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  • BC Network
    Tuesday, January 16, 2018

    Did you read our post “Work Now, Party Later,” advising you to do just that in response to the new Department of Labor rule governing disability claims procedures? If so—party on! If not, we hope you enjoyed your holiday celebrations, because it is now time to work.

    On January 5, the Department of Labor announced its decision that the new disability claims procedure rules will take effect on April 1 of this year. Here is our suggested plan of attack for employers:

    Step 1: Review our previous blog post to familiarize yourself with the new rules.

    Step 2: Identify which of your plans offer disability benefits.

    Remember to check both your ERISA qualified and nonqualified plans.

    Step 3. Determine whether you need to amend your plan and/or SPD.

    Under the new rules, participants who file a disability claim must receive an expanded explanation of their adverse benefit determination and a notice of their rights. The explanation will need to include the following:

    • A discussion of the claimants’ description to their own doctors regarding their disability,
    • the views of the health care and vocational professionals hired by the plan,
    • any disability determinations made by the Social Security Administration and presented by the claimants, and
    • any specific rules, guidelines, protocols, or standards used by the plan in making its determination.

    Claimants must also be notified that they are entitled to receive upon request, and free of charge, all documents relevant to their claim, and a statement of their right to bring an action under Section 502(a).

    Step 4.  Update your plans, SPDs and internal policies.

    If you determine that your plan and/or summary plan description needs an update, or you are not sure whether an update is appropriate, contact your attorney. Even if your plan does not require amendment, you should closely review your disability denial policy and modify any form letters, internal manuals, or similar documents governing disability claims procedures so that they comply with these new procedures.

    Finally, remember that the new rules expand the definition of “adverse benefit determination”.  This definition now includes any cancellation or discontinuance of disability coverage that, except to the extent attributable to a failure to timely pay required premiums or contributions, has a retroactive effect with respect to a participant or beneficiary.

    So for all of you who failed to heed our earlier advice, your final deadline for complying with the new disability claims procedures is April Fool’s Day.  Draw your own conclusions.

    Monday, November 27, 2017

    The Affordable Care Act (ACA) introduced a “pay or play” scheme, effective January 1, 2015, in which Applicable Large Employers (ALEs) must offer affordable qualifying healthcare to their full-time employees (and their dependent children) or pay a penalty. Despite President Trump’s first Executive Order (discussed here) directing a rollback of the Affordable Care Act (ACA) and instructing the Secretary of Health and Human Services to minimize the “unwarranted economic and regulatory burden of the act,” the Internal Revenue Service (IRS) quietly updated its Questions and Answers on Employer Shared Responsibility Provisions Under the ACA to include the first official guidance detailing the process for enforcement of the penalty. Notably, this update coincided with an IRS announcement that penalties for the 2015 calendar year will be assessed late this year.

    The ALE penalty process starts with Letter 226J, which the IRS will send to ALEs it believes owe a penalty based on information reported on Forms 1095-C and 1094-C. The letter will explain the penalty calculations and describe steps to follow depending on whether the ALE agrees or disagrees with the proposed penalty amount.

    If you receive Letter 226J and disagree with the proposed penalty, you may:

    • Complete, sign and date Form 14764 ESRP Response (to be included with Letter 226J);
    • Include a statement explaining the basis for your disagreement (you may include supporting documentation) and describing any changes you want to make to the information reported on your Form(s) 1094-C or 1095-C (do not file a corrected Form 1094-C); and
    • Make any changes to Form 14765, Employee PTC Listing to dispute and make corrections to the assessable full-time employees (including any additional documentation supporting your changes).

    Generally, you will have 30 days from the date the letter was issued to respond. If the IRS does not receive your response by the response date indicated on the first page of Letter 226J, it will issue a Notice and Demand for the proposed and assessed penalty.

    The IRS will review any response to Letter 226J and respond with the appropriate version of Letter 227, which will outline any further actions you may need to take. If you disagree with the proposed or revised penalty in Letter 227, you may request a “pre-assessment conference” within the IRS Office of Appeals. However, you must do so by the response date indicated on Letter 227, which generally will be 30 days from the date of the letter. If, at the end of this process, the IRS determines a penalty is owed, it will issue a notice and demand for payment using Notice CP 220J.

