests state and secretarial authority to impose punishments for violation of the statute.  Under 42 U.S.C. § 300gg–22(b)(2)(C)(i),

(C)(i) Amount of Penalty, In general – The maximum amount of penalty imposed under this paragraph is $100 (one hundred dollars) for each day for each individual with respect to which such a failure occurs.

However, some factors may mitigate the final amount owed as penalty under 42 U.S.C. § 300gg–22(b)(2)(C), (D), (E), and (F). Although 42 U.S.C. § 300gg–22(b)(2)(C) – “Amount of Penalty” imposes a maximum amount of penalty of $100 for each day for each individual with respect to which such a failure occurs, the final amount of civil penalty an insurance company in violation must ultimately pay could actually be increased, revised downwards, or dismissed entirely.

Within 42 U.S.C. § 300gg–22(b)(2)(C)(ii) – “Considerations in Imposition”, the Secretary, in determining the amount of any penalty to be assessed, shall take into account the previous record of compliance of the entity being assessed with the applicable provisions of this part and the gravity of the violation.

According to 42 U.S.C. § 300gg–22(b)(2)(C)(iii) – “Limitations”, no civil money penalty shall be imposed on any failure for which it is established to the satisfaction of the Secretary that the insurance corporation against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed. Moreoever, no civil money penalty shall be imposed on any insurance company failure if such failure was due to reasonable cause and not to willful neglect, and such failure is corrected during the 30-day period beginning on the first day any of the entities against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed.

As provided by 42 U.S.C. § 300gg–22(b)(2)(D)- “Administrative Review”, any insurance company assessed a civil money penalty is granted an administrative review and opportunity for hearing. Specifically, the insurance company assessed shall be afforded an opportunity for hearing by the Secretary upon request made within 30 days after the date of the issuance of a notice of assessment.

Furthermore, any insurance company that is assessed a civil money penalty and engages in an administrative review is also entitled to judicial review under the statutory provisions of 42 U.S.C. § 300gg–22(b)(2)(E) – “Judicial Review”. The judicial review requirement for insurance companies assessed a civil money penalty provides that any entity against whom an order imposing a civil money penalty has been entered, after an administrative hearing, may obtain review by the United States district court for any district in which such entity is located or the United States District Court for the District of Columbia by filing a notice of appeal in such court within 30 days from the date of such order, and simultaneously sending a copy of such notice by registered mail to the Secretary.

Thereafter, the Secretary shall promptly certify and file in such court the record upon which the penalty was imposed.  With regards to the standard of review for the court, 42 U.S.C. § 300gg–22(b)(2)(E)(iii) dictates that findings of the Secretary shall be set aside only if found to be unsupported by substantial evidence. Of course, any final decision, order, or judgment of the district court concerning such review shall be subject to appeal.

Following final judgement of a civil money penalty against a health insurance corporation, the entity must actually pay the assessed fine. However, if the health insurance company fails to pay the civil money penalty after it has become a final and unappealable order, or after the court has entered final judgment in favor of the Secretary, 42 U.S.C. § 300gg–22(b)(2)(F) requires that the Secretary shall refer the matter to the Attorney General who shall recover the amount assessed by action in the appropriate United States district court.

Under Federal law, all consumers are entitled to an annual copy of their medical report files from the nationwide specialty consumer reporting agencies.

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