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2016 Year in Review


DOL Audits

The Department of Labor (DOL) continues to step up the number of audits it conducts each year with a renewed focus on compliance. It’s more important than ever for TPAs to advise their client employers to be aware that everything from their health care plans to their financial dealings and operations of other plans can be placed under review in the event of a DOL audit.

The ACA reporting requirements brought about increased scrutiny of employer-sponsored health care plans and the government, and especially the DOL is expected to respond to anomalies or red flags that arise with an employer audit. But employers should be aware that the Department follows the paper trail which means that it does not have to limit its inquiries to ACA-related information only, and employers should be prepared for full-blown audits of health care plans. For that reason, among the topics that TPAs should be well-informed about are the ACA compliance requirements because the DOL has the authority to audit for compliance with several laws, including the ACA, HIPAA and MHPAEA, etc.

Significant Changes Proposed for Form 5500, Schedule J

The DOL, IRS, and PBGC jointly proposed major changes to Form 5500 that would affect retirement, health, and other welfare plans. According to a DOL source, the proposals are intended to improve employee benefit plan reporting by requiring more detailed information on issues such as group health. Of primary importance to TPAs was Schedule J which included questions that significantly burden self-funded employers. SPBA and many TPA members submitted comments to the proposed regulations.

The new proposed Schedule J will require plans that provide health benefits will see the most changes in the way they report their plan data to the Department of Labor. The new Schedule J will require a broad array of information, including:

·       The number of individuals offered COBRA coverage whether they took it or not (the current rule has no COBRA beneficiary reporting);

·       Whether the plan offers coverage for employees, spouses, children or retirees (the current rule has no reporting on participants);

·       What type of group health benefits are offered under the plan (for example, health, general surgical, pharmacy or prescription drug, mental health/substance use disorder, wellness program, preventive care, vision, dental, etc.);

·       Information on whether the plan is funded through a health insurer and whether benefits are paid through a trust or from an employer's general assets (self-funded);

·       Whether the plan has participant or employer contributions (including non-cash contributions);

·       Whether there was a failure to timely transmit participant contributions to the plan (currently no such reporting is required);

·       Grandfather benefit options (currently, no such reporting is required);

·       Did the plan utilize stop loss coverage? If so, total premium payments for stop-loss coverage, and detailed information on the attachment points for this coverage, individual claim limits, and the policy's aggregate claim limits, will be required (currently no such reporting is required);

·       Did the plan receive rebates, refunds or reimbursements from a service provider? (currently no such reporting is required);

·       Whether the plan's summary plan description (SPD), summaries of material modifications (SMM), and summaries of benefits and coverage (SBC) comply with Federal content requirements; and whether the plan is compliant with HIPAA, GINA, MHPAEA, Newborns’ and Mothers’ Health Protection Act, Women’s Health and Cancer Rights Act, Michelle’s Law and ACA (currently no such certification is required);

·       Detailed information regarding claims, such as how many benefit claim denials were appealed during the plan year; how many appealed claims were upheld as denials, and how many were payable after appeal; whether any claims for benefits were not adjudicated within the required time frames; and the total dollar amount of claims paid during the plan year; and at any time was the employer unable to pay claims at any time during the plan year? (currently no such reporting is required).


Transitional Reinsurance Fee Contributions

HHS finalized regulations with 2016 payment parameters for health care reform’s premium stabilization programs and cost-sharing requirements.

Reinsurance Contributions:

·       The annual contribution amount for the transitional reinsurance program is set at $27 per enrollee for 2016 filings due in Jan. 2017. The fees, which fund reinsurance in the individual market for 2014 through 2016, are assessed on all health insurers and self-insured group health plans (regardless of size) providing major medical coverage.

·       The reinsurance contribution submission process and reiterate that contributions may be made in one or two payments, but annual enrollment counts still must be submitted and the payments scheduled by November 15, for payment in January 2017.  

·       In addition, the current exemption from reinsurance contributions for expatriate health coverage is extended to certain self-insured expatriate plans for 2015 and 2016.

There is another exemption for self-administered, self-funded plans.

SHOPs and Individual Market Exchanges.

·       The final regulations establish that SHOP coverage may be offered to former employees (and their dependents), including retirees and COBRA qualified beneficiaries. Furthermore, SHOPs are permitted to collect premiums for COBRA coverage directly from COBRA enrollees and remit them to the insurer.

·       HHS is examining the feasibility of SHOPs taking on additional COBRA administration functions, including COBRA’s notice requirements. HHS did not finalize a policy on accepting SHOP premium payments by credit card, so until further notice, checks and bank drafts will be accepted in federally facilitated SHOPs.

·       Numerous standards for the individual market Exchanges were finalized. Among them is a change in the proposed Exchange open enrollment period for 2016, which will run from November 1, 2015 through January 31, 2016.  HHS had proposed automatic re-enrollment strategy for federally facilitated Exchanges for 2016, but decided not to finalize proposed changes to the current enrollment hierarchies (used to select a default plan if an enrollee doesn’t act during open enrollment). Currently, an enrollee who remains eligible for Exchange coverage is to be re-enrolled in the same plan unless he or she elects to change, or the product is not available.