    Given that it is already late November, ALEs should expect to begin receiving Letter 226Js in the near future.

    Tuesday, October 31, 2017

    New rules issued by the Trump administration, including both interim final and temporary regulations effective October 6, 2017, significantly expand “who” may object to the Patient Protection and Affordable Coverage Act’s (PPACA) contraceptive coverage mandate and why those entities or individuals may object.

    Background:

    Under the PPACA, the Health Resources and Services Administration (HRSA), a division of the United States Department of Health and Human Services (HHS), has the authority to require that certain preventive care and screenings for women be covered by specific group health plans and health insurance issuers.  HRSA has used that discretion to require, among other things, contraceptive coverage.  HHS, the Department of Labor, and the Department of the Treasury, the agencies tasked with enforcing that requirement, have permitted certain health insurance issuers and group health plans with religious objections, such as non-profit organization and church plans, to receive an exemption or accommodation from this requirement.  As a result of the Hobby Lobby litigation, closely held for-profit organizations with religious objections to contraceptive coverage were added to the list of entities which could request an accommodation; however, accommodations are intended to shift the cost of providing these services and supplies to third-party administrators and health insurance issuers rather than permitting a group health plan to truly not offer the services or supplies.

    The new world order:

    The first interim final rule and associated temporary regulations provide that all non-governmental plan sponsors and health insurance issuers that object to contraceptive coverage based on sincerely held religious beliefs, including student health plans of institutions of higher education, may qualify for an exemption.  Those same entities may request an accommodation rather than exemption if they prefer.  Individual employees, even those employed by governmental entities, are also permitted to object to contraceptive coverage’s inclusion in their health plan based on their sincerely held religious beliefs.

    The second interim final rule provides that the entities and individuals who may request an exemption may also request an exemption because of their sincerely held moral convictions, not just their religious beliefs.

    Conclusion:

    If you, or the group health plan you sponsor, object to contraceptive coverage based on a sincerely held religious belief or moral conviction, it is more likely than not that this expansion now permits you to exclude all or a portion of contraceptive coverage from your plan.

    Tuesday, August 8, 2017

    According to one recent survey, telemedicine services (i.e., remote delivery of healthcare services using telecommunications technology) among large employers (500 or more employees) grew from 18% in 2014 to 59% in 2016.  Common selling points touted by telemedicine vendors include reduced health care costs and employee convenience.  However, state licensure laws imposing restrictions on telemedicine practitioners can often limit the value (or even availability) of telemedicine services to employees.

    But that seems to be changing.

    Texas Law Change

    This summer Texas passed legislation (SB 1107) prohibiting regulatory agencies with authority over a health professional from adopting rules pertaining to telemedicine that would impose a higher standard of care than the in-person standard of care.  With the enactment of SB1107, the Texas Medical Board must revise portions of its existing telemedicine regulations, which had largely been viewed as some of the most restrictive in the country.  Key revisions proposed by the Board at its July meeting included the elimination of the following requirements:

    • Patient must be physically in the presence of an agent of the treating telemedicine practitioner
    • Physical examination of the patient by the telemedicine practitioner in a traditional office setting within the past twelve months
    • Interaction between the patient and telemedicine practitioner must be via live video feed

    However, it appears that the Board will continue its prohibition against the use of telemedicine for prescribing controlled substances for the treatment of chronic pain.

    Prescribing Controlled Substances

    Meanwhile other states have relaxed their rules relating to telemedicine practitioners seeking to prescribe controlled substances.  For example, the Florida Board of Medicine replaced its ban on any prescription of controlled substances using telemedicine with a new rule that allows telemedicine practitioners to issue prescriptions except in the case of controlled substances for the treatment of psychiatric disorders.  Delaware, Indiana, Michigan, Ohio and West Virginia have also expanded the circumstances under which telemedicine practitioners can prescribe controlled substances.

    For more information on the Texas legislation, read this overview from Bryan Cave’s healthcare attorneys.

    Expanded State Licensing of Practitioners

    State licensing laws generally preclude or restrict a provider licensed in one state from delivering medical services to individuals in another state.  Consequently, an out-of-state physician (absent certain exceptions) must obtain a full and unrestricted license to practice medicine on patients in a particular state.  In an effort to facilitate license portability and the practice of interstate telemedicine, the Federation of State Medical Boards developed an Interstate Medical Licensure Compact.  So far, 25 states participate in the Compact or have taken action to become Compact states.  Under the Compact, licensed physicians can qualify to practice medicine across state lines within the Compact if they meet the agreed upon eligibility requirements.

