• 409A
  • Commentary/Opinions/Views
  • Deferred Compensation
  • Employment Agreements
  • Equity Compensation
  • ERISA Litigation
  • Executive Compensation
  • Family and Medical Leave Act (FMLA)
  • Fiduciary Issues
  • Fringe Benefits
  • General
  • Governmental Plans
  • Health Care Reform
  • Health Plans
  • International Issues
  • International Pension and Benefits
  • Legal Updates
  • Multi-employer Plans
  • Non-qualified Retirement Plans
  • On the Lighter Side
  • Plan Administration and Compliance
  • Qualified Plans
  • Securities Law Implications
  • Severance Agreements
  • Tax-qualified Retirement Plans
  • Uncategorized
  • Welfare Plans
  • Archives
  • March 2018
  • February 2018
  • January 2018
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • BC Network
    Tuesday, April 26, 2016

    Question Mark ManOn April 20, the “Big Three” agencies (DOL, Treasury/IRS, and HHS) released another set of FAQs (the 31st, for those of you counting at home). Consistent with earlier FAQs, the new FAQs cover a broad range of items under the Affordable Care Act, Mental Health Parity and Addiction Equity Act, and Women’s Health Cancer Rights Act. The authors are admittedly curious about how “Frequently” some of these questions are really asked, but we will deal with all of them in brief form below.

    1. Bowel Preparation Medication – For those getting a colonoscopy, there is good news. (No, you still have to go.) But the ACA FAQs now say that medications prescribed by your doctor to get you ready for the procedure should be covered by your plan without cost sharing. Plans that were not already covering these at the first dollar will need to start.

    2. Contraceptives – As a reminder, plans are required to cover at least one item or service in all the FDA-approved contraceptive methods. However, the FAQs also hearkened back to earlier FAQs reminding sponsors that they could use medical management techniques to cover some versions of an item (such as a generic drug) without cost sharing while imposing cost sharing on more expensive alternatives (like a brand name drug). However, plans must have an exception for anyone whose provider determines that the less expensive item would be medically inappropriate. None of this is news. However, the FAQs did acknowledge that plans can have a standard form for requesting these kinds of exceptions. They referred issuers and plan sponsors to a Medicare Part D form as a starting point. While the Medicare Part D form is a useful starting point, it would likely need significant customization for anyone to use it properly for these purposes.

    3. No Summer Recess for Rescission Rules – As most people know by now, ACA prohibits almost all retroactive cancellations of coverage. The FAQs confirm that school teachers who have annual contracts that end in the summer cannot have their coverage retroactively cancelled to the end of the school year (unless one of the limited circumstances for allowing rescissions applies, of course).

    4. Disclosure of the Calculation of Out-of-Network Payments is Now Required – The ACA requires that plans generally provide a certain level of payment for out-of-network emergency services that is designed to approximate what the plan pays for in-network emergency services. The regulations provide three methods a plan may choose from to determine the minimum it has to pay. Out-of-network providers are permitted to balance bill above that. The FAQs confirm that plans are required to disclose how they reached the out-of-network payment amount within 30 days of a request by a participant or dependent and as part of any claims review.   The penalties associated with failing to provide such information on request (up to $110/day) are steep. Additionally, failing to strictly follow the claims procedures can allow a participant or dependent to bypass the process and go straight to court or external review. Given these consequences, insurers and plan sponsors should make sure they have processes in place to provide this information.

    5. Clinical Trial Coverage Clarifications – The FAQs confirm that “routine patient costs” that must be covered as part of a clinical trial essentially include items the plan would cover outside the clinical trial. So, if the plan would cover chemotherapy for a cancer patient, the plan must cover the treatment if the patient is receiving it as part of a clinical trial for a nausea medication, for example. In addition, if the participant or dependent experiences complications as a result of the clinical trial, any treatment of those complications must also be covered on the same basis that the treatment would be covered for individuals not in the clinical trial.