·       These regulations have broad implications for employers that sponsor group health plans. Additional guidance on discriminatory benefit designs (i.e. “drug tiering” to place most or all drugs for a certain condition on the highest-cost tier) is anticipated in the future.

ERISA Advisory Council

The ERISA Advisory Council members have presented the Secretary of Labor with their recommendations on the two issues studied this year: (1) cybersecurity considerations for benefit plans, and (2) participant plan transfers and account consolidation for the advancement of lifetime plan participation.  The DOL has published an Executive Summary that can be found at

ERISA Handbook, NAIC

·       The National Association of Insurance Commissioner’s ERISA (B) Work Group has continued work on major revisions of the Health and Welfare Plans Under the Employee Retirement Income Security Act: Guide to State and Federal Regulation (ERISA Handbook) to include a new definition of “single-employer plan” and “self-funded MEWAs” and Professional Employer Associations (PEOs).  They receive regular advisories from the Department of Labor.  The review is nearing completion after the Winter Meeting 2016 and will be submitted for adoption at an upcoming meeting in 2017.  The Working Group reports to the Regulatory Framework (B) Task Force and the Managed Care (B) Committee. Expect additional information from NAIC as DOL Staff are working closely with NAIC on the ERISA Handbook and on Preemption issues in general.  Special attention is being given to small groups under 100 that self-fund.

·       Expect more NAIC efforts in the area of stop-loss legislation.

·       A separate one-time report was required to study the fully insured and self-insured markets to determine the extent to which the new insurance market reforms might cause adverse selection in the large group market or encourage small and mid-size employers to self-insure. (RAND Study)

·       DOL Technical Release No. 2014-01 The DOL has issued a technical release taking the position that ERISA does not preempt (that is, it does not supersede or prohibit) certain state regulation of stop-loss insurance issued to self-insured ERISA plans or plan sponsors. Stop-loss insurance protects against the risk of high claims by reimbursing plans or plan sponsors for claims paid in excess of a set amount or “attachment point.” The release explains that policies with very low attachment points effectively enable ERISA plan sponsors to shift the financial risk while avoiding state-law benefit mandates and certain health care reform provisions applicable to insured plans—and could lead to adverse selection in the fully insured small-group market. Noting that ERISA preemption has precluded state attempts to regulate stop-loss policies as health insurance, the guidance concludes that states may regulate stop-loss insurance policies issued to ERISA plans or plan sponsors—so long as the law regulates the insurance company and the business of insurance. For example, a state law that prohibits insurers from issuing stop-loss policies with attachment points below specified levels would not, in the DOL's view, be preempted by ERISA. The DOL’s analysis was rooted in ERISA’s “savings clause” (which generally saves from preemption state laws regulating insurance) and the U.S. Supreme Court’s preemption analysis in its Miller ruling.

DOL Fiduciary Rule on Conflict of Interest

The DOL regulations, commonly known as the Conflict of Interest in Investment Advice fiduciary rules, expand who is considered to be an ERISA fiduciary, and who may be considered to be providing investment advice for a fee to a retirement or other employee benefit plan, or its participants. The regulations significantly alter how employee benefit plans, their fiduciaries, and participants will receive investment advice.

Why should plan sponsors pay attention to the fiduciary rule changes? The DOL regulations relating to the Conflict of Interest in Investment Advice expanded the definition of a fiduciary.  Plan sponsors have a fiduciary responsibility to the group health plan. As fiduciaries to ERISA plans, they are required to comply with fiduciary rules, including the requirement to prudently select and monitor service providers.

Gobeille v. Liberty Mutual Case on Preemption

The U.S. Supreme Court held that as applied to Employee Retirement Income Security Act plans, ERISA pre-empts a Vermont law that requires certain entities, including health insurers, to report payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database. The decision was a 6-2 opinion by Justice Kennedy on March 1, 2016. Justice Thomas and Justice Breyer filed concurring opinions. Justice Ginsburg filed a dissenting opinion, in which Justice Sotomayor joined. Many states are reviewing their laws noting the recent Supreme Court decision in Gobeille v. Liberty Mutual supporting the preemption of state data collection efforts by ERISA.

CMS Issues 2017 Medicare Part D Benefit Parameters Used for Creditable Coverage Disclosures

CMS finalizes 2017 payment and policy updates for Medicare Health and Drug Plans

The Centers for Medicare & Medicaid Services (CMS) and released the final Medicare Advantage and Part D Prescription Drug Program changes for 2017 that seek to provide stable payments to plans, and make improvements to the program for plans that provide high quality care to the most vulnerable enrollees.