    Employer Compliance Considerations

    These and other actions by states to facilitate the growth of telemedicine may encourage more employers to jump on the telemedicine bandwagon.  However, employers should be aware that as with any group health plan, the provision of a telemedicine program to employees can raise a number of compliance issues under the Affordable Care Act (ACA), Health Insurance Portability and Accountability Act (HIPAA), Employee Retirement Income Security Act (ERISA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) as well as disqualify individuals participating in a high deductible health from making or receiving contributions to their health savings account.

    Friday, July 28, 2017

    Are you gearing up for open enrollment’s alphabet soup? Anyone who works in human resources/employee benefits and has survived even one open enrollment season knows just how busy that alphabet soup will make your next few months.

    Before open enrollment is in full swing and things get too crazy, you should spend some time reviewing the disclosures you will use. Even if you have a TPA who generally takes responsibility for open enrollment, the ultimate responsibility for legal compliance belongs to the plan administrator.

    In particular, this year there have been some major changes to the Summary of Benefits and Coverage (“SBC”). The new SBC requirements apply to all group health plans for plan years beginning on or after April 1, 2017. You should confirm that your SBC has been updated to satisfy the new requirements. Among other changes, you’ll notice that a new introductory paragraph has been added; certain questions have been eliminated, added (e.g., are there services covered before you meet your deductible?), or rephrased; and, a third coverage example has been added. Because the changes to the SBC are quite extensive this year, we recommend that you undertake a wholesale review of your SBC.

    Here are a few quick tips to help you review your SBC:

    1. Compare your SBC to the DOL’s template SBC: There’s a template available for your use at https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-template-final.pdf. We recommend using this template if you provide SBCs electronically because there are imbedded hyperlinks for each defined term that take participants directly to that exact term in healthcare.gov’s uniform glossary. If you don’t provide SBCs electronically, you will still need to reference the uniform glossary’s web address (https://www.healthcare.gov/sbc-glossary/) at the top of the SBC.
    2. Tips for Comparison on Form: When comparing your SBC to the template, here are some quick things to check:
    • Is the SBC no more than four doubled-sided pages;
    • Are all defined terms underlined; and
    • Are no rows or columns deleted?
    1. How to Compare for Substance: The Department of Labor has provided an instruction guide which includes detailed language and guidance for situations which may not be standard: https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-instructions-for-completing-the-individual-health-insurance-coverage-final.pdf. You should verify that the detailed SBC language requirements are satisfied (both what to say and what not to say).

    Our final word of advice: find time to review your SBCs now before your alphabet soup starts to boil (or call your friendly outside counsel for help)!

    Wednesday, July 19, 2017

    Update: On November 24, 2017, the Department of Labor filed a final rule to delay the applicability date of new disability claims procedures regulation by 90 days, through April 1, 2018.

    Plan sponsors are typically forced to wait for last minute guidance to satisfy year-end compliance obligations. As a result, those of us who work with these plans spend the last days of the year frantically ensuring plans are in compliance mode while friends and family ring in the new year with frivolity and festivities. While we can’t guarantee that won’t happen again this year, if it happens to you because you are evaluating the impact of the new disability claim procedures on plans, then shame on you. As discussed below, the information necessary to comply with the new rules is already available. So address these obligations now – then dig out your little-black-dress or tux, and join the year-end frivolity!

    The final rule modifying the disability claims procedures, issued late last year, became effective January 18, 2017, and applies to claims for disability benefits which are filed on or after January 1, 2018.  Plan sponsors should identify their claims procedures, plan documents and SPDs that may need to be updated to reflect the new rule. To assist in that endeavor, the key changes implemented by the new rule are summarized below.

