Plan sponsors of self-insured group health plans have to balance the need for cost-containment strategies while ensuring compliance with federal health benefit mandates. Mental health parity compliance is particularly challenging to navigate as case law is still being developed in this area.
The Mental Health Parity and Addiction Equity Act (MHPAEA), as amended by the Affordable Care Act (ACA), generally requires that group health plans ensure that the financial requirements and treatment limitations on mental health or substance use disorder (MH/SUD) benefits they provide are no more restrictive than those on medical or surgical benefits.
MHPAEA generally applies to group health plans that provide coverage for mental health or substance use disorder benefits in addition to medical/surgical benefits. Some self-insured plans are exempt from MHPAEA, such as those with 50 or fewer employees.
The Department of Labor (DOL) has primary enforcement authority with regard to MHPAEA over private sector employment-based group health plans.1
In April 2018, the Departments of Labor, Health and Human Services and the Internal Revenue Service issued a package of guidance on MHPAEA. Among the items was the “FY 2017 MHPAEA Enforcement Fact Sheet”, which states that in fiscal year (FY) 2017, the DOL conducted 187 MHPAEA-related investigations and cited 92 violations of MHPAEA noncompliance.2
The Employee Benefits Security Administration (EBSA) branch of the DOL authored publications and compliance assistance materials to assist plans with MHPAEA compliance. One of these publications, “Warning Signs” is an extremely useful tool to refer to when doing a quick review of a plan document/summary plan description.3 This document was published in May 2016, but the DOL is expected to publish a “Warning Signs 2.0” document in fiscal year 2018 to focus on non-quantitative treatment limitations (NQTLs), since this appears to be a problem compliance area for plans. NQTLs are generally limits on the scope or duration of benefits for treatment that are not expressed numerically, such as medical management techniques, provider network admission criteria, or fail-first policies. In terms of MHPAEA compliance, plans should ensure that any NQTLs with respect to MH/SUD benefits are comparable to the limitations that apply to the medical/surgical benefits in the same classification.
Current Mental Health Parity Cases
MHPAEA does not require that self-insured group health plans cover MH/SUD benefits; it only requires that if a plan does cover MH/SUD benefits that the benefits are in parity with the medical/surgical benefits.
One of the challenges for plans is determining the scope of benefit types that are compared for parity purposes. Since case law is still being developed in this area, these matters continue to be unsettled.
The following are some recent cases that highlight this area of concern.
Vorpahl v. Harvard Pilgrim Health Care Ins. Co. (D. Mass. July 20, 2018)4
This focus of this case is on coverage of a “wilderness treatment program”. The plan at issue is a fully-insured plan that denied coverage for an employee’s dependent children who received treatment at a state-licensed outdoor youth treatment program that was authorized to provide mental health services. The children’s parents claim the plan’s exclusion for “health resorts, recreational programs, camps, wilderness programs, outdoor skills programs, relaxation or lifestyle programs, and services provided in conjunction with (or as part of) those programs” violates the MHPAEA and the ACA. The US District Court for the District of Massachusetts dismissed the ACA claim but denied the insurer’s motion to dismiss the MHPAEA claim, so this portion of the lawsuit will proceed.
What is interesting about this case is how the plan participants determined the medical/surgical equivalent of the wilderness treatment program, which is different than how the plan viewed the benefits and exclusions.
The plan argued that its exclusion is a categorical exclusion that applies to both medical/surgical benefits and MH/SUD benefits provided at this type of facility. The example the plan gave for the medical/surgical equivalent is a “diabetes camp”, which the plan would also exclude.
The plan participants argued that because the plan covers medical/surgical benefits provided at other inpatient treatment settings it should cover this wilderness treatment program setting as well since it is an equivalent type of treatment setting. In support of their position, they cited the Joseph F. v. Sinclair Servs. Co. case from 2016, in which the court ruled that the plan violated MHPAEA by covering skilled nursing facilities but not covering residential treatment facilities.
So which comparison is correct—the more specific setting comparison, or the broader category comparison? There is currently no direct guidance on this issue.