Under Medicare Part D regulations, most group health plan sponsors offering prescription drug coverage to Part D eligible individuals (including active or disabled employees, retirees, COBRA participants, and beneficiaries) must disclose to those individuals and to CMS whether the plan coverage is creditable or non-creditable. For coverage to be creditable, its actuarial value must equal or exceed the actuarial value of defined standard Medicare Part D coverage under CMS guidelines. In simple terms, the actuarial equivalence determination measures whether the employer’s coverage is, on average, at least as good as standard Medicare prescription drug coverage; if it is, the employer’s coverage is creditable.

CMS has released the following 2017 parameters for the defined standard Medicare Part D prescription drug benefit:

·       Deductible: $400 (a $40 increase from 2016);

·       Initial coverage limit: $3,700 (a $390 increase from 2016);

·       Out-of-pocket threshold: $4,950 (a $100 increase from 2016);

·       Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are not eligible for the coverage gap discount program: $7,425 (a $362.50 increase from 2016);

·       Estimated total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are eligible for the coverage gap discount program: $8,071.16 (a $555.94 increase from 2016); and

·       Minimum cost-sharing under the catastrophic coverage portion of the benefit: $3.30 for generic/preferred multi-source drugs (a $.35 increase from 2016), and $8.25 for all other drugs (a $.85 increase from 2016).

These parameters will be used by group health plan sponsors to determine whether their plans’ prescription drug coverage is creditable for 2017. The information is needed for required disclosures to Part D eligible individuals and to CMS. In addition to the annual participant disclosure notice requirement, which may be satisfied by providing a single notice at the same time each year, disclosure notices may also be required at other times (i.e, prior to an individual’s Medicare Part D initial enrollment period or upon request from a Medicare Part D eligible individual.

CMS is also finalizing policies that will further combat opioid overutilization by encouraging safeguards before an opioid prescription is dispensed at the pharmacy and maintaining access to needed medications.

Final DOL Disability Claims Regulations Require Notice of Contractual Limitations Periods

The Department of Labor (DOL) finalized regulations addressing the claims procedure requirements for plans providing disability benefits under the Employee Retirement Income Security Act of 1974 (ERISA). The final regulations, which mirror enhancements to the claims procedures for group health plans added under the Affordable Care Act (ACA), require plans to satisfy additional procedural and notice requirements for disability claims. The final regulations apply to all claims for disability benefits filed on or after January 1, 2018.

Citing a need for greater transparency and accountability in disability claims processing, the Department of Labor (DOL) issued final regulations on December 16, 2016 governing the claims procedure requirements for ERISA plans that provide disability benefits as follows:

The regulations amend existing DOL claims regulations for plans providing disability benefits. In general, a benefit is a disability benefit subject to the disability claims regulations if a plan conditions the benefit's availability on a showing of disability (regardless of how the plan characterizes the benefit or whether the plan is a health or retirement plan).

According to the DOL, the final regulations are "substantially the same" as the November 2015 proposed regulations, with some notable exceptions. Among other changes, the final regulations:

·       Limits conflicts of interest by requiring independence and impartiality of plan decision makers.

·       Expands the content requirements for denial notices involving disability claims.

·       Provides claimants notice and an opportunity to respond prior to appeal-level denials based on new or additional evidence.

·       Strengthens deemed exhaustion rules.

·       Expands the definition of "adverse benefit determination" to include rescissions of disability benefit coverage.

·       Requires that claims notices be provided in a culturally and linguistically appropriate manner.

The DOL also clarified that the independence and impartiality requirements apply even if a plan does not directly hire or compensate the individuals involved in making claim determinations. According to the DOL, the rule is not limited to individuals that the plan directly hires, and

reaches individuals hired or compensated by third parties engaged by the plan regarding claims.

As a result, if a plan's service provider is in charge of hiring, compensating, terminating, or promoting an individual involved in claims decision-making, the plan must take steps (i.e. through the terms of its service contract or ongoing monitoring) to ensure that the service provider's policies, practices, and decisions regarding hiring, compensating, terminating, or promoting covered individuals are not based on the likelihood that the individual will support the benefit denial.

21st Century Cures Act

A sprawling health bill that is a grab bag for health care issues was passed by the Senate on Dec. 13, 2016 and signed by the President includes provisions allowing small employers with no group health plan to offer their employees a stand-alone health reimbursement arrangement (HRA) to help pay for medical care expenses—including Exchange coverage Qualified Small Employer HRAs (QSEHRA): Establishes a new type of HRA called a qualified small employer health reimbursement arrangement that is not considered a group health plan for almost all purposes under the Code, ERISA, and the Public Health Service Act (PHSA).

·       QSEHRA benefits must be employer-funded (no salary reductions),

·       may not be excluded from income unless the recipient has minimum essential coverage (as defined in Code § 5000A(f)), and

·       can only be used to pay for medical care expenses (as defined in Code § 213(d)) of eligible employees and their covered family members after the employee has provided proof of coverage. QSEHRAs are generally available for years beginning after 2016.