    1. New Independence and Impartiality Provisions. These new provisions are intended to reduce the possibility of unfair claims review. The change requires that “decisions regarding hiring, compensation, termination, promotion, or other similar matters…must not be based upon the likelihood that the individual will support the denial of benefits.” That being said, the regulation does not represent a significant change from prior law as both industry practice and case law have generally protected procedural independence.
    2. New Disclosure Requirements. The new disclosure requirements mandate three new disclosures upon an adverse benefit determination. First, the plan must provide a “discussion of the decision” explaining the basis for disagreeing with views presented by certain professionals. The regulation requires the discussion when the plan administrator disagrees with the (1) “views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant,” (2) “views of medical or vocational experts whose advice was obtained on behalf of the plan…regard[less of] whether the advice was relied upon in making the benefit determination,” and (3) “disability determination[s] regarding the claimant presented by the claimant to the plan made by the Social Security Administration.” Second, the plan must disclose the specific internal rules, guidelines, protocols, standards and other similar criteria which were relied upon in making the adverse determination. If such guidelines, protocols, etc. do not exist, the plan must make a statement saying so. Third, the plan must make a statement that the claimant is entitled to receive upon request and free of charge all the documents, records, and other information relevant to the claimant’s claim for benefits.
    3. Enhanced Review Rights. The final rule also requires affords enhanced rights to review and respond to new information before the final decision. The plan must promptly disclose (1) “new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination…in connection with the claim;” and (2) new or additional rationales forming the basis of the plan’s determination. The disclosures must be made free of charge and “as soon as possible and sufficiently in advance of the date on which the notice of [an] adverse benefit determination on review is required.”
    4. New Deemed Exhausted Provisions. The new deemed exhausted provision allows claimant to immediately pursue civil enforcement if the plan fails to strictly adhere to all the requirements of the ERISA claims procedures in connection with the claim.
    5. Expanded Definition of Adverse Benefit Determination. The new regulation adds that in the case of a plan providing disability benefits, the term ‘adverse benefit determination’ includes any cancellation or discontinuance of disability coverage that, except to the extent it is attributable to a failure to timely pay required premiums or contributions, has a retroactive effect with respect to a participant or beneficiary.
    6. New Culturally and Linguistically Standards. New standards apply when the claimant’s address is in a county in which ten percent or more of the population is literate only in the same non-English language (e.g. ten percent of the county is literate in Spanish but not English). In those circumstances, a notice will not be culturally and linguistically appropriate unless the plan meets the following requirements: (1) “[t]he plan provide[s] oral language…that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals,” (2) “[t]he plan must provide, upon request, a notice in any applicable non-English language,” and (3) “[t]he plan must include in the English version of all notices, a statement prominently displayed in any applicable non–English language clearly indicating how to access the language services provided by the plan.”
    7. New Disclosure Requirements. The new regulation provides additional requirements to the process of notifying the claimant of the plan’s benefit determination following review. While the prior regulation required a statement of the claimant’s right to bring an action under § 502(a), the new regulation also requires the plan to describe any applicable contractual limitations periods applying to the claimant’s right to bring the action as well as the calendar date upon which the claimant’s rights expire.

    Party on!

    The author thanks St. Louis summer associate Ben Ford for his assistance in researching and preparing this blog post.

    Tuesday, May 9, 2017

    480652321Last month, the Office of Civil Rights (OCR) of the U.S. Department of Health and Human Services (HHS) announced a resolution agreement with the Center for Children’s Digestive Health (CCDH) which included a $31,000 penalty.

    This isn’t the first time a covered entity has paid a “resolution amount” to settle potential violations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules with respect to a business associate agreement (or lack thereof).

    • March 2016: North Memorial Health Care of Minnesota  paid $1.55 million to settle charges that it failed to enter into a business associate agreement with a major contractor performing certain payment and health care operations activities on its behalf and to complete a risk analysis.
    • April 2016: Raleigh Orthopaedic Clinic, P.A. of North Carolina  agreed to pay $750,000 to settle charges that it potentially violated the HIPAA Privacy Rule by handing over the protected health information of approximately 17,300 patients without first executing a business associate agreement.
    • September 2016: Care New England Health System entered into a settlement relating to the failure to timely amend an existing business associate agreement for the HIPAA Omnibus Final Rule and paid $400,000.