    6. MOOPing Up After Reference-Based Pricing – Non-grandfathered plans that use a reference-based pricing structure are generally required to make sure that participants and dependents have access to quality providers that will accept that price as payment in full. However, the FAQs say that if a plan does not provide adequate access to quality providers, then any payment a participant or dependent makes above the reference price has to be counted toward the maximum out-of-pocket limit that the participant or dependent pays.

    7. Mental Health Parity and Addiction Equity Analysis Must be Plan-by-Plan – The Mental Health Parity and Addiction Equity Act (MHPAEA) tries to put mental health and substance abuse benefits on par with medical/surgical benefits by providing that the cost-sharing and other types of treatment limitations must be the same across particular categories of benefits. Where these types of limitations vary, the MHPAEA rules look at the “predominant” financial requirement that applies to “substantially all” medical/surgical benefits in a particular category. For purposes of determining which limitations are “predominant” and apply to “substantially all” the benefits, the rules generally require that a plan look at the dollars spent by the plan on those benefits. In other words, the determination is not based on how many types of services a particular cost-sharing requirement or limitation (like a copayment) applies to, but how much money is spent on the various services. These types of analysis require looking at claims experiences. The FAQs confirm that an issuer may not look at its book of business to make these determinations. Instead, the determinations must be made plan-by-plan. As a practical matter, most plans that provide mental health and substance abuse benefits try to apply as uniform of levels of cost sharing and treatment limitations as they can to help simplify this analysis.

    8. Playbook for Authorized Representatives Requesting Information about MHPAEA Coverage – The FAQs also provide a list of items that a provider may request in an effort to determine a plan’s compliance with the MHPAEA provisions or in trying to secure treatment for an individual. Plan sponsors and issuers would be well-advised to peruse the FAQs to look at the types of documents since these will likely find their way into a form document request that plan sponsors and issuers are likely to see. The FAQs also list items that the agencies say a plan must provide. Plans and issuers should review their processes to determine if all the relevant information is being provided in response to these types of requests.

    While not relevant for group plan sponsors, the FAQs also confirm that individuals applying for individual market coverage are required to receive a copy of the medical necessity determination the issuer uses for mental health and substance abuse benefits on request.

    9. Going to the MAT – The FAQs confirm that Medication Assisted Treatment (MAT) for opiod use disorder (think: methadone maintenance) is a substance use disorder benefit that is subject to the MHPAEA limitations on cost-sharing, etc. described above.

    10. Nipple/Areola Reconstruction Coverage Required to Be Covered – Under the Women’s Health Cancer Rights Act, health plans and health insurance coverage must cover post-mastectomy reconstruction services. The FAQs confirm that this includes reconstruction of the nipple and areola, including repigmentation.

    Friday, April 1, 2016

    Hullabaloo: noun: a commotion, a fuss.

    In recent years, almost every change to health care has caused a hullabaloo. Today, we thought you might enjoy reading about a few recent and proposed changes that, although important, have not caused quite the uproar to which we have become accustomed.

    The Department of Health and Human Services has finalized the annual in-network out-of-pocket maximums for non-grandfathered health plans for 2017:

    An enrollee in self-only coverage may not pay more than $6,850 for essential health benefits in 2016; for 2017, that number has increased to $7,150.

    An enrollee in any coverage other than self-only may not pay more than $13,700 for essential health benefits in 2016; for 2017, that number has increased to $14,300.

    Section 1411 of the Patient Protection and Affordable Care Act requires federally facilitated marketplaces (but not state facilitated marketplaces) to provide notice to employers when it is determined that an employee is eligible to receive a subsidy. The final rule, however, only requires these marketplaces to provide notice to employers when an employee actually enrolls in coverage.

    And, the Departments of Labor, Health and Human Services, and the Treasury will be working together to finalize the updated requirements of the Summary of Benefits and Coverage (SBC) after the comment period closes March 28, 2016. The proposed changes to the SBC include a revised template, instructions, and an updated uniform glossary (see here). The new SBC requirements must be satisfied by the first day of the first open enrollment period for plan years beginning on or after April 1, 2017 (or, the first day of the first plan year beginning on or after April 1, 2017 if the plan does not use an open enrollment period).

