Subscribe
Categories
  • 409A
  • COBRA
  • 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
  • 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, June 14, 2016

    Wellness Word CloudIn 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.

    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.

    Thursday, January 7, 2016

    MovingDeadlinesOn 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.

     

    Tuesday, December 8, 2015

    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:
      1. 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.
      2. The internal rules, guidelines, protocols, standards, or other criteria which were used to deny the claim, or a statement that these do not exist.
      3. 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:
      1. 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.
      2. 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.
      3. 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.
      4. 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.

    Friday, August 14, 2015

    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:

    1. 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.
    2. 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.
    3. It also amends the ACAplay 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.
    4. 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.
    Monday, July 13, 2015

    Grooms Wedding RingTwo years after recognizing same-sex marriages for purposes of federal law, the U.S. Supreme Court has gone a step further, requiring that all states recognize same-sex marriages as valid if they were valid in the jurisdiction where they were performed.  Further, states are required to license same-sex marriages no differently than opposite sex marriages.  In short, the Supreme Court struck down existing state bans on same-sex marriage.

    Effect on 401(k) Plans and Other Qualified Plans: 401(k) and other qualified retirement plans are not impacted by Obergefell, since the previous Windsor decision, along with guidance issued by the IRS following Windsor, already required qualified retirement plans to recognize same-sex spouses.  Following Windsor, same-sex marriages were to be treated no differently than opposite-sex marriages for all purposes, including automatic survivor benefits (spousal annuities), determining hardship withdrawals, and qualified domestic relations orders (QDROs)).

    Effect on Medical Plans:  Sponsors of insured medical plans are bound by the terms of the insurance contract – and therefore have little discretion on the matter of same-sex coverage.  The providers must write their policies to comply with applicable state law and the plan sponsor buys the policy subject to those terms.

    On the other hand, self-funded medical plans may define their own terms.  They are governed by ERISA, and as such, state law is largely preempted.  Accordingly, any state requirement that the plan cover same-sex spouses may be preempted.  Moreover, there is no federal law which mandates coverage of spouses (although if it did, “spouse” would include a same-sex spouse).  In the absence of a federal law requiring coverage for spouses, a plan sponsor may still choose whether or not to cover some or all spouses — although treating same-sex spouses differently than opposite-sex spouses is not without risk.  There have been a number of challenges asserted with respect to plans which do not provide same-sex coverage and those challenges are likely to escalate.  In short, while the Obergefell decision does not on its face compel same-sex spousal coverage under self-funded medical plans, the decision coupled with the trend of legal developments in this area creates an increased level of exposure for employers who offer spousal coverage for opposite-sex spouses but not for same-sex spouses.

    In a previous blog we discussed ramifications of the Obergefell decision on domestic partner benefits.  See HERE.

    Wednesday, July 1, 2015

    Gavel and RingsAs has now been widely reported, the Supreme Court ruled on June 26 (the second anniversary of the Windsor decision) that same-sex couples have a right to marry in any part of the United States. Despite being hailed as a victory for marriage equality, as this New York Times article points out, it may not be such happy news for currently unwed domestic partners. Specifically, there is a concern, as the article points out, that employers who previously extended coverage to domestic partners out of a sense of equity may now decide not to since both opposite-sex and same-sex couples can now marry.

    As the article mentions, there was a concern at one time that domestic partnership rules would be used by some employees to cover individuals with whom they are not really in a committed relationship. Given that not all states have registration requirements or clear standards, it was largely up to employers to set the standards for what constituted enough of a commitment for a domestic partner to warrant coverage. The difficulty was that employers had to balance not covering individuals who really were not in committed relationships with setting a standard low enough that those who really were in such relationships could qualify. The article says that it does not appear that this was really a problem, but of course, the validity of such relationships are more difficult to verify than a marriage.

    What the article also fails to point out is that there are some valid reasons why employers may want to eliminate coverage for unmarried domestic partners. Health coverage provided to a spouse is generally nontaxable under federal and state laws. However, domestic partnerships, by contrast, are subject to a patchwork of various rules ranging from essentially marriage equivalence in some states to complete non-recognition in others. This means that, in many cases, domestic partner health coverage results in imputed (that is, non-cash) income to employees for federal and some state purposes. The calculation of that imputed income is not 100% clear and the administration of those benefits can be complex.

