While on this day, most people focus on the heart, we’re going to spend a little time focusing on the head. Under the Mental Health Parity and Addiction Equity Act (MHPAEA), health plans generally cannot impose more stringent “non-quantitative” treatment limitations on mental health and substance abuse benefits (we will use “mental health” for short) than they impose on medical/surgical benefits. The point of the rule is to prevent plans from imposing standards (pre-approval/precertification or medical necessity, as two examples) that make it harder for participants to get coverage for mental health benefits than medical/surgical benefits. “Non-quantitative” has been synonymous with “undeterminable” and “unmeasurable”, so to say that this is a “fuzzy” standard is an understatement.
However, we are not without some hints as to the Labor Department’s views on how this standard should be applied. Most recently, the DOL released a fact sheet detailing some of its MHPAEA enforcement actions over its last fiscal year. In addition to offering insight on the DOL’s enforcement methods, it also provides some examples of violations of the rule:
- A categorical exclusion for “chronic” behavior disorders (a condition lasting more than six months) when there was no similar exclusion for medical/surgical “chronic” conditions.
- No coverage resulting from failure to obtain prior authorization for mental health benefits (for medical/surgical benefits, a penalty was applied, but coverage was not denied).
- A categorical exclusion for all residential treatment services for mental health benefits.
- Requiring prior authorization for all mental health benefits when that requirement does not apply to medical/surgical benefits.
- Requiring a written treatment plan and follow-up for mental health benefits when no similar requirements were imposed on medical/surgical benefits.
- Delay in responding to an urgent mental health matter (it’s not quite clear how this is a violation of the rule since there was no discussion comparing the delay to medical/surgical benefits, but we list it for completeness).
This is not an exhaustive list, but it gives at least a flavor of some of the plan provisions and/or practices that might violate the rule. In addition, the DOL previously issued a “Warning Signs” document that provided other examples. Further clarity is also expected in the future. Under the 21st Century Cures Act that was passed late last year, the DOL and other relevant departments are tasked with providing additional examples and greater clarity on how these rules apply.
One might be tempted to think that the Trump Administration will not enforce the MHPAEA rules as tightly as the Obama Administration did. At this point, it is hard to say. The 21st Century Cures Act also directed the relevant agencies to come up with an action plan to facilitate improved Federal/State coordination on these issues, so even if the Federal government backs off, there may be state enforcement actions under applicable state statutes as well.
Given these developments, plan sponsors should review the existing DOL releases and additional documents as they come out against their plan terms and discuss practices for approving and denying mental health claims with their insurers or third party administrators to evaluate whether they may be running afoul of these rules. Plan sponsors of self-funded plans have greater control over how their plans are designed and, in some cases, administered. However, even sponsors of insured plans should consider engaging their insurers in a discussion on these points to avoid potential employee relations issues and unexpected jumps in premiums that could happen if an insurer is forced to change its policies by the government.
It might be tempting to conclude that the recent Department of Labor regulations on disability claims procedures is limited to disability plans. However, as those familiar with the claims procedures know, it applies to all plans that provide benefits based on a disability determination, which can include vesting or payment under pension, 401(k), and other retirement plans as well. Beyond that, however, the DOL also went a little beyond a discussion of just disability-related claims.
The New Rules
The new rules are effective for claims submitted on or after January 1, 2018. Under the new rules, the disability claims process will look a lot like the group health plan claims process. In short:
- Disability claims procedures must be designed to ensure independence and impartiality of reviewers.
- Claim denials for disability benefits have to include additional information, including a discussion of any disagreements with the views of medical and vocational experts and well as additional internal information relied upon in denying the claim. In particular, the DOL made it clear in the preamble that a plan cannot decline to provide internal rules, guidelines, protocols, etc. by claiming they are proprietary.
- Notices have to be provided in a “culturally and linguistically appropriate manner.” The upshot of this is that, if the claimant lives in a county where the U.S. Census Bureau says at least 10% of the population is literate only in a particular language (other than English), the denial has to include a statement in that language saying language assistance is available. Then the plan must provide a customer assistance service (such as a phone hotline) and must provide notices in that language upon request.