While this case is still at its early stages procedurally, we will be watching to see how it develops.
Bushell v. Unitedhealth Group Inc., 2018 WL 1578167 (S.D.N.Y. 2018)5
The question in this case is how to determine the MH/SUD equivalent of the plan’s “nutritional counseling” benefit.
In this case, the plan participant who has anorexia nervosa sued the insurer after it denied her claim for nutritional counseling to treat her condition. The insurer asserted that nutritional counseling was not covered under the plan.
The plan participant argued that the plan covered such counseling for non-mental health conditions, such as diabetes, and therefore was in violation of MHPAEA. The insurer asked the court to dismiss the claim, arguing that the counseling services that were requested were not in the same classification as the counseling services that were covered under the plan. The court refused to dismiss the claim, therefore allowing the case to proceed.
The parity rules under MHPAEA are applied on a classification basis. Therefore, if a plan provides mental health or substance use disorder benefits in any “classification”, then mental health and substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided. Those classification requirements apply to the following:
In this particular case, the medical/surgical benefit of diabetes nutritional counseling was covered within the “outpatient, out-of-network” classification (as noted by the court in this case), but the mental health benefit for anorexia nutritional counseling, which may also fall into that classification, was not. Therefore, if mental health is covered under the plan, and the medical/surgical benefit of nutritional counseling for diabetes is covered in any of the classifications listed above, then the mental health benefit of nutritional counseling must be provided in parity in that same classification(s).
The plan participant makes a good argument for parity here. Plans that cover both (1) mental health benefits and (2) the medical/surgical benefit of diabetes nutritional counseling should take the conservative approach and cover mental health nutritional counseling as an additional benefit. Another option would be for the plan to provide a “Nutritional Counseling” benefit that is more general, and not specific to just diabetes.
The results are pending in this case but we will be tracking the outcome. Plans should be aware that eating disorder treatments are considered mental health benefits. Congress addressed this in section 13007 of the 21st Century Cures Act and this subject was also addressed in the FAQs that the Departments issued on June 16, 2017.6,7 Plans should be cautious when reviewing plan exclusions to ensure they cannot be interpreted as applying a limit on an eating disorder treatment.
The DOL’s published enforcement reports suggest that the DOL is continuing to investigate compliance with MHPAEA. In addition, based on current litigation, it appears there is a fairly low burden to state a claim under MHPAEA that survives a motion to dismiss. Plan sponsors should review cost-containment techniques with counsel to ensure they are designed to mitigate risk in this area while ensuring compliance.
Corrie Cripps is a plan drafter/compliance consultant with The Phia Group. She specializes in plan document drafting and review, as well as a myriad of compliance matters, notably including those related to the Affordable Care Act.
1 The Mental Health Parity and Addiction Equity Act (MHPAEA), https://www.cms.gov/cciio/programs-and-initiatives/other-insurance-protections/mhpaea_factsheet.html, (last visited August 8, 2018).
2 FY 2017 MHPAEA Enforcement Fact Sheet, https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/mhpaea-enforcement-2017.pdf, (last visited August 8, 2018).
3 Warning Signs – Plan or Policy Non-Quantitative Treatment Limitations (NQTLs) that Require Additional Analysis to Determine Mental Health Parity Compliance, May 2016, https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/mental-health-parity/warning-signs-plan-or-policy-nqtls-that-require-additional-analysis-to-determine-mhpaea-compliance.pdf, (last visited August 8, 2018).
4 Vorpahl v. Harvard Pilgrim Health Care Ins. Co. (D. Mass. July 20, 2018), https://www.bloomberglaw.com/public/desktop/document/Vorpahl_v_Harvard_Pilgrim_Health_Ins_Co_No_17cv10844DJC_2018_BL_2?1533762894, (last visited August 8, 2018).
5 Bushell v. Unitedhealth Group Inc., 2018 WL 1578167 (S.D.N.Y. 2018), https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2017cv02021/471192/38/, (last visited August 8, 2018).
6 21st Century Cures Act, Pub. L. No. 114-255 (2016).
