Consumer privacy protection continues to be top of mind for regulators given a climate where technology companies face scrutiny for lax data governance and poor data stewardship.  Less than a year ago, California passed the California Consumer Privacy Act (CCPA) of 2018, to strengthen its privacy laws.  In many regards, the CCPA served as a watershed moment in privacy due to its breadth and similarities to the E.U. sweeping General Data Protection Regulation (GDPR) law.

Yet, California continues to push the envelope further.  Recently, California State Senator Jackson and Attorney General (AG) Becerra introduced a new bill (SB561) that will expand the consumer’s right to bring private lawsuits for violations of the CCPA. If passed, SB561 will: (1) provide for a private right of action for all CCPA violations—not just those stemming from a data breach; (2) eliminate the 30-day period for businesses to cure after receiving notice of an alleged violation; and (3) allow the AG to publish guidance materials for businesses instead of allowing businesses’ the option to seek specific opinions of the AG. Currently, the CCPA allows the AG office to bring action against business, in most instances, only allowing consumers to bring private action in instances of data breach resulting from a business’s failure to implement reasonable security measures. If SB561 is passed, the CCPA will materially expose businesses to private actions for damages applicable to other violations under the CCPA, including failure to provide consumers with proper notifications required under the CCPA.

These developments are just the tip of the iceberg.  Emboldened by California’s example, many other states are following suit. As such, businesses that implement an effective CCPA compliance program will likely position them to satisfy potential compliance obligations in other states moving forward.  For example, Colorado recently passed as sweeping law to protect patient privacy (HB18-1128), which went into effect September 1, 2018.  Colorado now requires covered entities (e.g., business entities that maintain, own, or licenses personal identifying information (PII) in the course of their business) to implement, and ensure that third-party service providers implement, reasonable security procedures and practices.  Additionally, the law requires covered entities to develop written policies and procedures concerning the destruction of paper and electronic documents that contain PII. Further, the law authorizes the AG to bring criminal prosecution against covered entities that violate the new rules.

Other states including Hawaii, Maryland, MassachusettsNew Mexico, New York, North Dakota, Rhode Island, and Washington are also using the CCPA and the GDPR as templates to perform similar overhaul of their privacy laws. As a result of this state law trend, businesses should closely monitor the legislative progress of these state bills.  Further, if businesses have not yet started shoring up their privacy and data security practices and programs, they had better do so in short order. It is likely that many of these state laws, if passed, will carry stiff penalties for noncompliance and may subject businesses to class actions.

In addition to these piecemeal state law efforts to strengthen privacy, the U.S. Chamber of Commerce is currently exploring whether a Federal consumer privacy protection law should be enacted.  It appears that the privacy tidal wave starting on California’s west coast is making its way eastward . . . .

 


Daniel Kim


Alaap B. Shah

Did you know that your zip code is a better predictor of your health than your genetic code? Public health experts – and your health insurance provider – have long known that the air you breath, the education you receive, your net worth, and even the music that you listen to are strong indicators of your overall health – and the possibility that you might need expensive medical procedures in the future. By some measures, up to 50% of your overall health is determined by social, economic, and environmental factors. As the movement to value-based payment continues in health care, there has been a renewed focus from policymakers and payors on “social determinants of health” in an attempt to curtail health care costs by addressing the root problems of poor health; before the patient is at-risk and when the interventions may be cheaper than medical care.

The concept that social determinants of health play a crucial role in limiting health care costs is hardly new, but has been more prominently incorporated into payment reform programs recently. New York, for example, has established the Health and Recovery Plan (“HARP”), a program designed for Medicaid beneficiaries with serious mental illness or substance use disorders. The HARP program combines traditional medical care with “Home and Community Based Services,” with the intent to ensure that HARP beneficiaries also receive care for underlying social factors that exacerbate their mental health or substance use issues. HARP now includes, as part as the Medicaid managed care premium paid by New York State to managed care organizations administering the program, coverage for services ranging from assistance in accessing transportation, locating and securing housing, instruction on personal budgeting, and both general and vocational education services. While HARP is intended for beneficiaries over 21, New York is launching a similar program for children with behavioral health needs. New York has recently also implemented a rule for Medicaid managed care organizations requiring them to include services offered by “community-based organizations,” such as food programs or job training programs, in value-based contracts between Medicaid managed care organizations and downstream providers with the intent to address social factors in “traditional” health care payment arrangements.