- New or additional rationales or evidence considered on appeal must be provided as soon as possible and so that the claimant has an opportunity to respond before the claims process ends.
- If the claims rules are not followed strictly, then the claimant can bypass them and go straight to court. This does not apply to small violations that don’t prejudice the claimant.
- As with health plan claims, recessions of coverage are treated like claim denials.
- If a plan has a built-in time limit for filing a lawsuit, a denial on appeal has to describe that limit and include the date on which it will expire. Basically, claimants have to know that they need to sue by a certain date. The DOL noted in the preamble that, while this only applies to disability-related claims, they believe any plan with such a time limit is required to include a description or discussion of it under the existing claims procedure regulations.
More information about the changes is available in this DOL Fact Sheet.
What to Do
While January 1, 2018 might seem like a long way off at this point, employers and plans need to consider taking the following steps early next year:
- For insured disability plans, plan sponsors need to engage their insurance carriers in a discussion about how these procedures will apply to them and what changes are needed to the insurance contracts. Some insurers may be slow to adopt these new procedures, which could put plan sponsors in a difficult position.
- For self-funded disability plans, plan documents will need to be updated, and procedures put in place.
- For retirement plans, there are some decisions to make. Recall that the procedures only apply if a disability determination is required. One way to avoid this is to amend the definition of disability so that it relies on a determination by the Social Security Administration or the employer’s long-term disability carrier. For defined contribution plans, this is likely to be the most expedient approach.
For defined benefit pension plans, this may not necessarily work. To the extent the disability benefit results in additional accruals, such a change may require a notice under 204(h) of ERISA. If a disability pension allows participants to elect a different from of benefit, then any change in the definition it may have to apply to future accruals under the plan, which means a disability determination may still be required for many years to come. Additionally, tying a disability determination to something other than the SSA raises similar issues if the plan sponsor changes disability carriers or plans that change the definition of disability.
Further, before going down the road of changing disability definitions, plan sponsors may want to consider whether a more restrictive definition, like the SSA definition, is consistent with their benefits philosophies. For plan sponsors who that cannot (or choose not to) amend their retirement plan disability definitions, plan documents must be amended before January 1, 2018 to incorporate these rules and procedures must be developed to address them.
- All plans that have lawsuit filing deadlines, even if they don’t provide disability benefits, should revise their notices to include a discussion of that deadline.
In the latest round of ACA and Mental Health Parity FAQs (part 34, if you’re counting at home), the triumvirate agencies addressed tobacco cessation, medication assisted treatment for heroin (like methadone maintenance), and other mental health parity issues.
Big Tobacco. The US Preventive Services Task Force (USPSTF) updated its recommendation regarding tobacco cessation on September 22, 2015. Under the Affordable Care Act preventive care rules, group health plans have to cover items and services under the recommendation without cost sharing for plan years that begin September 22, 2016. For calendar year plans, that’s the plan year starting January 1, 2017.
The new recommendation requires detailed behavioral interventions. It also describes the seven FDA-approved medications now available for treating tobacco use. The question that the agencies are grappling with is how to apply the updated recommendation.
Much like a college sophomore pulling an all-nighter on a term paper before the deadline, the agencies are just now asking for comments on this issue. Plan sponsors who currently cover tobacco cessation should review Q&A 1 closely and consider providing comments to the email address firstname.lastname@example.org. Comments are due by January 3, 2017. The guidance does not say this, but the implication is that until a revised set of rules is issued, the existing guidance on tobacco cessation seems to control.
Nonquantitative Treatment Limitations. Under applicable mental health parity rules, group health plans generally cannot impose “nonquantitative treatment limitations” (NQTLs) that are more stringent for mental health and substance use disorder (MH/SUD) benefits than they are for medical/surgical benefits. “Nonquantitative” includes items like medical necessity criteria, step-therapy/fail-first policies, formulary design, etc. By their very nature, these items are (to use a technical legal term) squishy.