    However, unlike the other settlements in which the covered entity had reported a breach, OCR was not investigating a breach involving the CCDH’s protected health information.   It appears that the compliance review of CCDH arose in connection with OCR’s investigation of FileFax, a file storage company used by CCDH.  Instead of disposing a client’s unwanted records in a secure manner, FileFax placed the records in an unlocked outdoor dumpster.  During the investigation, OCR presumably identified the existing relationship between FileFax and CCDH.  Although CCDH records began utilizing FileFax in 2003, the only business associate agreement the parties could produce was executed in 2015.

    In addition to the $31,000 resolution amount (one of the smallest among prior settlements), CCDH must perform certain obligations and make reports to HHS for a period of two years.  During this period CCDH will be subject to increased scrutiny by OCR.

    The CCDH settlement is a timely reminder of the importance of a business associate agreement even if no electronic protected health information is involved and demonstrates OCR’s readiness to require a settlement agreement, resolution amount and corrective action plan even in the absence of any protected health information being made public.  With no sign of a slowdown in OCR compliance and enforcement actions, plan administrators should ensure that as they enter into arrangements with new service providers for their group health plans no protected health information is transferred until the business associate agreement (and not just the service agreement) has been executed.  Plan administrators may also want to confirm that they have the proper business associate agreement in place with each existing business associate and that any prior business associate agreements are retained for at least six years after the date last in effect.

    Friday, May 5, 2017

    Health Care ReformAfter weeks of “will they or won’t they” that rivals some of the great TV sitcom near romances for suspense (even though it was considerably shorter), House Republicans passed the American Health Care Act (“AHCA”) just before going on recess (more information on the bill here and here).   As with the version that was released in early March, this is designed to meet the Republicans’ promise to “repeal and replace” the ACA.  As before, in many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is.

    Below is a brief summary of the most important points (many of which may look familiar from our prior post on the original iteration of the AHCA . Where we did not make any substantive changes from our prior post, we have indicated those with the words “No change”):

    • Employer Mandate, We Hardly Knew You (No change). The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
    • OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription (No change). This goes back to the old rules that allowed these reimbursements. This would begin in 2018.
    • Reduction in HSA Penalty (No change). One of the pay-fors for the ACA was an increase in the penalty for non-health expense distributions from HSAs from 10% to 20%. The AHCA takes it back to 10% starting in 2018.
    • Unlimited FSAs Are (or Would Be) Here Again (No change). AHCA repeals the $2,500 (as adjusted) limit on health FSA contributions starting in 2018.
    • Medicare Part D Subsidy Expenses Would Be Deductible Again (No change). The ACA still allowed Medicare Part D subsidies to be excluded from a company’s income, but denied the deduction, for tax purposes, for any expenses that were subsidized.  This reinstates the prior law that allowed a “double tax benefit” of both the exclusion of the subsidy from income and the deduction for the costs funded by the subsidy starting in 2018.
    • A New COBRA Subsidy (No change). The AHCA does away with ACA’s income-based subsidies in favor of age-based subsidies from $2,000 to $4,000 per individual per year (with a max of $14,000 for a family) with a phaseout for incomes over $75,000 per year ($150,000 for married filing jointly). However, unlike the ACA subsidies (which could only be used for individual market insurance), the new subsidies would also be available for unsubsidized COBRA coverage.   This would not kick in until 2020.  The subsidies are adjusted based on the CPI+1, which means they are probably unlikely to keep pace with medical inflation.  Additionally, any excess subsidy (which seems unlikely) would be put into an HSA for the individual’s benefit.
    • Trading in The Cadillac Tax for a Newer Model Year (No change). Hearing the outcry of employers who did not want their health benefits taxed, the bill instead kicks the Cadillac Tax down the road. Instead of applying in 2020, it now applies in 2025.  There is no adjustment to the thresholds in this bill, so it will still pick up coverage that is not all that “Cadillac” (despite its name). Despite being highly unpopular, the Cadillac Tax has basically survived.
    • HSA Enhancements (1 change). The HSA contribution limits would be increased effective in 2018 so that they are the same as the out of pocket maximums that apply to HSAs (currently $6,550 for self-only coverage and $13,100 for family coverage). Additionally, expenses incurred up to 60 days before the account is established could be reimbursed from the account.  This version of the bill would also allow both spouses to make HSA catch-up contributions to the same HSA.
    • Continuous Coverage Requirement (Minor Changes). In lieu of the individual mandate, the law would require individuals to maintain continuous coverage (with no more than a 63-day break in the twelve months prior to enrollment). If they did not, then insurance companies could assess a 30% enrollment surcharge above their regular premium through the end of the year in which they enroll.  This is designed to encourage individuals to stay in the insurance market.  Employers will recognize the 63-day break rule from the old HIPAA creditable coverage rules.  This is basically the same concept, only applied across both employer plans and the individual market (the HIPAA rules did not apply to the individual market).  And unlike the HIPAA rules, the penalty here is a 30% premium increase, whereas under the HIPAA rules, pre-existing conditions could be excluded for a period of time if the individual did not maintain creditable coverage.  For employers, this will probably mean a return to having to issue creditable coverage certificates.
    • No More Small Business Health Care Tax Credit. This would be eliminated starting in 2020. The tax credit was limited to ACA SHOP coverage and could only be claimed for two consecutive years.
    • Elimination of Additional Medicare Tax. The ACA added an additional 0.9% tax on wages above certain thresholds ostensibly to fund Medicare (although, given the way Congress budgets, it could theoretically have been used for anything). AHCA takes this tax away beginning in 2018.
    • Not so Essential Health Benefits. The AHCA allows states to seek a waiver of the current essential health benefits requirement to establish their own set of essential health benefits. For small group plans, this would mean a change in what they have to cover, if the state in which the insurance is issued obtains a waiver.  For large group plans and particularly self-insured plans, it is unclear what impact this will have.  While those plans are not required to cover essential health benefits, they cannot impose annual or lifetime limits on those benefits.  As a practical matter, most plans simply don’t have these limits on nearly all benefits to avoid confusing participants and complicating administration.  However, if a state obtains a waiver, its list of EHBs may be so small that some employers could consider changing their plan designs.