7 FAQs About Affordable Care Act Implementation Part 38 and Mental Health And Substance Use Disorder Parity Implementation, https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-38.pdf, (last visited August 8, 2018).
Third party subrogation and reimbursement rights and the State of New York have always had a bit of a contentious relationship. At every turn it seems New York is tinkering with its state laws in a way that weakens the rights of insurance companies and (they think) benefit plans of all kinds. Many arguments are available both for and against the viability of a benefit plan’s rights in New York. As you can expect, Private Self-Funded ERISA Plans enjoy the benefit of preemption and surely do not have to be concerned with these changes in New York State Law … Or do they?
Ask any attorney practicing personal injury law in the State of New York and most will argue(rather aggressively, in fact) that New York does not allow subrogation and reimbursement under any circumstances, and that they have the federal case law to prove it. Sereboff v. Mid Atlantic Medical Services, Inc. and its progeny be damned, despite providing that a benefit plan with clear and explicit plan terms allowing for recovery without reduction is entitled to full recovery so long as it is proactive and can trace the actual settlement fund to traceable assets. 547 U.S. 356 (2006). See also US Airways, Inc. v. McCutchen, 133 S.Ct. 1537 (2013). To them a quick read of Wurtz v. Rawlings is the law of the land. 761 F.3d 232 (2014).
Recall Wurtz in 2014 when the Second Circuit Court of Appeals held that United Health, a fully insured benefit plan arrangement, was unable to satisfy the Davila test and obtain complete preemption from state law, and accordingly, the New York anti-subrogation law would apply to eliminate the rights of United Health and eradicate its right of recovery. Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). That outcome, alone, is not all that surprising given the health plans fully insured status. Wurtz, 761 F.3d. at n. 6.
What did come as a bit of a surprise was the way in which the Second Circuit reached that decision. Essentially, the court reasoned in a long, somewhat convoluted opinion that a law suit by a plan beneficiary against its employee benefit plan to enforce an anti-subrogation law does not “relate to” employee benefits and therefore cannot be preempted on a defensive pleading. In pertinent part, the court stated:
This expansive interpretation of complete preemption ignores the fact that plaintiffs' claims are based on a state law that regulates insurance and are not based on the terms of their plans. As a result, state law does not impermissibly expand the exclusive remedies provided by ERISA § 502(a). Under ERISA § 514(a)-(b), state laws that "relate to" ERISA plans are expressly preempted, but not if they "regulate insurance." 29 U.S.C. § 1144(a)-(b). Based on this "insurance saving clause," the Supreme Court has held that state statutes regulating insurance that nonetheless affect ERISA benefits are not expressly preempted, with no hint that claims under these statutes might still be completely preempted and thus unable to be adjudicated under those state laws when they do not expand the remedies available for beneficiaries for claims based on the terms of their plans. See Rush Prudential HMO Inc. v. Moran, 536 U.S. 355, 377-79, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002); UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 366-67, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999).
This effectively created a race to the courthouse steps. If the participant first sues the plan for enforcement of an anti-subrogation law, the plan would not be able to claim preemption and would be unable to litigate in federal court, potentially unable to enforce its right of recovery.1 Every plaintiff’s lawyer in New York (along with its sister states Connecticut and Vermont, all notoriously anti subrogation) was provided the leverage they needed to look at all benefit plans, even private self-funded plans whose rights have repeatedly been protected by The Supreme Court of the United States, and force them into settlements. After all, do the plans really want to end up in state court and argue with a court consisting of New York judges with a bias against subrogation that just went to great lengths to interpret incorrectly ERISA’s preemption framework in order to reach its outcome? Interestingly, the court itself acknowledged in footnote 6 of the decision that the outcome for a private self-funded plan would likely be different. The footnote stated:
The issue in FMC was the effect of the so-called "deemer clause" of ERISA § 514(b)(2)(B), which exempts self-funded plans from the savings clause. The Supreme Court held that the deemer clause did not cause preemption of the entire statute in all cases, but only as applied to self-funded plans. 498 U.S. at 61, 111 S.Ct. 403. Under FMC, the applicability of N.Y. Gen. Oblig. Law § 5-335 to self-funded plans would only mean that the law is preempted as applied to those plans (which is not the case here because the plans at issue are insured), not that the law is not "specifically directed" at insurance.