·       Qualifying Employers: QSEHRAs may be offered only by employers that do not offer a group health plan and are not “applicable large employers” (ALEs) as defined in Code § 4980H(c)(2).

·       Eligible Employees: QSEHRA benefits generally must be offered on the same terms to all employees, with limited exceptions including employees with fewer than 90 days of service, those under age 25, and certain part-time and seasonal employees.

·       Benefit Amount: Annual benefits cannot exceed an indexed maximum of $4,950 per year ($10,000 if family members are covered) and must be provided on the “same terms” to all eligible employees.

·       Notice Requirement and W-2 Reporting: Employers offering a QSEHRA must give an annual notice to eligible employees at least 90 days before the start of the year or the employee’s initial eligibility date, or within 90 days after the legislation’s enactment, whichever is latest. The notice must (1) state the amount of the employee’s permitted benefit, (2) instruct the employee to disclose the permitted benefit amount to the Exchange if the employee seeks advance payment of premium tax credits, and (3) include a warning that if the employee does not have minimum essential coverage for any month, the employee might be subject to tax under Code § 5000A and the QSEHRA reimbursements might be taxable. Employees’ permitted benefits must be reported on Form W-2.                    

Additional provisions:

·       Research for medical schools, hospitals and physicians: The bill provides $4.8 billion over 10 years in additional funding to National Institutes of Health to help researchers at universities and medical centers get hundreds of millions more dollars in research grants, most of it toward research on cancer, neurobiology and genetic medicine.

·       Mental health and substance abuse: The most significant piece of mental health legislation since the 2008 law requiring equal insurance coverage for mental and physical health. Mental Health Parity. Several provisions are aimed at improving compliance with the mental health and substance use disorder parity rules. Federal agencies (HHS, DOL, and Treasury) are directed to issue guidance with regularly updated examples and illustrations based on actual investigations of violations. They must also issue additional guidance on disclosure methods and non-quantitative treatment limitations. In addition, the new law requires the agencies to audit plans and insurers that have violated the parity rules at least five times, and clarifies that eating disorder benefits, including residential treatment, must be provided consistent with the requirements of the parity rules.

·       HIPAA Privacy: There are provisions relating to health information technology and the privacy and security of health information. HHS must issue guidance clarifying when health care providers or other covered entities may use or disclose PHI when communicating with family members, caregivers, and others involved in a patient’s care in specified circumstances.

·       Provides $1 billion in state grants over two years to address opioid abuse and addiction:  While most of that money goes to treatment facilities, some will fund research. The bill also boosts funding for mental health research and treatment, with hundreds of millions of dollars authorized for dozens of existing and new programs.

·       Strengthens laws mandating parity for mental and physical health care and includes grants to increase the number of psychologists and psychiatrists, and pushes states to provide early intervention for psychosis, a treatment program that has been hailed as one of the most promising mental health developments in decades. The bill generally requires states to use at least 10 percent of their mental health block grants on early intervention for psychosis, using a model called coordinated specialty care, which provides a team of specialists to provide psychotherapy, medication, education and support for patients’ families, as well as services to help young people stay in school or their jobs.

·       Sets up a $5 million grant program to provide assertive community treatment, one of the most successful strategies for helping people with serious mental illnesses, such as schizophrenia. Like the early intervention program, assertive community treatment provides a team of professionals that is on call 24 hours a day. The bill also expands a grant program for assisted outpatient treatment, which provides court-ordered care for people with serious mental illness who might otherwise not seek help.

·       Instructs the secretary of the Department of Health and Human Services to clarify when doctors can share patients’ medical information with family caregivers, as well as educate health care providers about what the law actually says. Aimed to address opioid addition and mental health services that impact HIPAA.

·       Makes structural changes to the way federal agencies provide mental health services:

·       A new committee would link leaders of key agencies involved in mental health care, such as the Department of Veterans Affairs, the Department of Justice and the Substance Abuse and Mental Health Services Administration, or SAMHSA. Creates a new position, the Assistant Secretary for Mental Health and Substance Use to oversee SAMHSA and disseminate the most successful approaches to treating mental illness. Establishes an advisory board, the National Mental Health and Substance Use Policy Laboratory, to analyze treatments and services to help decide which ones should be expanded.

·       Health information technology: Pushes federal agencies and health providers nationwide to use electronic health records systems and to collect data to enhance research and treatment.

·       Cuts to Preventive medicine: The bill cuts $3.5 billion — about 30 percent — from the Prevention and Public Health Fund established under Obamacare to promote prevention of Alzheimer’s disease, hospital acquired infections, chronic illnesses and other ailments.