Importantly for plan sponsors, the agencies gave examples of impermissible NQTLs in Q&As 4 and 5. In Q&A 4, they describe a plan that requires an in-person examination as part of getting pre-authorized for inpatient mental health treatment, but does preauthorization over the phone for medical benefits. The agencies say this does not work.
Additionally, Q&A 5 addresses a situation where a plan implements a step therapy protocol that requires intensive outpatient therapy before inpatient treatment is approved for substance use disorder treatment. The plan requires similar step therapy for comparable medical/surgical benefits. So far, so good. However, in the Q&A, intensive outpatient therapy centers are not geographically convenient to the participant, while similar first step treatments are convenient for medical surgical benefits. Under these facts, applying the step therapy protocol to the participant is not permitted. The upshot, from the Q&A, is that plan sponsors might have to waive such protocols in similar situations. This particular interpretation will not be enforced before March 1, 2017.
Substantially All Analysis. To be able to apply a financial requirement (e.g. copayment) or quantitative treatment limitation (e.g. maximum number of visits) to a MH/SUD benefit, a plan must look at the amount spent under the plan for similar medical surgical benefits (e.g. in-patient, in-network or prescription drugs, as just two examples). Among other requirements, the financial requirement or treatment limitation must apply to “substantially all” (defined as at least two-thirds) of similar medical/surgical benefits.
The details of that calculation are beyond the scope of this post, but Q&A 3 sets out some ground rules. First, if actual plan-level data is available and is credible, that data should be used. Second, if an appropriately experienced actuary determines that plan-level data will not work, then other “reasonable” data may be used. This includes data from similarly-structured plans with similar demographics. To the extent possible, claims data should be customized to the particular group health plan.
This means that, when conducting this analysis, plan sponsors should question the data their providers are using. If it is not plan-specific data, other more general data sets (such as data for an insurer’s similar products that it sells) may not be sufficient. Additionally, general claims data that may be available from other sources is probably insufficient on its own to conduct these analyses.
Medication Assisted Treatment. The agencies previously clarified the MHPAEA applies to medication assisted treatment of opioid use disorder (e.g., methadone). Q&As 6 and 7 provide examples of more stringent NQTLs and are fairly straightforward. Q&A 8 addresses a situation where a plan says that it follows nationally-recognized treatment guidelines for prescription drugs, but then deviates from those guidelines. The agencies say a mere deviation by a plan’s pharmacy and therapeutics (P&T) committee, for example, from national guidelines can be permissible. However, the P&T committee’s work will be evaluated under the mental health parity rules, such as by taking into account whether the committee has sufficient MH/SUD expertise. Like we said, it’s squishy.
Court-Ordered Treatment. Q&A 9 specifically addresses whether plans or issuers may exclude court-ordered treatment for mental health or substance use disorders. You guessed it — a plan or issuer may not exclude court-ordered treatment for MH/SUD if it does not have a similar limitation for medical/surgical benefits. However, a plan can apply medically necessary criteria to court-ordered treatment.
The Bottom Line. The bottom line of all this guidance is that plan sponsors may need to take a harder look at how their third party administrators apply their plan rules. Given the lack of real concrete guidance, there’s a fair amount of room for second guessing by the government. Therefore, plan sponsors should document any decisions carefully and retain that documentation.
The Department of Labor (DOL), along with several other federal agencies, recently released adjusted penalty amounts for various violations. The amounts had not been adjusted since 2003, so there was some catching up to do, as required by legislation passed late last year.
These new penalty amounts apply to penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015 (which was when the legislation was passed). Therefore, while the penalty amounts aren’t effective yet, they will be very soon and they will apply to violations that may have already occurred. Additionally, per the legislation, these amounts will be subject to annual adjustment going forward, so they will keep going up.
- For a failure to file a 5500, the penalty will be $2,063 per day (up from $1,100).
- If you don’t provide documents and information requested by the DOL, the penalty will be $147 per day (up from $110), up to a maximum penalty of $1,472 per request (up from $1,100).
- A failure to provide reports to certain former participants or failure to maintain records to determine their benefits is now $28 per employee (up from $10).