Wurtz, 761 F.3d. at n. 6.
You see, even there the court conceded that this outcome was based on the fact that this was an insured Plan, but of particular concern is how the Court determined that anti subrogation law did not relate to the benefit Plan.
So really, what is the problem here? It appears the court clearly misinterpreted ERISA’s preemption framework, while likely still reaching a correct outcome given that particular plans’ fully insured status, and even conceded that the outcome would likely be different for a Private Self-funded Plan? Well, the problem is simple. We lawyers find any leverage point we have and use it to our full advantage. The fact of the matter is that that law is only as good as what can and reasonably in prudently be enforced, and lawsuits are expensive. That, along with considering the risk of the Second Circuit Court again misinterpreting the “relation to” portion of ERISA, can be a risky proposition and not always a prudent use of Plan assets to win the race to the Court, so to speak.
Enter Cognetta v. Bonavita, a case this author hopes is the beginning of a clarification of the decision in Wurtz that will finally give plan representatives the tool they need to once and for all quiet this race to the court nonsense. E.D.N.Y. No. 1:17-cv-03065 (2018). In Cognetta, the Plan paid approximately $110,000.00 to cover the medical expenses of plan participants injured in an automobile accident. In an abundance of caution, the Plan got way ahead of the game and won the race to the court. In fact, the Plan did not even wait for the case to settle. Instead, while the participant’s injury claims were still pending with the third party, the Plan shrewdly filed for a Declaratory Judgement asking the court to determine that it did, in fact, have an equitable lien and a constructive trust over the possible settlement funds and sought a Court Order that upon settlement, those funds were to be held in Trust.
Much to the delight of self-funded benefit plans everywhere, the court ruled in favor of the Plan. Among the most interesting parts of the decision was how this court laid out the most important part of the entire dispute in Wurtz, and that is, how the Court handled this “relation to” notion. In Cognetta, the Court provided in pertinent part:
…The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). To that end, ERISA Section 514(a) expressly preempts "any and all" state laws that "relate to any employee benefit plan." 29 U.S.C. § 1144(a). A state law "relate[s] to" an employee benefit plan if that law "has a connection with or reference to such a plan." Franklin H. Williams Ins. Tr. v. Travelers Ins. Co., 50 F.3d 144, 148 (2d Cir. 1995) (quoting Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985)). The scope of ERISA's express preemption clause is "as broad as its language." FMC Corp. v. Holliday, 498 U.S. 52, 59 (1990) (quoting Shaw v. Delta Air Lines, 463 U.S. 85, 98 (1983))…
Even where a state law "relate[s] to" an employee benefit plan, however, ERISA does not expressly preempt that law if it "regulates insurance." 29 U.S.C. § 1144(b). A law "regulates insurance" if it is "specifically directed towards entities engaged in insurance" and "substantially affect[s] the risk pooling arrangement between the insurer and the insured." Wurtz v. Rawlings Co., 761 F.3d 232, 240 (2d Cir. 1994) (quoting Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 342 (2003)). In such a situation, the state law is "saved" from express preemption. Id. Nevertheless, an employee benefit plan governed by ERISA cannot be "deemed . . . an insurance company or other insurer . . . for purposes of any law of any State purporting to regulate insurance." 29 U.S.C. § 1144(b)(2)(B). That is, a state law cannot escape ERISA preemption by erroneously classifying an employee benefit plan as "insurance." See id.