    The next health care hullabaloo may be just around the corner. For now, enjoy the calm!

    Wednesday, March 2, 2016

    ThinkstockPhotos-122516159A few weeks ago, the President released his proposed budget for the fiscal year 2017. As usual, it is dense. However, the President has suggested some changes to employee benefits that are worth noting. While they are unlikely to get too much traction in an election year, it is useful to keep them in mind as various bills wind their way through Congress to see what the President might support.

    • Auto-IRAs. Stop us if you’ve heard this one before. The proposal would require every employer with more than 10 employees that does not offer a retirement plan to automatically enroll workers in an IRA. No employer contribution would be required and, of course, individuals could choose not to contribute. (In case you’ve forgotten, we’ve seen this before.)
    • Tax Credits for Retirement Plans. Employers with 100 or fewer employees who “offer” an auto-IRA (note the euphemistic phrasing in light of the first proposal) would be eligible for a tax credit up to $4,500. The existing startup credit for new retirement plans would also be tripled. Small employers who have a plan, but add automatic enrollment would also be eligible for a $1,500 tax credit.
    • Change in Eligibility for Part-Timers. The budget would require part-time workers who work 500 hours per year for three consecutive years to be made eligible for a retirement plan.
    • Spending Money to Help Save Money. The President proposes to set aside $6.5 million to encourage State-based retirement plans for private sector workers.
    • Opening Up MEPs. To help level the playing field with the State-run plans, the budget proposes to remove the requirement that employers have a common bond to participate in a multiple employer plan (MEP). This is a proposal that has already been floated by Sen. Orrin Hatch, so there’s some possibility that, even in an election year, this might get passed (probably, if not mostly, because it would be hard for anyone to have a vote for open MEPs used against them on the campaign trail given that so few outside the retirement space even know what they are).
    • More Leakage For Long-Term Unemployed. The budget also proposes to allow long-term unemployed individuals to withdraw up to $50,000 per year for two years from tax-favored accounts. This proposal, if implemented, would be interesting to study empirically. Obviously, it would lead to more leakage from retirement plans, but would people be more apt to contribute knowing that they could withdraw if they really needed to do so?
    • Double-tax of Retirement Benefits? In what appears to be a repeat of a prior proposal, page 50 of the budget summary states that the value of “Other Tax Preferences” (not specified) would be limited to 28 percent. This would seem to describe the President’s proposal from prior years that to the tax benefit of retirement plan contributions (among other items). However, such a proposal is, in our view, counter-intuitive given the other proposals to expand retirement access.
    • Cadillac Tax Would Get a Tune-Up. The ACA tax on high-cost coverage would change the thresholds that determine when the tax applies. Currently, there is one threshold for self-only coverage and another for coverage other than self-only coverage. The budget would propose to change the thresholds to the higher of those amounts or the average premium for a gold plan in the ACA Marketplace in each state. This is designed to help address geographic variations in the cost of coverage. There is also a mention in the summary of making it easier for employers with flexible spending arrangements to calculate the tax, but it is not clear what form that would take.
    • Miscellaneous. In the budget tables, there are also a few benefits items, such as:
      • Expanding and simplifying the small employer tax credit for employer contributions to health insurance (page 148).
      • Simplifying the required minimum distribution rules (page 152).
      • Taxing carried interests / profits interests as ordinary income (page 153).
      • Requiring non-spousal beneficiaries of deceased IRA owners and retirement plan participants to take inherited distributions over no more than five years (page 153).
      • Capping the total accrual of tax-favored retirement benefits (which seems like another repeat of prior proposals – page 153).
      • Limiting Roth conversions to pre-tax dollars (page 153).
      • Eliminating the deduction for dividends on stock in ESOPs of publicly-traded companies (page 153).
      • Repealing the exclusion of net unrealized appreciation for certain distributions of employer securities from qualified retirement plans (page 153).

    A summary of these changes from the Administration is available here (along with a few other items).  More on the overall budget is available here. Do you have additional details, other information, or a point of view on these proposals? Post it in the comments!