While policymakers and payors are expanding attention to social determinants of health to shape health programs (and in so doing decrease money spent on medical interventions), so too are they eyeing social factors in determining the cost of health care. Companies, such as LexisNexis, are aggregating personal data and developing risk scores that are based almost entirely on an individual’s socioeconomic factors, and marketing that information to health care payors. Though LexisNexis states that it does not intend for the scores to be used to price insurance products, experts have identified risk scores as a potentially useful tool in pricing health plans. Since social factors tend to benefit wealthier individuals, with pricing health plans based on socioeconomic data has a potential to exacerbate disparities in health care access between the rich and poor. The connection between steady employment and better health outcomes has been used to justify Medicaid work requirements in states that have recently requested waivers from the federal government to implement such requirements. Others have pointed that this approach may confuse cause and effect; people with jobs are in a better socioeconomic position than those who aren’t, and therefore are generally healthier. These programs and products simply demonstrate the wide-ranging effect “social determinants of health” already have on health care and the opportunity for their role to grow substantially.

Social determinants of health are not a new idea, but they have a renewed focus as a cost-effective way to decrease health care expenditures. For providers, it may mean incentives or requirements to incorporate external factors into their delivery of care. For organizations that address such social issues, it may portend increased funding. Attention to this area may provide a unique opportunity to realize savings for providers in risk-based agreements and allow providers to get ahead of the curve in a “new” trend in health care.

Cassie Chang, a Legal Intern (not admitted to the practice of law) in the firm’s New York office, contributed significantly to the preparation of this post.

At this point, it’s not really ground-breaking news that America has a problem with opioid drugs. By way of anecdote, when I became a federal prosecutor in 2011, the last heroin case that had been prosecuted in the Nashville U.S. Attorney’s office was in the early-1990s; although, to be fair, there were then lots of what we called “pill” cases involving opioids. When I left the office in 2017, at least half of the office’s major investigations were directly related to opioids–some pills, but mostly outright heroin or fentanyl/carfentanyl . In Nashville, Tennessee, OxyContin (which is an opioid-based painkiller) can be worth up to $1.25/milligram (mg). That means that just one 80mg OxyContin has a street value of $100. Price, is of course, a reflection of demand and demand, in this case, is driven by addiction.

That addiction is costing Americans a lot of money. The White House estimates that in 2015, over 33,000 Americans died from opioid related overdoses and that the economic cost of the opioid crisis was $504.0 billion, or 2.8% of GDP. To put that in some perspective, 2015 U.S. healthcare spending accounted for 17.7% of GDP, which means that Americans spent ~1/6 as much on opioids as they did on healthcare. State governments, often stuck footing the bill for indigent addicts because of increased law-enforcement activity and drug/medical treatment, are looking at the opioid manufacturers and distributors to help pay some of this cost.

In September, 41 state attorneys general announced serving subpoenas on 6 opioid manufacturers as part of a multi-state investigation into whether the companies engaged in any unlawful practices in the marketing and distribution of prescription opioids. The attorneys general are also looking into the distribution practices of 3 pharmaceutical distributors that account for the distribution of roughly 90% of the U.S. opioid supply. According the N.Y. State AG, opioid distributors alone make nearly $500 billion a year in revenue, but those numbers (perhaps as a result of the market response to the negative publicity generated by all of this) might not be as robust as they once were. Stock prices (many of these companies are privately held) for two of the manufacturers subject to the AG subpoenas have seen stocks nose dive by ~90% and ~75% respectively after both achieving all-time highs in 2015. Of course, the reason for those drops is likely non-singular, but the timing does perhaps signal the market’s appetite for risk.