Whether a state law that regulates insurance applies to a plan or is preempted by ERISA depends on whether the plan purchases insurance. See FMC Corp., 498 U.S. at 64; see also Arnone v. Aetna Life Ins. Co., 860 F.3d 97, 107 (2d Cir. 2017). Where a plan buys insurance, it "remains an insurer for purposes of state laws `purporting to regulate insurance.'" FMC Corp., 498 U.S. at 61. By contrast, where a plan is self-funded and does not purchase insurance from an insurance company, ERISA "exempt[s]" the plan "from state laws that `regulat[e] insurance.'" Id. (second alteration in original); see also Wurtz, 761 F.3d at 241 n.6. …
Cognetta, E.D.N.Y. No. 1:17-cv-03065
And in that last paragraph lies the crux of the issue. It is because the private self-funded plan does not purchase insurance, and under ERISA’s Deemer clause, cannot be considered “insurance” that application of the rule in Wurtz is incorrect as it relates to self-funded benefit plans. Once one determines that a plan is not insurance pursuant to the Deemer clause, it is then that we determine whether the law a participant is seeking to enforce “relates to” an employee benefit Plan. An anti-subrogation clause is by definition the attempt of a plan participant to seek benefits to which it is not entitled, i.e. the ability to keep benefits paid which are subject to a subrogation or reimbursement obligation.
While this is indeed an exciting development, some notes of caution.
First, this decision was reached at the Federal Trial Court level. There are three other Federal districts in New York and none of them have binding authority over the other; meaning that if this exact same issue were to be heard in the Southern District of New York, the outcome could be different. If and only if this decision is appealed, heard, and upheld, by the Second Circuit Court of Appeals will it then be the law of the land in all Federal Districts under the purview of the Second Circuit, including Connecticut and Vermont. Until then, this decision simply gives plans the same leverage New York attorneys had against them, the risk of loss and cost of pursuit rendering such pursuit an imprudent use of funds, be that due to fiduciary concerns with respect to the plan, or practical concerns with the respect to the participant.
Second, and perhaps most importantly, the ability of self-funded benefit plans to win on any issue in Federal Court in the Land still rests on one very basic concept … plan language. If the Plan language is insufficient in any way, a plan is at serious risk of losing its rights. In Cognetta, the Plan was well drafted, and assuming the Second Circuit makes good on its Footnote in the Wurtz decision, It would likely uphold the decision in the Cognetta case upon appeal.
We will have to wait and see how this plays out. Either way, it is an exciting development in the Second Circuit and finally provides what looks to be a light at the end of the tunnel on the Wurtz problem in the Second Circuit. Make no mistake, New York lawyers will find other ways to make our road to recovery more difficult. Having the right tools and partners in place to identify recovery opportunities and act on them continues to be the best way to protect plan funds. Then all we can do is roll with the punches, and every so often, we’ll get some relief!
1 This can present insurmountable challenges in some states, such as Illinois, where state courts have repeatedly refused to apply clear plan terms that conflict with state laws. Bishop v. Burgard, 764 N.E. 2d 24 (Ill. 2002). As an intermediate court of appeals in the state noted “…McCutchen may foreshadow a different result than our supreme court has pronounced in the past.” Schrempf, Kelly, Napp & Darr, Ltd. v. Carpenters’ Health and Welfare Trust Fund, 35 N.E.3d 988 (2015).
Plan Administrators of self-funded plans are able to customize their benefit offerings to meet the needs of the employer group, as long as that customization is compliant. Compliance for self-funded plans subject to the Employee Retirement Income Security Act (“ERISA”) includes federal health-related regulations such as the Patient Protection and Affordable Care Act (“PPACA” or “ACA”) and the Mental Health Parity and Addiction Equity Act (“MHPAEA”). The lurking problem exposing employers, who sponsor those self-funded plans, to unexpected liability are the federal employer-related regulations. The Equal Employment Opportunity Commission (“EEOC”) and the Department of Justice (“DOJ”) have taken action to enforce compliance with certain employer-related regulations such as the Americans with Disabilities Act (“ADA”) and Title VII of the Civil Rights Act of 1964 (“Title VII”).
Provided below are examples of when an exclusion in a self-funded plan, such as an excluded medical condition or treatment for that medical condition, can be compliant with the applicable health-related regulations, such as the ACA and MHPAEA, but that same medical condition is still afforded protection under employer-related regulations such as the ADA and Title VII.