HHS Final Regulations Extend Broad Nondiscrimination Rules to Some Health Plans and TPAs Outside the Exchanges 

HHS Office of Civil Rights (OCR) finalized regulations implementing health care reform’s Section 1557 which prohibits discrimination in certain “health programs and activities” on the basis of race, color, national origin, sex, age, or disability. Section 1557 applies broadly to a wide variety of federally assisted entities, but these final regulations apply only to health programs and activities funded or administered by HHS. This draws in federal and state Exchanges (including Small Business Health Option Programs (SHOPs)) and the insurers that participate in them. The final regulations confirm that the rules generally apply to Exchange insurers even with respect to the plans and services they offer outside the Exchanges or, in some instances, as third-party administrators (TPAs) for employer group health plans.

These regulations are generally effective July 18, 2016, additional compliance time is allowed for required design changes to health coverage, for which the applicability date is the first day of the first plan or policy year beginning on or after January 1, 2017. Employers will want to discuss the impact of the regulations with their TPAs, as the rules may have a wide-ranging effect on group health plan design and TPA services provided to employers.

·       Applies to covered entities which include employee health benefits of certain employers that receive federal financial assistance and are principally engaged in health care (e.g., hospitals and nursing homes).

·       Prohibits covered entities from denying, canceling, limiting, or refusing to issue or renew policies; using discriminatory benefit designs; denying or limiting coverage of a claim; or imposing additional cost-sharing or other coverage limitations on any of the prohibited bases.

·       Explains that sex discrimination includes discrimination on the basis of gender identity and clarify that Exchange insurers may not deny or limit coverage for health services that are ordinarily or exclusively available to individuals of one gender because an individual’s sex assigned at birth, gender identity, or recorded gender is different than the one to which the services are ordinarily or exclusively available.

·       Categorical coverage exclusions or limitations for health services related to gender transition are considered per se discriminatory.

·       Require covered entities to provide individuals with notice of their rights, in “significant publications” and “significant communications” (among other places), with taglines alerting individuals with limited English proficiency to the availability of language-assistance services. Sample notices are available on the HHS website.

·       Clarifies that an employer does not become covered by the rules just because its self-insured health plan’s TPA is covered. However, recognizing that TPAs generally do not control the design of the self-insured health plans they administer, HHS explains that it will only process a complaint against a TPA where the alleged discrimination is related to the TPA’s own administration of the plan. If the alleged discrimination relates to the benefit design of the plan, HHS will instead proceed against the employer/decision maker if it has jurisdiction over the employer (e.g., a hospital that is covered under the rules). Where HHS lacks jurisdiction, it may refer the matter to the EEOC.

Section 1557 Nondiscrimination Regulations only applies to employers who:

·       Are principally engaged in providing or administering health services or health coverage

·       Receive “federal financial assistance” with the primary objective to fund an employee health benefit program or

·       Are not principally engaged in providing or administering health services or health coverage, but operate an employee health program that receives federal financial assistance. Note that employers may still be subject to Section 1557 even if they are unaware that they are receiving federal financial assistance.

·       Federal financial assistance could include grants, loans, government contracts, and other similar types of assistance. The HHS defines this category broadly, having previously indicated that recipients of Children’s Health Insurance Program (CHIP) premiums, Medicaid, and Medicare Parts A, C, and D, including retiree drug subsidies, qualify as receiving federal financial assistance.

·       If Section 1557 applies to an employer, it also applies to all employer-sponsored employee health benefit programs, which include health coverage, wellness programs, health clinics, and long-term care coverage or insurance.

·       Section 1557 and the definition of sex discrimination, includes pregnancy, gender identity, and sex stereotyping. Under the rule, individuals must be treated consistently with their gender identity. For example, individuals must have access to health facilities consistent with their gender identity. Further, sex-specific health care cannot be denied or limited if the individual seeking care identifies with another gender. For example, prostate exams would not have to be offered to a transgender male, but treatment for ovarian cancer should be provided. Finally, an explicit exclusion for any health-related service associated with gender transition will be considered facially discriminatory.

·       Language assistance: Under Section 1557, all covered entities must provide nondiscrimination and accessibility notifications and taglines. Note, the deadline for providing these notifications and taglines was October 16, 2016.These statements must inform participants that language assistance, along with auxiliary aids and services, can be provided, free of charge if necessary. The statements must also provide a summary of how to obtain these services. Additionally, covered entities with 15 or more employees are required to adopt grievance procedures and designate an employee to coordinate any grievances. The HHS has posted sample notifications and grievance procedures on its website. This information must be displayed prominently on all significant communications, enrollment materials, at covered entities’ physical locations, and on their websites. The HHS provided some relief by permitting covered entities to exhaust any existing supply of current publications before complying with this portion of Section 1557, relieving any obligation to complete a special printing of new Summary Plan Descriptions.

·       Taglines must be written in at least the top 15 most spoken languages by limited English proficient populations statewide. Samples of the tagline translated into 64 languages are also available online, and the HHS provides a state-by-state list of the top 15 most spoken languages.