    Tuesday, February 2, 2016

    photo77Well, we’ve toyed with your emotions enough on this subject…. the deadlines for ACA reporting have not changed. Truth be told, unless this law is repealed by a Republican President taking office next term, we’re likely stuck with the ACA reporting rules as they stand (as modified by further informal guidance). So, what if you encounter this situation under the current legal landscape? You’ve made it through information compilation and data entry processes, you’ve poured over the instructions on the Forms 1094 and 1095s (or better yet, hired a consultant to do that) and you’re now ready to submit your returns electronically to the IRS – maybe even “on time” under the initial deadlines before they were extended. Congratulations! But, what happens when you receive a dreaded “error” message in connection with that submission?

    First and foremost, please stay calm!

    We know you’re at your wits end with this whole endeavor, but that IRS is actually poised to help (we hope). Last week, the IRS held a webinar concerning how to deal with rejection. And while they cannot help you with rejection in the dating world (sorry us ERISA nerds are left to search the galaxy for someone who loves us for who we are and our “humor”), they may be able to assist with submission rejection errors. Slides from the presentation entitled “Things to Know, Overview of Rejection Triggers, Tax Year 2015 Lessons Learned, Form 1094/5-C Q&A” attempt to answer many questions on various types of errors filers may encounter (including differing types of errors at the Transmission level: (i.e., the entire Transmission is rejected) or Submission level (i.e., one or more but not all of the Submissions in a Transmission are rejected) and how to address these errors.

    These slides also address a series of more general Q&As on how to complete the forms. For example, two Q&As state that Line 15 on Form 1095-C (which lists the employee share of lowest cost monthly premium for self-only MV coverage) should be completed if an offer of coverage (other than a qualifying offer for all 12 months of the calendar year) is reported on Line 14 whether or not the employee enrolled in the coverage offered. Stated simply, unless you’re entering Code 1A in the All 12 Months box in Line 14, then something should be listed on Line 15.

    This latest publication is just one in a series of presentations hosted by IRS working groups and posted on If you’re interested in reviewing prior releases, that information can be found here. Less technical and more legal ACA guidance issued by the IRS for applicable large employers is also all posted here.

    Thursday, January 21, 2016

    IRS AheadSigned into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.

    In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.

    In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year after it was directed under the terms of the statute).

    The parameters of this certification process is particularly important as PEOs are seeing ever-increasing interest these days as many businesses require assistance with the Affordable Care Act (“ACA”) requirements. Small and midsize employers are also looking to access large-group benefits as PEOs can leverage their size to negotiate more favorable rates with insurers.

    One question for businesses that remains to be fully addressed is whether a PEO (certified or not) can take over sole liability for ACA’s “play-or-pay” employer mandate under Section 4980H? Since its enactment in 2010, the ACA has cast uncertainty on its impact with third-party staffing arrangements. Additionally, the final rule and preamble implementing the employer mandate uses the term “professional employer organization” in a manner that may not be reflective of the IRS-stamp of approval PEOs we now have in 2016.

    The final rule attempted to address this issue by indicating that, when the PEO client organization (i.e., the employer engaging the PEO) is the “common law employer” but wants to have the offer of coverage made by the PEO treated as the offering having been made by the PEO client organization, then the PEO client organization must pay a higher fee for those employees who enroll in the health coverage (as compared to those employees who do not so enroll).

    Under the “common law employer” standard, whether a common law employment relationship exists is a facts and circumstance analysis which requires consideration of “the right to control and direct the individual who performs the services.” Language found in the SBEA specifically tip-toes around this issue, stating “nothing in this section shall be construed to affect the determination of who is an employee or employer.” Nonetheless, it is generally understood that under most arrangements PEOs treat employees as the PEO client organization’s common law employees. In cases where a PEO is not the common law employer of the employee (either in place of or in addition to the PEO client organization), however, the PEO has another path to offer coverage on behalf of a client and satisfy the client’s employer mandate obligation so long as the client pays the PEO an extra fee for individuals who enroll in the PEO’s health plan.