Pension and Retirement
- A failure to provide a blackout notice will be subject to a $131 per day penalty (up from $100).
- A failure to provide participants a notice of benefit restrictions under an underfunded pension plan under 436 of the tax code will cost $1,632 per day (up from $1,000).
- A payment in violation of those restrictions will be $15,909 per distribution (up from $10,000).
- A failure of a multiemployer plan to provide plan documents and other information or to provide an estimate of withdrawal liability will be $1,632 per day (up from $1,000).
- A failure to provide notice of an automatic contribution arrangement required under Section 514(e)(3) of ERISA will also be $1,632 per day (also up from $1,000).
Health and Welfare
- Employers who fail to give employees their required CHIP notices will be subject to a $110 per day penalty ($100, currently).
- Failing to give State Medicaid & CHIP agencies information on an employee’s health coverage will also cost $110 per day (again, up from $100).
- Health plan violations of the Genetic Information Nondiscrimination Act will also go up to $110 per day from $100. Additionally, the following minimums and maximums for GINA violations also go up:
- minimum penalty for de minimis failures not corrected prior to receiving a notice from DOL: $2,745 (formerly $2,500)
- minimum penalty for GINA failures that are not de minimis and are not corrected prior to receiving a notice from the DOL: $16,473 (up from $15,000)
- cap on unintentional GINA failures: $549,095 (up from $500,000)
- Failure to provide the Affordable Care Act’s Summary of Benefits and Coverage is now $1,087 per failure (up from $1000).
The above penalty amounts are usually maximums (the penalties are “up to” those amounts), which means the DOL has the discretion to assess a smaller penalty. Employers and plans should be mindful of these and the other penalty increases described in the fact sheet. These increased penalties give the DOL additional incentive to pursue violations and assess penalties. They also give the DOL greater negotiating leverage in any investigation. For these reasons, it pays to be aware of the various compliance obligations (and any associated timing requirements) and make sure your plans’ operations are consistent with those obligations.
The United States Department of Labor recently issued a Final Rule updating the Fair Labor Standards Act (the “FLSA”) that includes an increase in the standard salary level and that will take effect December 1, 2016. Under the FLSA, certain employees may be exempted from overtime pay for working more than 40 hours per week if their job duties primarily involve executive, administrative, or professional duties and their salary is equal to or greater than the required salary levels.
Among other changes made by the Final Rule, the threshold salary levels have been dramatically increased and will continue to be automatically updated every three years in the future. Prior to the Final Rule, the standard salary level was $455/week or $23,660/year. As of December 1, 2016, the standard salary level will be $913/week or $47,476/year. Highly compensated employees are subject to a less stringent job duties test than lower compensated employees; the salary threshold for highly compensated employees was $100,000 and will increase to $134,004.
The Final Rule also revises prior FLSA regulations by permitting up to ten percent (10%) of the salary thresholds to be met with nondiscretionary bonuses and incentive compensation (including commissions).
Employers may face many other decisions in addition to whether to increase pay or limit overtime hours as a result of the Final Rule. Many employers offer certain benefits, like long-term disability or paid time off, to employees on the basis of whether the employee is exempt or non-exempt under the FLSA. As employees’ classifications change, their benefits will change accordingly unless employers decide to make corresponding changes to benefits eligibility.
Employers will also need to revisit their retirement plans to confirm whether overtime pay is eligible for employer contributions, including matching contributions; if so, employers should plan ahead for increased contributions. Further, if overtime pay is excluded, employers should be aware of potential nondiscrimination testing issues (as a result of non-highly compensated employees becoming newly eligible for and receiving overtime pay).
Finally, increased overtime costs may require employers to reduce other employee benefits or require greater employee contributions for such benefits to stay on budget for the year. Regardless of its exact impact on your business, the Final Rule is sure to require some changes. Start planning now; December 1st will be here before you know it!
In a recently released IRS Chief Counsel Memo, the IRS confirmed that wellness incentives are generally taxable. The memo also, indirectly, confirmed the tax treatment of wellness programs more generally.