·       Consequences of Section 1557 violations: Individuals who believe they are victims of discrimination have the right to bring private actions against employers covered by Section 1557. Employers who are found not to be in compliance can also be required to submit compliance reports and may no longer be eligible for federal financial assistance. The matter may also be referred to the Department of Justice. Moreover, even if the employer is not covered by Section 1557, the rules state that HHS can refer or transfer the matter to the EEOC.

·       In tandem with this rule, the EEOC released similar rules earlier in 2016 amending Executive Order 11246. They require certain government contractors to ensure that their fringe benefits, such as health coverage, do not discriminate on the basis of sex. Employers that violate this Executive Order can be liable for make whole and injunctive relief, and can have their contracts terminated and face debarment proceedings.

Same-Sex and Transgender Employees Protected According to EEOC

Continuing legal actions after the Supreme Court’s decision on same-sex spousal benefits have sharpened the U.S. Equal Employment Opportunity Commission’s focus on employee rights on sexual orientation discrimination cases.  In particular, the EEOC ruling in Complainant v. Foxx expanded the agency’s position that lesbian, gay, bisexual, and transgender (LGBT) employees may bring valid sex discrimination claims under Title VII of the Civil Rights Act of 1964 as a sex discrimination case.  The case involved an action brought by an employee where discrimination based on sexual orientation was alleged.  In another case, Cote v. Wal-Mart Stores, Inc. filed by employees in legal same-sex marriages alleged that Wal-Mart began offering health benefits to same-sex spouses in January 2014, but prior to that time, the company refused to provide such benefits. The employee, Cote, attempted to enroll her same-sex spouse in the company’s health plan but was refused. This case is still in the courts, but it serves as a warning to employers that refusal to provide health benefits to same-sex spouses will be considered discrimination under Title VII of the Civil Rights Act of 1964. 

Title VII makes it illegal to discriminate against a job applicant or employee with respect to compensation, terms, conditions or privileges of employment because of race, color, religion, sex or national origin.  Title VII applies to employer-provided benefits and requires that coverage under an employer-sponsored group health plan be provided without regard to any of the prohibited factors. TPAs should make their clients aware that the EEOC internal memorandum detailing how charges could be tracked and coordinated involving same-sex couples or transgender employees is now available on the EEOC website.

Court Ruling Nixing ACA Reimbursements is Frozen Until New Administration Takes Office

The U.S. Court of Appeals for the District of Columbia Circuit has brought to an end the Obama Administration's attempt to overturn a ruling that threatened to gut the Affordable Care Act (ACA). The Appellate Court put a key case on hold until after President-elect Trump takes office. (U.S. House of Representatives v. Burwell, (2016, DC Cir.) No. 16-5202)

·       In May 2016, the district court for the District of Columbia granted a summary judgment to the House of Representatives in their challenge to ACA §1402. The court found that ACA §1402 impermissibly appropriated money for reimbursements to insurers in violation of Article I, §9, clause 7 of the Constitution, which requires that such monies be appropriated by Congress. The court enjoined any further reimbursements under ACA §1402 until a valid appropriation was in place, but stayed its injunction pending an appeal by the parties.

·       The Obama Administration appealed the district court's ruling. But now the U.S. Court of Appeals for the District of Columbia Circuit has agreed to a request by House Republicans to delay its consideration of the government's appeal until after President-elect Trump takes office on January 20. If the law is repealed by Congress, the case would be moot. The Appellate Court's decision to put the case on hold will not have an immediate effect on the law, as the lower court ruling was put on hold pending the appeal. The court gave both sides until February 21, 2017 to provide an update on the status of the case.

FAQs issued by the Agencies on Preventive Services, Rescission, Mental Health Parity

Frequently Asked Questions (FAQs) published regarding implementation of the market reform provisions of the Affordable Care Act, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), and the Women’s Health and Cancer Rights Act of 1998 (WHCRA). These FAQs answer questions from stakeholders to help people understand the laws and benefit from them, as intended. They were prepared jointly by the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury. The FAQs addressed a variety of health care reform requirements—including coverage of preventive services and rescission—as well as mental health parity and reconstructive surgery after mastectomy under the Women’s Health and Cancer Rights Act.

EEOC Issues Final Wellness Regulations Under ADA

The EEOC issued final regulations addressing the impact of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) on employer-sponsored wellness programs. The ADA regulations provide guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that ask them to respond to disability-related inquiries or undergo medical examinations. The GINA regulations address the extent to which an employer may offer an inducement to an employee for the employee’s spouse to provide health information as part of a health risk assessment. Final Rule Effective date: Jan. 1, 2017

Although the final regulations largely mirror the 2015 proposed regulations there are some notable changes and clarifications as follows:

·       Maximum Incentive: The final ADA regulations clarify how to calculate the 30% limit on incentives that may be offered to employees for answering disability-related questions or undergoing medical examinations as part of a wellness program. Four situations are addressed: (1) where the employer requires employees to be enrolled in a particular health plan in order to participate in the wellness program, the limit is 30% of the total cost of self-only coverage under that plan; (2) if the employer offers a single health plan but employees do not have to be enrolled in the plan to participate in the wellness program, the limit is 30% of the cost of self-only coverage under the employer’s plan; (3) where the employer offers more than one health plan but does not require enrollment in a particular plan as a condition of participating in the wellness program, the limit is 30% of the employer’s lowest-cost self-only major medical coverage; and (4) if the employer does not offer a health plan, the limit is 30% of the total cost to a 40-year-old non-smoker purchasing self-only coverage under the second-lowest-cost plan at the “silver” coverage level on the Exchange in the location of the employer’s principal place of business. The GINA rules apply the same standards to spouses for providing information about current or past health status.