    Additional guidance from the IRS in relation to these certified PEOs and how, if at all, they will impact the employer mandate would certainly be welcome and may help clear up some of these issues, but until that time companies should remain diligent and be aware of the potential legal risks.

    Wednesday, January 6, 2016

    Congress’s recent $1.8 trillion holiday shopping spree (aka The Consolidated Appropriations Act, 2016, which became law on December 18, 2015) included a few employee benefit packages. We recently unwrapped the packages. Here is what we found.


    1.   Cadillac Tax Delayed. The largest present under the employee benefits tree is a delay in the so-called “Cadillac” tax, which as originally enacted imposed a 40% nondeductible excise tax on insurers and self-funded health plans with respect to the cost of employer-sponsored health benefits exceeding statutory limits. The tax is now scheduled to take effect in 2020 rather than 2018. Once – or if – the delayed tax provision becomes effective, it will be deductible. The cost of this gift is $17.7 billion.

    Since the Cadillac tax is basically unadministrable in its current form, we can’t imagine there is even one person at Treasury who would champion it. Expect a full repeal of the tax shortly after a new administration, whether Republican or Democrat, takes office in January 2017.

    2.  Medical Device Excise Tax Suspended for 2016 and 2017 and Health Insurance Tax Suspended for 2017. The Affordable Care Act, as adopted in 2010, imposes an excise tax equal to 2.3% of the sales price of certain medical devices. Opponents of the medical device tax argued that it has been a drain on the economy and has halted investment in research and development for life-saving technologies. Many members of Congress agreed. Thus, a two-year suspension, with a price tag of $3.3 billion, became part of the holiday appropriations law.

    The health insurance tax (again, as originally imposed under the 2010 ACA) imposed a tax on insurance companies based on net premiums written for health insurance. This tax has been passed through to employers and insureds by the carriers. Accordingly, it has drawn criticism and a one-year moratorium on the tax was approved. The $12.2 billion price tag associated with this moratorium should lead to a corresponding decrease in health insurance premiums in 2017.

    3.  Parity Between Transit and Parking Benefits. The monthly limit on commuter vehicle and transit benefits which may be excluded from an employee’s income has been permanently increased to equal the same amount as qualified parking benefits. This added parity was made effective retroactive to January 1, 2015. As a result, the monthly exclusion limit on both commuter vehicle/transit benefits and qualified parking benefits is $250 for 2015 and $255 for 2016. Note that the qualified bicycle commuting reimbursement limitations remain at $20 per month.

    The Act’s retroactive increase of the commuter vehicle and transit benefit limit causes administrative issues with respect to employees who have utilized this benefit in 2015 in monthly amounts above $130 (the previously-applicable 2015 limit) on an after-tax basis. Expect IRS guidance this month regarding how employers should deal with the retroactive increase in the exclusion limits.

    Tuesday, December 29, 2015

    We have been shouting the ACA reporting compliance deadlines from the rooftops for months now.  Well, I guess it is a case of the “boy who cried wolf”.  At the eleventh hour, the IRS has caved to a slew of complaints, concerns and continuing questions about the new (and complex) ACA reporting requirements and given employers a post-holiday present in the form of IRS Notice 2016-4.   But is it too little too late? The Notice relaxes the current deadlines for those who are not ready to file (or still have unanswered questions preventing them from filing).  Specifically, the Notice provides:

    • an automatic 60-day extension for furnishing Forms 1095-C and 1095-B to employees, and
    • an automatic three-month extension for filing the required forms with the IRS.

    By “automatic”, we mean that no action is required (and nothing needs to be sent to the IRS) to avail yourself of the extension. The newly extended deadlines (for this year only) are as follows:

    • The 2015 Form 1095-B and Form 1095-C (which were originally required to be provided to the insured and/or employees by February 1, 2016 (paralleling the W-2 timeframe)) are now not due to be furnished until March 31, 2016.
    • The 2015 Forms 1095-B and Form 1095-C (which were originally required to be filed with the IRS by February 29, 2016) are now not due to be filed with the IRS until May 31, 2016 (for filings other than electronic filings).
    • For health coverage providers and employers filing electronically, the filing date with the IRS is extended from March 31, 2016, to June 30, 2016.  As a reminder, groups that file 250 or more returns are required to file electronically.