    The AHCA would make many other changes that are beyond the scope of this post, but these are the ones that are most likely to impact on employers or their plans.  Notably, the employer reporting requirement is not removed by this bill, so that will continue to be a compliance obligation.

    The open question is whether this bill will make it through the Senate.  It passed the House 217-213, which was one more than the bare minimum needed to achieve a majority (with certain House seats currently empty).   In the Senate, the margin is even thinner with Republicans holding a 51-49 majority and Vice President Pence holding a tie-breaking vote in the event of a 50-50 split.  Some key Republican Senators are also reportedly saying they will start with a clean slate, which means more negotiation and potential for talks within the Senate or in conference between the Senate and the House to stall.  At the present time, no Democratic support is expected in the Senate.

    Regardless, if and until this bill becomes law, we repeat, yet again, our earlier admonition: continue keeping up with your compliance obligations – and keep your eye on twitter.

    Thursday, April 20, 2017

    Stop-LossOn April 5, the “Self-Insurance Protection Act” passed the House and moved to the Senate.  This bill, if enacted, would amend ERISA, the Public Health Service Act and the Internal Revenue Code (the “Big 3” statutes containing ACA rules) to exclude from the definition of “health insurance coverage” any stop-loss policies obtained by self-insured health plans or a sponsor of a self-insured health plan.  No additional guidance is given regarding what would constitute a “stop-loss policy” under the proposed definition.  According to this fact sheet from one Congressional committee, the law appears to address concerns that HHS might one day decide to try and regulate stop-loss insurance.  In our opinion, that seems unlikely under the current administration, but it could be a regulatory priority in future administrations.

    But what does the Self-Insurance Protection Act mean for state regulation of stop-loss insurance?

    As the Department of Labor noted in a prior technical release (and as we have written about previously), states have been attempting to regulate stop-loss insurance and have previously sought to include stop-loss insurance in the definition of “health insurance coverage” under certain circumstances (i.e., policies with attachment points below specified amounts).  However, such laws have been found to be preempted by ERISA.  In comparison, and as the DOL notes, state laws prohibiting insurers from issuing stop-loss policies with attachment points below specified thresholds are generally not preempted because they regulate insurance, which is an exception from ERISA preemption.  The upshot of this is that a state generally cannot force a stop-loss policy with a low attachment point to act like a regular medical policy, but a state could prevent the sale of that stop-loss policy.