As to the incentives, the IRS held that a cash payment to employees for participating in a wellness program is taxable to the employees. The memo did not deal with incentives paid to dependents, but we presume those would be taxable to the applicable employee as well. The IRS did say that certain in-kind fringe benefits (like a tee shirt) might be so de minimis as to be exempt as fringe benefits. Confirming the IRS’s long-standing position, however, cash does not qualify for this exception and is taxable.
This tax treatment also applies to premium reimbursements if the premiums were paid for on a pre-tax basis through a cafeteria plan. Therefore, if employees who participate in a wellness program receive a premium reimbursement of premiums that were originally paid on a pre-tax basis, those reimbursements would be taxable to the employee. This is logical since, if an employee was simply allowed to pay less in premiums (as opposed to being reimbursed), the amounts not paid as premiums would increase his or her taxable compensation. There is no reason to expect that a reimbursement would be treated any differently for tax purposes. While the memo focused on a reimbursement of premiums that were paid for the wellness program, we do not expect the result would be any different if the reimbursement was for premiums under the major medical plan.
This brings us to the more subtle point in the memo. The memo stated that services provided under the wellness program, such as health screening, cause the wellness program to be treated as a group health plan under the tax code. While this is not news from a legal perspective, it is an important reminder that wellness programs may be group health plans. If they are, there are broader, potentially substantial, implications, such as the need to have a plan document and SPD, the need to file Forms 5500, and the need to comply with the ACA (not to mention all of the various wellness-related rules themselves under HIPAA, ADA, and GINA). The extent to which the program needs to comply with these rules depends on the nature of the wellness program and whether it is part of a group health plan or offered separately.
In short, the IRS Memo confirms that wellness incentives are generally taxable and reminds us that that wellness compliance is both complex and multi-faceted. Implementing a wellness program takes careful planning to ensure full legal compliance with a number of applicable laws.
On 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.
On December 3, 2015, the President signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”) which provides for five years of funding for highway projects. If you just skimmed the news on this one, you may not have noticed that the FAST Act included a repeal of the extension to the Form 5500 filing deadline that was provided under the stop-gap Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that was passed in August.
As we reported in our previous blog post, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 provided that, beginning in 2016, the automatic extension for the Form 5500 would be extended from 2½ months to 3½ months from the initial deadline. Calendar year plans would be allowed to file as late as November 15th.
In response to a luke-warm reception to the extended deadline (which was apparently viewed by many as serving only to prolong misery), the FAST Act provides that the old October 15th automatic extension deadline has been restored.
Don’t get tripped up by this legislative game of “now-you-see-it-now-you-don’t.” As we embark on the new year, mark your calendars for October 15th as the automatic extension due date for filing Form 5500.
Recently, the DOL released proposed amendments to the current procedural rules for employees claiming disability benefits under an ERISA plan. The proposed rules enhance existing procedures, mirror the procedural protections for claimants contained in the PHS 2719 Final Rule, and update the ERISA claims procedures (set forth in ERISA Section 503) to align with these standards.
Summaries of the major provisions follow:
- Independence and Impartiality – avoiding conflicts of interest. All claims must be adjudicated in a manner which ensures that the persons making the decision are independent and impartial. The proposed rules specify that this independence and impartiality requirement mandates that decisions involving the hiring, compensation, termination, promotion, or similar matters of individuals making claims-related decisions, such as a claims adjudicator or medical experts, cannot be made based on the likelihood that the individual will support the denial of disability benefits.
- Enhanced Basic Disclosure Requirements. To assist claimants with fully evaluating whether an appeal is worth pursuing and to alleviate confusion, the proposal suggests that each adverse benefit determination notice should contain:
- A discussion of the decision, including the basis for disagreeing with a disability determination by the Social Security Administration, a treating physician, or other third party disability payor if the plan did not follow those determinations.
- The internal rules, guidelines, protocols, standards, or other criteria which were used to deny the claim, or a statement that these do not exist.