    Many employers who saw extending coverage to same-sex couples as important were willing to suffer those difficulties and take on that risk of the IRS or state agencies second-guessing their calculations when marriage was not uniformly available to those couples. Now that it is, those employers have to engage in a cost-benefit analysis to determine if the complexity and risk are worth it on a going-forward basis.

    Additionally, it is unclear what the effect of state domestic partner and civil union laws will be after the Obergefell decision. Even though marriage is now available to same-sex couples, the decision did not remove those laws from the states’ books. What movement, if any, states make in this regard will likely influence what employers do going forward as well.

    The talent recruitment marketplace will eventually sort this out, but in the interim, employers should at least consider evaluating whether offering unmarried domestic partner benefits continues to be important as part of their recruitment and retention strategy.

    Friday, June 5, 2015

    In Duda v. Standard Insurance Company, a recent case decided by the Federal District Court in the Eastern District of Pennsylvania, we are reminded of the limits on the type of relief an employer may obtain for participants in its insured ERISA plans.  In this case, the employer filed suit against the insurer of its long-term disability plan under Section 502(a)(3) of ERISA, which provides the following:

    “A civil action may be brought…(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan.”

    A suit brought by a fiduciary under 502(a)(3) is preferable since the de novo standard of review, which is less deferential to the party making the initial benefit determination, would apply.  The court determined that the employer was not a plan fiduciary for purposes of making claims determinations, and therefore could not rely on this provision to sue the fiduciary that held such authority (i.e., the insurer). The court noted that even if the employer was considered to be a fiduciary, ERISA does not afford a fiduciary the right to sue if the relief sought can be obtained directly by the participant under 502(a)(1)(B), which provides the following:

    “A civil action may be brought …(1) by a participant or beneficiary… (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan or to clarity his rights to future benefits under the terms of the plan.”

    Thus, an employer’s leverage, if any, to pressure insurers to pay benefits rests with the power to move the business to a different insurer.  Of course, that leverage is significantly impaired if the insurer is not interested in keeping the business.

     

     

    Thursday, April 16, 2015

    WellnessOn April 16, the Equal Employment Opportunity Commission (the “EEOC”) finally gave a peek into its thinking about what constitutes a “voluntary” wellness program under the Americans with Disabilities Act (the “ADA”). Recall that, while there are extensive wellness rules under HIPAA and ACA for these types of programs, there was always a gray area with regard to whether these programs were considered “voluntary” for ADA purposes. The EEOC recently started suing companies over their programs and was heavily criticized for doing so without issuing any guidance (aside from a couple of non-binding opinion letters). These proposed regulations are the beginnings of the guidance the critics have requested. While not binding, they are a good starting point for understanding where the EEOC may end up.

    Under the proposed rules, a workplace wellness program will be “voluntary” if:

    1. It does not require employees to participate.
    2. It does not deny coverage under a plan or benefit package for non-participation. It also cannot limit benefits for employees who do not participate.
    3. The employer does not take an adverse employment action against employees (presumably for not participating).
    4. If the program is part of a group health plan, the employer must provide a notice in understandable language that describes the type of medical information that will be obtained, how it will be used, and the restrictions on the disclosure of that information. The notice also must describe the employer representatives and other parties to whom the information will be disclosed and the methods that the employer will use to ensure the information is not improperly disclosed.
    5. The incentive under the program, when combined with the reward for any other wellness program that is part of a group health plan, cannot exceed 30% of the total cost of employee-only coverage under the plan.

    There are a few observations from a review of the proposed rule. First, under the HIPAA rules, the incentive can be up to 30% of the total cost of family coverage if spouses and dependents are eligible to participate in the wellness program. The EEOC’s proposed rules contain no such expansion. It is not clear whether the EEOC feels it does not have jurisdiction over non-employees participating in a health plan or if it is trying to reign in the possible incentives under wellness programs.

    Also, under the ACA wellness rules, the incentive can swell to 50% of the cost of coverage if the program is related to tobacco use cessation. The EEOC noted that a program that merely asks individuals if they are tobacco users is not subject to the ADA because that information is not considered a disability-related inquiry or a medical examination. Therefore, the incentive for that type of program could still go as high as 50% of the cost of coverage. However, if biometric screening (like a blood test) is used to determine the presence of tobacco, then it would be subject to the EEOC’s requirements, when they are finalized.