ACA and Title VII Compliance
Discrimination on the Basis of Sex
The ACA’s Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability with regards to certain covered entities’ health programs. A covered entity is one that receives federal funding as outlined in the ACA. The convoluted issue is whether treatment for gender identity is a protected class under the category of “discrimination based on sex.” While Section 1557 does not specifically state that plans subject to it must cover gender transition surgery, the rules do state that the Health and Human Services, Office for Civil Rights (“HHS, OCR”) will investigate any complaints. With that said, the December 31, 2016, U.S. District Court injunction (applicable nationwide) was placed on certain parts of Section 1557, including the prohibitions against discrimination on the basis of gender identity and termination of pregnancy, and that injunction is still in effect. The DOJ’s recent guidance, while it does not specifically address Section 1557, appears to hint that the current administration is not going to ask a federal judge to lift the current injunction.
The self-funded plans that are not directly subject to Section 1557, because of the lack of federal funds, must still comply with the ACA. There are no actual benefit mandates for transgender services under the ACA for self-funded plans that are not subject to Section 1557. Therefore, there does not appear to be a direct benefit compliance issue for plans that exclude treatment for gender identity. Regardless, there is the potential for a discrimination issue under Title VII which may draw unwanted attention from the EEOC (as HHS does not have the authority in this case).
Whether a Plan is or is not subject to Section 1557, it would still be a plan’s best practices to cover gender identity services since employers are not shielded from liability under Title VII. Title VII prohibits employment discrimination based on race, color, religion, sex and national origin, and the EEOC’s interpretation of its prohibition on discrimination based on sex, includes discrimination based on gender identity and sexual orientation. The EEOC, as an independent commission, takes the stance that employees who undergo gender reassignment are protected under Title VII. For example, the EEOC filed an amicus brief on August 22, 2016, arguing that an individual’s gender dysphoria made gender reassignment surgery “medically necessary” and that the failure to cover this surgery was a sex discrimination violation of Title VII. The case for which this amicus brief was filed, involved a self-funded health plan that had a sex transformation surgery exclusion. The above-noted case is a perfect example of when an exclusion that complies with health-related regulations can cause a discrimination lawsuit to be brought by the EEOC against the employer. Therefore, Plan Administrators must proceed with caution when excluding treatment for gender identity or dysphoria, even if they are not subject to Section 1557, because the EEOC may still have a discrimination claim under Title VII.
MHPAEA and ADA Compliance
The MHPAEA requires mental health and substance use disorder benefits to be covered in parity with the plan’s medical and surgical benefits. The Department of Labor (“DOL”) recently issued proposed FAQs on mental health and substance use disorder parity, and they seem to imply that a plan can compliantly exclude a particular medical condition (i.e., autism), because the exclusion of all benefits for a particular condition would not be considered a “treatment limitation” in the MHPAEA regulations. Comments on these proposed FAQs should be submitted to the DOL by June 22, 2018. As for the medical condition of autism, there is currently no consensus in the medical community regarding whether autism should be classified as a mental health disorder (psychiatric disorder) or a neurological/developmental disorder. With that said if a private self-funded ERISA plan chose to explicitly exclude autism there would be no direct violation of the MHPAEA or the ACA.
Excluding the medical condition of autism does not, however, shield the employer from responsibilities they have under the ADA. Pursuant to the ADA, a “qualified individual with a disability” must be provided with reasonable accommodations unless the employer can show that the accommodation would impose an undue hardship to them. An employee with autism, who would qualify as a disabled individual under the ADA, may request such reasonable accommodations.
A violation of the ADA could result in a lawsuit being brought by the EEOC. For example, the EEOC filed a lawsuit against an employer in California who did not provide reasonable accommodations to their employee with autism. The employer was subject to a large fine, agreed to change their policies and procedures, and will also submit annual reports to the EEOC regarding compliance. Therefore, even if the medical condition of autism is compliantly excluded under the plan, the employer still has to comply with the ADA, such as providing reasonable accommodations. In addition, given the EEOC’s protection of individuals with autism, the EEOC may find an exclusion of autism to be discriminatory and employers of self-funded plans must be cautious.