·       Notice Requirements: The ADA regulations confirm that, for all programs that ask employees to respond to disability-related inquiries or undergo medical examinations (whether or not offered through a group health plan), an employer must provide a notice that clearly explains what medical information will be obtained, how it will be used, who will receive it, and the restrictions on disclosure. The EEOC will provide a sample notice on its website that satisfies the necessary requirements. Declining to include a requirement that employees must provide prior, written, and knowing authorization, the EEOC addressed concerns for participants who unwittingly waive their privacy rights in the ADA regulations’ confidentiality rules. The final GINA rules add no new notice or authorization requirements. The EEOC makes clear that if current notifications provided under other laws (such as HIPAA) do not include the required level of detail, employers must revise existing notifications or develop a new notice that complies with the final regulations. While the rule leaves open the possibility of using existing notifications if they include the required information, a model notice will be welcome.

·       Confidentiality Requirements: The final ADA regulations adopt the confidentiality provisions of the proposed regulations, and add two new requirements:

o    The employer may only receive medical information or history collected by a wellness program in aggregate form that does not disclose the identity of specific individuals except as is necessary to administer a health plan.

o   An employer may not require an employee to agree to the sale, exchange, sharing, transfer, or other disclosure of medical information (except to the extent permitted to carry out specific activities related to the wellness program), or to waive confidentiality protections under the ADA as a condition for participating in a wellness program or receiving an incentive. Employers should keep in mind that individually identifiable health information created or received by a wellness program that is part of a group health plan is likely to be protected health information (PHI) subject to HIPAA’s strict limitations on disclosures to plan sponsors.

·       Bona Fide Benefit Plan Safe Harbor: The final ADA regulations pointedly affirm the EEOC’s position that the bona fide benefit plan safe harbor relied on by courts in Seff v. Broward County and EEOC v. Flambeau, Inc. does not apply to an employer’s decision to offer rewards or impose penalties in connection with wellness programs that include disability-related inquiries or medical examinations—even if the programs are part of the employer’s health plan. A Q&A explains that the ADA safe harbor was intended to allow insurers and plan sponsors to use information about risks posed by certain health conditions to make decisions about insurability and the cost of insurance and notes that many insurance practices (such as preexisting condition exclusions) that were permissible when the ADA was enacted are now unlawful under health care reform. The preamble to the final regulations states that Seff and Flambeau applied the safe harbor far too expansively in connection with wellness programs. We note that the EEOC has appealed the Flambeau decision to the Seventh Circuit, and the case may ultimately be decided by the Supreme Court. In the meantime, employers that continue to rely on the safe harbor as a means of avoiding the ADA’s “voluntary” requirement should be mindful of the EEOC’s opposition.

DOL’s Annual Report on Self-Insured Health Plans

The DOL’s annual report to Congress on self-insured health plans suggests a trend (based on data from the 2004–2013 Form 5500 data) away from self-insurance among relatively small plans and toward self-insurance among relatively large plans. The report is required by health care reform and provides general information about the characteristics of private-sector self-insured plans.

U.S. Department of Labor, Office of Inspector General Report

In its Report to Congress the U.S. Department of Labor Office on November 18, 2016, the Office of Inspector General released a report saying that the Department of Labor EBSA did not have the ability to protect the estimated 79 million plan participants in self-insured health plans from improper denials of health claims. 17-001-12-121.pdf

The Employee Benefits Security Administration (EBSA) is charged with regulating all Employee Retirement Income Security Act (ERISA) self-insured health plans and is thus responsible for protecting the estimated 79 million participants in those plans against improper denials of health benefit claims.  The OIG’s report stated that improper denials of health benefit claims can have catastrophic effects on the health and financial security of plan participants and their families. Because ERISA affords only limited legal remedies against improper denials of health benefit claims to EBSA and health plan participants, it is essential that claims be properly decided and appeals fairly adjudicated. It should be noted that the industry does not agree with the finding by the OIG.