So, obviously, if you are an AG looking to combat a public health disaster, going after the manufacturers of opioids (who, at least in 2015, had lots of money), much like the manufacturers of tobacco is pretty appealing. That said, there are some considerations that are likely to be major impediments in the effort to make this into a big tobacco settlement:

  1. Prescription pills are prescribed by a medical doctor. Unlike the pack of cigarettes bought at the gas station from a clerk whose only responsibility is to verify age, opioids are, ostensibly, ordered by someone with years of advanced medical training. Pinning all the responsibility (or even just “most of it”) on manufacturers and distributors alone will be a challenge.
  2. The success of the tobacco litigation was driven in no small part by the efforts of Richard “Dickie” Scruggs, the exceptionally well-connected Mississippi lawyer who spearheaded the class-action effort and coalesced all the states into letting him be the point-man for all negotiations. Much of what made Scruggs successful in that effort–1) the self-proclaimed advantage of home cookin‘; 2) the ability to wheel and deal in the Capital thanks to his access to then Senate Majority Leader, and brother-in-law, Trent Lott; 3) the close relationship with then Mississippi Attorney General Mike Moore (who, coincidentally, is advocating for the opioid suit, this time as a plaintiff’s attorney)–is unlikely to fly in today’s world given the guttural uneasiness associated with any of the tactics utilized by Scruggs, now a convicted felon for attempting to bribe a judge in a post-Katrina litigation, and overall discomfort with anything that smacks of nepotism.
  3. The stated goal of many of the proponents of the tobacco litigation was to put cigarette manufacturers out of business–this, of course, is a sentiment still voiced by some. But, no one is realistically seeking to litigate these pharmaceutical companies into the ground. While these companies manufacture opioids, they also research and manufacture drugs that help treat pediatric Crohn’s disease, multiple sclerosis and Parkinson’s disease, among others. Simply, even if there is a settlement in all of this, the reality is that the settlement is likely to contemplate the ability of these companies to continue to research and manufacture the next wave of pharmaceutical improvements.

We recently wrote about the many failures of health insurance co-ops created under the Affordable Care Act (“ACA”), and the impact of those failures on providers and other creditors, consumers, and taxpayers.

As we described, nonprofit co-op insurers were intended to increase competition and provide less expensive coverage to consumers; however, low prices, lack of adequate government funding, restrictions on the use of federal loans for marketing, and low risk corridor payments from the Centers for Medicare & Medicaid Services created financial challenges for these insurance plans. Facing insolvency, state regulators have ordered many plans to cease offering coverage and be wound down.

In New York, the largest co-op established under the ACA, Health Republic Insurance Company of New York (“Health Republic”), was ordered shut down by New York State regulators in September 2015 because of its poor financial condition.  Health Republic’s insolvency triggered a strong push by trade groups, legislators and other representatives for meaningful change in New York.

Various trade groups, including the Healthcare Association of New York State (“HANYS”) and the Greater New York Hospital Association (“GNYHA”), have been advocating for solutions, such as the establishment of a health insurance guarantee fund to protect consumers and providers in the event of a health insurer’s insolvency or liquidation.  Presently, New York is the only state that does not have an insurance guaranty fund. In other states, guaranty funds have been effective in protecting consumers and providers when co-op plans have failed.  Others proposed remedies include state funding of shortfalls through the budget process and reform of the insurance rate approval process.

On January 6, 2016, the New York State Senate conducted a hearing regarding Health Republic’s demise.  The Senators hosting the hearing sought to determine, among other things, whether new regulations, such as those with respect to rate setting, could prevent future insurer failures.

Recently, New York State Senate Health Committee Vice Chair David Valesky (D-Syracuse) introduced legislation that would establish a guaranty fund, financed by a temporary one-time assessment on the state’s health insurers, to reimburse doctors and hospitals if a health plan becomes insolvent. Health insurers would be barred from passing along the cost of the assessment to policyholders.  The bill is supported by HANYS and GNYHA.  The insurance industry, in contrast, opposes the bill.  [reported in Crain’s Health Plus Feb. 4 and http://www.nystateofpolitics.com/2016/02/valesky-bill-shores-up-medical-insurance/ ]

by Joseph J. Kempf, Jr., and Jane L. Kuesel

On April 12, 2012, Governor Andrew Cuomo issued an Executive Order requiring the State of New York to establish an American Health Benefit Exchange and Small Business Health Options Program in New York (together, the “Health Benefit Exchange”). The Governor’s action was taken in response to the mandate contained in Section 1311 of the Patient Protection and Affordable Care Act, and the New York Legislature’s failure to enact legislation to begin development of the Health Benefit Exchange. Although the Health Benefit Exchange is tied to compliance with federal health care reform, it will have an impact on all health care plans offered in the individual and small group markets in New York.

Read the full alert here