    In the recent guidance, the IRS strongly encouraged those who are ready to meet the deadlines (without availing themselves of the transition relief/extensions of the Notice) to file and furnish the forms on time.  The IRS remains poised to accept filing beginning in January 2016. Note that since this relief provides automatic extensions for those who need it, no further extensions will be granted by the IRS (i.e., no extensions will be granted beyond the extensions described above).  Any previously filed extension will not be formally addressed (or granted).

    Those who cannot meet the newly extended deadlines are still encouraged to file and furnish ASAP.  The IRS will consider “reasonable cause” when determining whether to abate any otherwise applicable penalties for late filing or furnishing.

    A little breathing room for employers… Phew.  Now back to work.

    Thursday, November 12, 2015

    ACA Blue HighlightLast month the U.S. Departments of Labor, Health and Human Services and Treasury published FAQs offering a veritable potpourri of guidance addressing preventive services, wellness programs and mental health parity.  Some potpourris offer a pleasing aroma – other not so much.  Decide for yourself whether this potpourri of guidance is pleasing based on the following summary.

    PREVENTIVE SERVICES – New guidance expands coverage obligations.

    Non-grandfathered health plan must cover certain preventive services without the imposition of any cost sharing.

    Lactation Counseling/Equipment. Among the preventive services that a non-grandfathered health plan must cover in-network without cost-sharing is comprehensive prenatal and postnatal lactation support, counseling, and equipment rental. The Departments provided the following clarifications with respect to such preventive service:

    • If participants do not have access to lactation counseling in-network, the plan must cover such services received from out-of-network provider at no-cost as preventive services.
    • The list of network providers as required to be disclosed or made available to participants under ERISA must include in-network lactation counseling providers.
    • A plan must cover lactation counseling services performed by any provider acting within the scope of his or her state license or certification (g., registered nurse), subject to reasonable medical management techniques.
    • A plan cannot limit coverage for lactation counseling to inpatient services.
    • Coverage for lactation support services must extent for the duration of the breastfeeding (assuming the individual remains covered under the plan).
    • Coverage for the rental or purchase of breastfeeding equipment generally cannot be restricted to a specific time period (g., within 6 months after delivery); but rather, must be available for the duration of the breastfeeding (assuming the individual remains covered under the plan).

    Weight Management Services. Current recommendations for adults include screening for obesity as well as intensive, multicomponent behavioral interventions for weight management. Consequently, a non-grandfathered health plan cannot include a general exclusion for weight management services for adult obesity.

    Colonoscopies.  In situations in which a colonoscopy is scheduled and performed as a screening procedure, a non-grandfathered health plan cannot impose any cost-sharing on any required pre-procedure consultations or pathology exams on polyp biopsies. Recognizing that prior guidance may reasonably have been interpreted in good faith as not requiring coverage without cost-sharing for such services, the Departments provided that this clarifying guidance would apply for plan years beginning 60 days after the publication of the FAQs (i.e., January 1, 2016 for calendar year plans).

    Religious Accommodations for Contraceptive Coverage.  A qualifying nonprofit or closely held for-profit company can seek a religious accommodation to the contraceptive coverage mandate using one of the following methods:

    The Form 700 or notice of objection will serve as the plan instrument relieving the entity from any obligation to contract, arrange, or pay for contraceptive services to which it objects and the plan’s third party administrator will be designated as the ERISA plan administrator responsible for separately providing payments for the contraceptive services.

    BRCA Screening and Genetic Counseling and Testing. The current preventive services recommendations include screening women who have family members with certain cancers to identify a family history that may be associated with an increased risk for potentially harmful BRCA mutations. The Departments clarify that genetic counseling and, if indicated, BRCA testing must be covered as preventive services for a woman who has been screened and found to be at increased risk of having a potential harmful gene mutation, even if she has previously been diagnosed with cancer, so long as she is not currently symptomatic of or receiving active treatment for breast, ovarian, tubal, or peritoneal cancer.

