Whether StayWell can legally award refunds to healthy customers has been referred to the attorney general for a second opinion.

Andreas J. Jordanou insurance commissioner at the Department of Revenue and Taxation has forwarded a complaint to the attorney general.

The complaint alleged StayWell Guam Inc.’s medical insurance refund program violates a section of the federal Health Insurance Portability and Accountability Act of 1996 and Guam law.

Documents filed on Dec. 1 2004 by Todd Baum director of recruitment and organization at the Guam Federation of Teachers — the complainant — said “The StayWell Commercial Silver plan of which I was a member and previously provided a copy of to your office included a pre-funded deductible appearing to violate the HIPAA nondiscrimination policy 29 CFR 2590.702. These provisions would allow this type of premium refund only for Bona Fide Wellness Programs to prevent or control a disease. The use of this prefunded deductible requires well and sick individuals pay a monthly refund of premium. StayWell uses the term refund in relation to the pre-funded deductible.”

Baum’s complaint also references local law. “In reference to 15 GCA §15707. Rebates or Refunds. (a) It is unlawful for an insurer broker agent or solicitor to pay or offer to pay directly or indirectly to any person as an inducement for such person to enter into an insurance contract on any risk in Guam any rebate of the whole or part of the premium or commission payable thereon or any valuable consideration which is not clearly specified promised or provided for in the policy. Any health insurer may refund to the insured a part of any premium paid for such insurance based on the insured’s utilization of health care benefits if such refund is clearly specified promised or provided for in the health insurance policy. This allows a Health Insurer to rebate but does not give them the ability to supercede the Federal Law and discriminate against different similarly situated individuals in the same group. Some get a refund and some do not based on their stated of health.”

A seven-page letter submitted to the insurance commissioner from William S. Bossany associate administrator with StayWell Insurance to Baum on Oct. 13 2004 defines StayWell’s insurance policies regarding refunds. A portion of that letter reads “Because a deductible is not part of the “premium” under conventional interpretations of the term or under the plan there is no “rebate” of premium when a subscriber receives a refund of the prefunded deductible. This refund is a return of the subscriber’s property that was not utilized by the subscriber to meet his or her deductible obligations under the plan. The refund is not a rebate of premium which under the definition in the plan becomes property of StayWell upon receipt by StayWell.”

Baum rebutted Bossany’s assertions in his Dec. 1 2004 letter and argued while the funds from the pre-funded deductible are held for Baum’s benefit StayWell keeps 20% of his money. “I would argue no trust exists the prefunded deductible is actually a rebate of premium for something other than a bona fide wellness program ” he said.

A letter dated Oct.13 2004 from Bossany to Jordanou reiterated StayWell’s position: “HIPAA preempts Guam law. However as you will see in our response to Mr. Baum the StayWell plan complies with HIPAA. There is no premium refund made by StayWell which is based upon the insured’s utilization of health care benefits. Instead there is a refund or unused prefunded deductible monies which are collected during the plan year.”

An Oct. 22 2004 letter to Baum’s employer the Guam Federation of Teachers from Bossany said “During our regular negotiations regarding the Government of Guam Health Insurance Contracts the government’s representatives have specifically agreed with us that our plan is HIPAA-compliant.” StayWell also filed with the insurance commissioner a copy of a February 1997 letter from Joseph T. Duenas former insurance commissioner. The letter from Duenas referred to StayWell’s 1997 medical insurance contract with the government of Guam. The letter read “The filing of the above referenced plan has been reviewed and approved effective this date.” The document also stated “Enclosed are copies of the plan stamped approved for your records.”

While StayWell argues that its refund program does not violate HIPAA Calvo’s Insurance Underwriters Inc. opted to discontinue one of its SelectCare insurance products with a refund program. The product was on the market from January 2001 and was pulled in December 2004. Calvo’s Insurance declined to comment.

According to staff of the insurance commissioner Baum’s complaint was forwarded to the attorney general’s office. As of April 29 the insurance commissioner had not received a response or an opinion from the AG’s office. MBJ