- A statement that the claimant is entitled to receive, upon request, relevant documents. Under the current ERISA claims procedures, this statement is only required to be provided when an appeal has been denied.
- Right to Review and Respond to New Information Before Final Decision. Claimants will have a right to review (free of charge) and respond to new evidence or rationales developed by the plan during the appeal process – instead of only after the appeal has been denied.
- Deemed Exhaustion of Claims and Appeals Processes. These proposed amendments strengthen the “deemed exhaustion” provisions in the current ERISA claims procedures as follows:
- Existing standards will be replaced by the more stringent 2719 Final Rules standards which require plans to follow all the requirements of the ERISA claims procedures, with an exception only for certain minor deficiencies, in order for a claimant not to have been deemed to have exhausted his/her administrative remedies under the plan.
- If the minor errors exception does not apply, the reviewing tribunal cannot give the plan’s decision special deference and must review the dispute de novo.
- Protection will be given to claimants whose attempts to pursue remedies in court under Section 502(a) of ERISA (based on deemed exhaustion) have been rejected by a reviewing tribunal.
- There is also a proposed safeguard provision for claimants who prematurely pursued a claim before exhausting the plan’s administrative remedies. Under this safeguard, if a court rejects a claimant’s request for review, the claim will be considered re-filed on appeal once the plan receives the court’s decision. The plan must inform the claimant of the resubmission and allow the claimant to pursue the claim.
- Coverage Rescissions – Adverse Benefit Determinations. This proposal adds a new provision to address coverage rescissions not already covered under the ERISA claims procedures. The proposed rule would amend the definition of an adverse benefit determination to include a rescission of disability benefit coverage that has a retroactive effect, whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time. This definition is modeled after the definition of rescission in the 2719 Final Rule but is much broader than the 2719 Final Rule’s definition as it is not limited to rescissions based on fraud or intentional misrepresentation of material fact. The proposed rule does not prohibit rescissions; instead, it equates them to adverse benefit determinations subject to the applicable ERISA claims procedures procedural rights.
- Culturally and Linguistically Appropriate Notices. This proposal adds a new “safeguard” requirement that adverse benefit determinations must be provided in a culturally and linguistically appropriate manner in certain situations. Specifically, if a claimant is from a county where 10 percent or more of the population is only literate in the same non-English language, any notice to the claimant must include a one-sentence statement in the relevant non-English language about the availability of language services. If the proposed amendment is adopted as is, the plan will also be required to provide oral language services (such as a telephone hotline) in the non-English language and, upon request, provide written notices in the non-English language.
The proposed amendments are subject to a 60-day public comment period following publication in the Federal Register. Watch this space for further updates.
When you were last pondering what creative name Congress will use on its next benefits-related bill (and, really, who does not do that in moments of abject despair, after a few glasses of wine, while bowling from time to time), surely the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015” was near the top of your mind, wasn’t it? No? Really?
Well, SURPRISE! Because that’s the name of your latest benefits bill. In truth, it does have some provisions about transportation and the VA, but there are also benefits changes buried in various corners of the new law:
- Beginning next year, the automatic extension for the Form 5500 has been, well, extended from 2 ½ months to 3 ½ months from the initial deadline. This will allow plan administrators of calendar year plans more time to prepare for Halloween, but may cut in on their Thanksgiving preparations.
- The law extended for four years (until the end of 2025) the ability to transfer excess pension assets to retiree health and life insurance accounts. Of the four provisions, this is the only one likely to result in an increase in federal revenues. The Joint Committee on Taxation estimates that it will raise $172 million in revenue over 10 years.
- It also amends the ACA “play or pay” mandate to exclude employees receiving coverage under TRICARE or through the VA from the employee count when determining if an employer is an “applicable large employer.” Thus, a small employer with a few veterans might avoid the employer mandate by this rule. However, note that, if the employer is an applicable large employer, then these employees still have to be offered coverage and they still get counted in determining any penalties. This rule is retroactively effective to 2014.
- Additionally, veterans receiving care through the VA for a service-connected disability will still be able to contribute to a health savings account (HSA). This is not effective, however, until next year.