    WELLNESS PROGRAMS – Don’t forget those water bottles!

    The 2013 final wellness regulations set the maximum permissible reward under a health-contingent wellness program that is part of a group health plan at 30% of the total cost of coverage under the plan (or 50% for wellness programs designed to prevent or reduce tobacco use). The Departments provided a reminder that a reward may be financial, non-financial or in-kind. Consequently non-financial (or in-kind) incentives (e.g., gift cards, water bottles and sports gear) provided by a group health plan to participants satisfying a standard related to a health factor are rewards subject to the 2013 regulations.

    MENTAL HEALTH PARITY – No easy outs on medical necessity disclosures.

    The Mental Health Parity and Addiction Equity Act requires the plan administrator to make the criteria for medical necessity determinations with respect to mental health and substance use disorder benefits available to any current or potential participant, beneficiary, or contracting provider upon request. The reason for any denial of reimbursement or payment for services with respect to mental health and substance use disorder benefits also must be made available to participants and beneficiaries.

    The Departments had previously expressed their opinion that such documents as well as the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation with respect to medical/surgical benefits and mental health/substance use disorder benefits also fall within the disclosure obligations under ERISA Section 104(b) (i.e., instrument under which the plan is established or operated) and the DOL claims regulations (i.e., all documents, records, and other information relevant to the claimant’s claim for benefits).

    Under the FAQs, the Departments clarified that a health plan cannot refuse to disclose such information on the grounds that it is “proprietary” or has “commercial value.” A plan is not required to, but may, provide a summary description of the medical necessity criteria in layperson’s terms. However, any such summary description cannot serve as a substitute for the actual underlying medical necessity criteria, if requested.

    Wednesday, October 21, 2015

    Overview. On October 8, 2015, President Obama signed the Protecting Affordable Coverage for Employees Act (“PACE”). As originally enacted, the Affordable Care Act (“ACA”) included a provision which, beginning in 2016, would have expanded the universe of employers considered “small employers” to include those employers with 51 to 100 employees. PACE eliminates this provision and instead leaves each state with the option of defining a small employer as an employer with up to 100 employees. As a result, the existing ACA definition of “small employer”, which currently includes only groups with 50 or fewer employees, will remain in effect after 2015, except in those states that choose to expand the definition.

    Staying in the large group market is significant for employers with 51-100 employees because several ACA requirements apply in the small group market that do not apply in the large group market. These small group requirements would have increased premiums and caused administrative issues for most employers with 51-100 employees. The three most significant differences between small group insured plans and large group insured plans are as follows:

    1. Small group insured plans must cover ten essential health benefits (e.g., pediatric dental care, mental health and substance use disorder services, behavioral health treatment).
    2. A small group insured plan must meet specified actuarial values, while a large group insured plan can provide any actuarial value as long as the plan meets the 60% minimum value requirement.
    3. As more fully described below, small group insured plans are subject to ACA’s national community rating rules.

    ACA Blue HighlightCommunity Rating Laws. If left to their own devices, insurance companies would charge premiums based on the risks they are insuring. In the health insurance arena, for example, insurance companies would normally rate employers purchasing group health insurance coverage based on such factors as the age and health status of plan participants. The community rating laws are designed to level the premium costs for group health insurance among small employers such that small groups with healthy members will pay higher premiums than would otherwise be the case if the insurance companies were allowed to fully rate based on risk, while small groups with less healthy employees will pay correspondingly lower premiums. In other words, the community rating laws are designed to compel healthy groups to subsidize the insurance costs of unhealthy groups.

    The various state departments of insurance impose widely different restrictions on insurance carriers’ ability to rate group health insurance coverage provided to small groups. New York, for example, imposes the most severe rating restrictions, while Virginia and Hawaii impose no rating restrictions at all, with the other 47 states falling somewhere in between.