The OIG stated that “EBSA did not have the ability to protect the estimated 79 million participants in self-insured health plans from improper claims denials because EBSA lacked any primary knowledge of denials of health benefit claims in any of the plans under its oversight”. They cite that in 1975, EBSA exempted health plans having fewer than 100 participants from reporting requirements because the agency did not want to create an undue administrative burden. As a result of this exemption, EBSA collected no information about denials of health claims from self-insured health plans. They also point to the fact that Form 5500, EBSA’s primary information collection tool, did not capture information on denials of health benefit claims. As a result, even the plans that were required to report to EBSA were not required to provide any information on their denials of health benefit claims. The OIG report stated that EBSA has conducted only limited reviews of these self-insured plans for compliance with external review requirements, and it has yet to issue final guidance for independent review organizations (IRO) that decide appeals of denied claims.

They recommended the Assistant Secretary for Employee Benefits Security use the agency’s existing authority to revisit and revise health plan reporting requirements, require aggregate claims data be reported for all reporting ERISA health and welfare benefit plans, use claims data to focus its health plan investigations, establish external review reporting requirements for IROs, and issue guidance to clarify the fiduciary status of IROs.

The Assistant Secretary for Employee Benefits Security generally agreed with our recommendations but disagreed that additional clarification regarding the fiduciary status of IROs was needed at this time.

IRS Letters Affirm Federal Tax Treatment of Domestic Partner Health Benefits

IRS Information Letters 2016-0008 and 2016-0012

The IRS has issued two information letters explaining the federal tax treatment of employer-provided health coverage for employees’ children and domestic partners. Noting that there has been no recent change in federal law or the IRS’s position, the letters explain that an employer can exclude employer-provided health coverage from an employee’s gross income if the coverage is for the employee, the employee’s spouse, the employee’s tax dependents, or any child of the employee who has not reached age 27 as of the end of the taxable year.

DOL Increases ERISA Civil Monetary Penalties for Inflation

The DOL issued regulations that increase the civil monetary penalties for a wide range of benefit-related violations. Recognizing that many penalties were becoming less effective as deterrents because the penalty amounts had not kept pace with inflation, Congress enacted legislation in 2015 requiring an initial “catch-up” adjustment to specified penalty amounts, followed by annual adjustments. These regulations establish the catch-up amounts. Future adjustments will be made by January 15 of each year, starting in 2017.

2016 changes include:

Form 5500: The maximum penalty for failing to file Form 5500 which must be filed by most ERISA plans increased from $1,100 to $2,063 per day that the Form 5500 is late.

Group Health Plans: The maximum penalty for failing to provide the summary of benefits and coverage (SBC) required under health care reform will increase from $1,000 to $1,087 per failure. Violations of the Genetic Information Nondiscrimination Act (GINA): Failing to provide information, such as eligibility rules based on genetic information or requesting genetic information for underwriting purposes, may result in penalties of $110 per participant per day.

Medicaid or CHIP: Maximum penalties relating to disclosures regarding the availability of assistance, including failure to disclose to a state relevant information about the employer’s plan, increased to $110 per day.

ERISA Recordkeeping:  The penalty for failure to comply with the ERISA § 209(b) recordkeeping and reporting requirements increased to $28 per employee.

Multiple Employer Welfare Arrangements (MEWAs): Penalties for failure to meet applicable filing requirements, which include annual Form M-1 filings and filings upon origination, increased from $1,100 to $1,502.

Additional penalties affect a wide range of compliance issues include failure to provide certain information requested by the DOL, failures not corrected within specified time periods, and defined benefit plan compliance failures. The regulations also include penalty increases for violations of other laws under the DOL’s jurisdiction.

HHS Lists Counties Requiring Benefit Notices in Non-English Languages

The Department of Health and Human Services (HHS) issued its 2016 list of counties in which benefits notices must be provided in certain non-English languages. The list reflects an Affordable Care Act (ACA) requirement under which group health plans and insurers must provide notices in a culturally and linguistically appropriate manner.  The final regulations apply to group health plans and insurers beginning on the first day of the first plan year that begins on or after January 1, 2017.

The list, which is based on data published by the US Census Bureau:

•    Reflects an Affordable Care Act (ACA) requirement that non-grandfathered group health plans and insurers provide notices in a "culturally and linguistically appropriate manner".

To satisfy the "culturally and linguistically appropriate" standard, plans and insurers must provide claims and appeals notices, on request (as opposed to doing so automatically), in a non-English language if 10% or more of the residents in a US county are literate only in the same non-English language. The "culturally and linguistically appropriate" standard also applies in the context of summaries and benefits and coverage (SBCs) under the ACA.

The 2016 version of counties that meet or exceed the 10% threshold includes:

•    The county name and state in which the county is located.

•    The percentage of individuals in the county who are literate only in Spanish, Chinese, Tagalog, or Navajo.

•     In addition to providing notices in a language that satisfies the non-English language threshold, plans and insurers must provide:

•    Oral language services (for example, a telephone customer assistance hotline) where customer service representatives will answer questions in a non-English language that meets the 10%-or-more threshold.

•    Assistance with filing claims and appeals, including external review, in an applicable non-English language






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