    It appears that the Self-Insurance Protection Act, in its current form, merely gives an additional argument that stop-loss policies cannot be treated like major medical insurance, no matter how low the attachment point is.  This is like the proverbial “belt and suspenders” since treating stop-loss like major medical insurance has been found to be preempted in some cases.  The only additional protection is that the federal government would also be prevented from regulating stop-loss like regular health insurance.  However, in its current form, the act does not prevent states from requiring stop loss policies to have a minimum attachment point.

    In other words, this Act, if it becomes law, would not dramatically change the landscape for stop-loss policies. For most employers considering self-insurance, the key factor from a stop-loss perspective remains understanding what kinds of stop-loss policies your state will allow.

    Tuesday, March 7, 2017

    Health Care ReformLate on Monday, House Republicans revealed, in two parts (here and here, with summaries here and here) the American Health Care Act (“AHCA”) that is designed to meet the Republicans’ promise to “repeal and replace” the ACA.  In many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is.  Below is a brief summary of the most important points:

    • Employer Mandate, We Hardly Knew You. The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
    • OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription. This goes back to the old rules that allowed these reimbursements. This would begin in 2018.
    • Reduction in HSA Penalty. One of the pay-fors for the ACA was an increase in the penalty for non-health expense distributions from HSAs from 10% to 20%. The AHCA takes it back to 10% starting in 2018.
    • Unlimited FSAs Are (or Would Be) Here Again. AHCA repeals the $2,500 (as adjusted) limit on health FSA contributions starting in 2018.
    • Medicare Part D Subsidy Expenses Would Be Deductible Again. The ACA still allowed Medicare Part D subsidies to be excluded from a company’s income, but denied the deduction, for tax purposes, for any expenses that were subsidized.  This reinstates the prior law that allowed a “double tax benefit” of both the exclusion of the subsidy from income and the deduction for the costs funded by the subsidy starting in 2018.
    • A New COBRA Subsidy. The AHCA does away with ACA’s income-based subsidies in favor of age-based subsidies from $2,000 to $4,000 per individual (with a max of $14,000 for a family) with a phaseout for incomes over $75,000 per year ($150,000 for married filing jointly). However, unlike the ACA subsidies (which could only be used for individual market insurance), the new subsidies would also be available for unsubsidized COBRA coverage.   This would not kick in until 2020.  The subsidies are adjusted based on the CPI+1, which means they are probably unlikely to keep pace with medical inflation.  Additionally, any excess subsidy (which seems unlikely) would be put into an HSA for the individual’s benefit.
    • Trading in The Cadillac Tax for a Newer Model Year. Hearing the outcry of employers who did not want their health benefits taxed, the bill instead kicks the Cadillac Tax down the road. Instead of applying in 2020, it now applies in 2025.  There is no adjustment to the thresholds in this bill, so it will still pick up coverage that is not all that “Cadillac” (despite its name). Despite being highly unpopular, the Cadillac Tax has basically survived.
    • HSA Enhancements. The HSA contribution limits would be increased effective in 2018 so that they are the same as the out of pocket maximums that apply to HSAs (currently $6,550 for self-only coverage and $13,100 for family coverage). Additionally, expenses incurred up to 60 days before the account is established could be reimbursed from the account.
    • Continuous Coverage Requirement. In lieu of the individual mandate, the law would require individuals to maintain continuous coverage (with no more than a 63-day break). If they did not, then insurance companies could assess a 30% enrollment surcharge above their regular premium for twelve months.  This is designed to encourage individuals to stay in the insurance market, even if they don’t need coverage.  Employers will recognize the 63-day break rule from the old HIPAA creditable coverage rules.  This is basically the same concept, only applied across both employer plans and the individual market (the HIPAA rules did not apply to the individual market).  And unlike the HIPAA rules, the penalty here is a 30% premium increase, whereas under the HIPAA rules, pre-existing conditions could be excluded for a period of time if the individual did not maintain creditable coverage.  For employers, this probably mostly would mean a return to having to issue creditable coverage certificates.

    The proposed AHCA makes many other changes that are beyond the scope of this post, but these are the ones that are most likely to have an impact on employer plans.  Of course, at this point, this is just proposed legislation and there’s no telling how much (if any) of this will survive the legislative process.   At least now, however, some legislators have something specific with which to work (and others have something specific to criticize).