    Additionally, the second requirement that the program “cannot limit benefits for employees who do not participate” raises a concern for disease management type programs which may provide additional benefits for employees who choose to participate. Usually, those types of programs do not include a penalty for non-participation, but it would be helpful to see a carve-out for these types of programs.

    Fourth, in the preamble, the EEOC takes issue with the opinion in Seff v. Broward County where the court ruled that a wellness program that is part of a group health plan does not have to comply with the “voluntariness” requirement under a separate ADA exception for bona fide benefit plans. The EEOC’s position is that Seff was wrongly decided because that logic would render the “voluntary” exception as irrelevant. However, the EEOC’s analysis fails to recognize that employers can (and do) offer wellness programs to their employee populations, regardless of health plan participation. Therefore, it would not be inconsistent to say that a wellness program that is part of a group health plan satisfies the separate “bona fide benefit plan” exception and one that is available to employees generally must satisfy the “voluntary” exception.

    The EEOC also noted that employers are still required to give reasonable accommodations for employees with disabilities to earn the financial incentives. The EEOC stated that providing a reasonable alternative standard and notice, as required by HIPAA, would likely (although not conclusively) fulfill this obligation. The EEOC also said the ADA requires a reasonable accommodation for participation-only programs (i.e, programs which reward participation regardless of results), even though HIPAA would not require a reasonable alternative standard and notice for those programs. However, the examples include offering a sign language interpreter for a deaf employee who is attending one of the classes, so it is not clear that the EEOC necessarily requires an alternative standard for participation-only programs.

    Comments to the proposed rule are due 60 days after it is published in the Federal Register (which is expected to happen on April 20).

    Tuesday, April 7, 2015

    For many years, medical plan drafting was viewed as a commodity. Insurance companies, third-party administrators and brokers often prepared summary plan descriptions and plan documents for self-insured medical plans using form documents. With the passage of the Affordable Care Act and other health-care related laws, however, medical claims, appeals and litigation have increased exponentially. In many instances, the terms of the plan documents have been outcome-determinative with respect to these disputes. There never has been a better time for an employer to step back and take a comprehensive review of the terms of the employer’s self-insured medical plan document and summary plan description, not only for compliance reasons but also to put the employer in the best position in the event of any dispute. The following are three drafting tips which might be considered during such a review.

    Kitchen SinkAvoiding the “Kitchen Sink” Appeal. Increasingly, our clients have been receiving lengthy appeals of denied claims for benefits. We refer to these epistles as “kitchen sink appeals” because the authors of the letters seemingly throw in everything but the kitchen sink. A typical kitchen sink appeal is prepared on behalf of an out-of-network provider who claims standing to appeal based on an assignment of benefits by a plan participant. A kitchen sink appeal is often a “cut-and paste” compilation of 25 pages or more, usually containing long passages and references to cases which appear to have no bearing whatsoever on the appeal. Usually, only one or two pages of a kitchen sink appeal contain any marginally relevant point, and yet the claims administrator must respond to the appeal in compliance with the strict requirements of the ERISA claims procedures.

    One manner of dealing with these nuisance appeals is to draft the medical plan document to prohibit the assignment of claims to third parties. Courts have uniformly recognized the enforceability of anti-assignment clauses, which are particularly effective in preventing kitchen sink appeals made by out-of-network providers who seek through litigation higher reimbursement amounts than they could negotiate with the plan directly.

    Subrogation Provisions. Medical plans should include carefully drafted subrogation provisions which are informed by Supreme Court precedent in Sereboff v. Mid Atlantic Medical Services, Inc. and U.S. Airways v. McCutchen. For example, a well-drafted subrogation provision will expressly state that the common law “make-whole doctrine” does not apply and will require plan participants to do nothing to prejudice the plan’s subrogation rights.

    On March 30, the Supreme Court announced it would review the Eleventh Circuit’s decision in Board of Trustees of the National Elevator Industrial Health Benefit Plan v. Montanile, another medical plan case involving subrogation. The Supreme Court’s decision in Montanile may further inform best practices in drafting medical plan subrogation provisions in self-funded plans.

    Plan Limitation Periods. The period of time during which a plan participant may bring a lawsuit in connection with a claim for medical benefits is typically governed by the most analogous state statute of limitations, which may be as long as ten years. A medical plan may be drafted, however, to shorten the limitations period for bringing such a lawsuit. Recent cases have upheld such provisions, provided they are reasonable and afford a long enough period of time to file a lawsuit after the administrative appeals process has been completed.