    Prior to 2014, there were no federal rating restrictions with respect to health insurance. This changed as a result of the enactment of ACA, which imposed national community rating restrictions on small groups of 50 or fewer effective January 1, 2014 (and, absent the enactment of PACE, would have imposed national community rating restrictions on groups of 100 or fewer effective January 1, 2016). The ACA community rating restrictions overlay rather than preempt the state law restrictions. In other words, insurance carriers are required to comply with state law community rating requirements to the extent more restrictive than the federal requirements.

    Implications of PACE. The biggest winners are fully-insured healthy groups in the 51-100 category in states that choose to stick with the 50-employee definition, which likely would have seen significant health insurance premium increases effective in 2016 absent the passage of PACE.

    Some states will need to consider whether to adjust their definitions of small employer for community rating purposes in light of PACE. Specifically, in anticipation of the ACA provision which would have expanded the small group definition to groups of 100 employees or fewer effective January 1, 2016, several states, including California, Colorado, Maryland, New York, Virginia and Vermont, had previously changed their definition of “small group” to encompass groups of 100 or fewer commencing January 1, 2016 to mirror what they thought would be the federal small group definition. Maryland reacted quickly to the President’s signing of PACE, issuing a bulletin on October 8 indicating that the definition of “small employer” for purposes of the Maryland community rating laws would remain at 50 employees in 2016 in light of the change in the federal law. It remains to be seen what other states will do in light of the passage of PACE.

    Wednesday, October 14, 2015

    As employers and other coverage providers are already aware, the Internal Revenue Service (“IRS”) will require that certain information be reported regarding the coverage employers offer or the coverage that is provided to individuals starting in early 2016. The applicable forms generally require a Social Security number or other taxpayer identification number (collectively, “TIN”). But what happens if the individual does not provide his or her TIN?

    Generally, if filers submit incomplete or incorrect information reporting, penalties will be imposed. Under Code Section 6721, the IRS can impose a penalty of up to $250 per incomplete or incorrect return which is capped at $3,000,000 a year. If a filer cannot secure the individual’s TIN, IRS regulations allow the penalty to be waived if the failure is due to reasonable cause, meaning there are significant mitigating factors or impediments, and the filer acted in a responsible manner.

    A significant mitigating factor could be, for example, the filer’s established history of compliance (if information has been incorrect or incomplete in the past, a consistently lessened rate of error is helpful). Impediments are events beyond the filer’s control; for instance, the failure of the individual to provide the necessary TIN.

    However, to take advantage of this, employers and coverage providers must show that they acted in a responsible manner. This includes taking significant steps to mitigate the failure, requesting appropriate extensions of time to file, etc. Specifically with respect to TINs, however, if the filer claims the individual’s failure to provide his TIN is the impediment to the filer reporting the individual’s TIN, the only way a Filer may show it acted in a responsible manner is to prove compliance with the information solicitation requirements in Treasury Regulations Sec. 301.6724-1(e).

    Regulation 301.6724-1(e) requires an initial solicitation at the beginning of the relationship, followed by two annual solicitations (by December 31 of the year in which the initial solicitation is made and December 31 of the following year) if the individual’s TIN still has not been secured. As an interesting additional requirement, if the annual solicitations are made by mail or telephone, the individual must be informed that he or she is subject to a $50 penalty imposed by the IRS under Code Section 6723 if he or she fails to provide his TIN. Mail solicitations also must include a Form W-9 and a self-addressed return envelope (which may or may not have postage prepaid). Telephone solicitations must be made to an adult member of the household and you must maintain a contemporaneous record of the phone call. There are also separate rules for make-up solicitations if you did not make an initial solicitation at the beginning of the relationship.

    What does this mean for you? If you are a minimum coverage provider or employer required to report certain information because of the Affordable Care Act, you should be prepared to comply with the procedures outlined in Treasury Regulations Sec. 301.6724-1. This means you need to be prepared to solicit TINs initially and annually for two years and, if you solicit by mail or telephone, that you include the necessary disclosures.