Substance Use Disorder
As discussed above, private self-funded ERISA plans are not required to cover mental health and substance use disorder benefits, but if they do, they must cover them in parity with the medical and surgical benefits. In other words, if a plan chooses not to cover these benefits at all, the plan would still be in compliance with the ACA and the MHPAEA. With that said, this will pose the same situation as above, because even if these benefits are not covered, employees would still have federal rights under the ADA.
For example, a qualified individual in Massachusetts had sought treatment for opioid use disorder and was denied treatment by a skilled nursing facility, creating action to be taken by the DOJ. The complaint was brought under the ADA because it was determined that these individuals were disabled on the basis of opioid use disorder. On May 10, 2018, the United States of America entered into a Settlement Agreement with Charlwell Operating, LLC, the skilled nursing facility, wherein the facility was found to be discriminating against individuals seeking treatment for opioid use disorder in violation of the ADA. The outcome of that settlement involved a penalty to be paid by the facility, and they were to adopt policies and conduct training, including training on the ADA itself.
Although this settlement involved discrimination by a provider and not an employer, it brings to light that the ADA protects and encompasses medical conditions that, at the same time, are not covered under the plan. If a medical condition is not covered, the employer must still ensure that reasonable accommodations and potential discrimination issues are being monitored.
Meeting at the Crossroads
Plan Administrators of self-funded plans should always keep in mind the protections of certain medical conditions that are enforced by the EEOC and DOJ. These protections are outside the realm of health-related requirements but inside the realm of employer-related requirements. When a plan’s benefit offerings or exclusions are compliant with the applicable health-related regulations, it does not mean the employer who sponsors that plan is safeguarded from (1) exclusions that may be deemed discriminatory under the ADA and Title VII, (2) the ADA requirements, such as reasonable accommodations, for those excluded medical conditions, or (3) general workplace discrimination regarding those excluded medical conditions.
By: Jon Jablon, Esq.
As you may know, the regulators have been impressively sparse in their opinions of reference-based pricing (or RBP, for short). Courts have scarcely weighed in at all, and the DOL has published a few bits of guidance, some more helpful than others, but it’s still the wild west out there in the RBP space.
One of the central themes – and in fact one of the only themes – of prior DOL guidance has been that balance-billed amounts do not count toward a patient’s out-of-pocket maximum. That’s from way back in the ACA FAQ #18, published in January 2014. Then, in April 2016, the DOL clarified a bit. Question 7 of FAQ #31 (which we have previously webinarred about, and yes, that’s a word, as of right now) indicates that the previous guidance still holds true.
Well, sort of.
Yes, amounts balance-billed by out-of-network providers are still exempt from being counted toward a patient’s cost-sharing maximum, but the wording “out-of-network providers” apparently specifically implies that there are some in-network providers, according to the DOL. Many RBP plans have no in-network providers whatsoever; the result is that balance-billed amounts are counted toward the patient’s out-of-pocket if there are no “in-network” options. What does “in-network” mean, though, in this context?
At first blush, the concept seems to create a problem for RBP, since having “in-network” providers is antithetical to RBP. In most cases, however, RBP is not administered in a vacuum; usually, RBP is administered, at least in part, by a vendor, and that vendor generally has some processes in place for avoiding member balance-billing. The plan must somehow ensure that members are not balance-billed above their out-of-pocket limits, unless they had options and consciously chose not to utilize them.
For instance, if a plan is using RBP for out-of-network claims only – that is, accessing a primary network, but paying based on a reference price for anything falling outside that network – the plan could, in theory, allow any patients to be balance-billed for any amounts, if those patients have chosen to go out-of-network. That’s because the plan has established options for the patient to avoid balance-billing – but if the patient has chosen to not utilize those options, that’s the patient’s prerogative.
The problem arises, however, in the context of a plan that uses no network and has no contracted providers; if a provider balance-bills a patient above the out-of-pocket maximum when the patient had no choice but to be balance-billed, that’s when an employer could be in a state of noncompliance.
Greatly simplified, the regulators have specified that plans using reference-based pricing must provide patients some reasonable way to avoid being balance-billed. If all providers are non-contracted and will balance-bill, the plan is not permitted to sit idly by and allow the balance-billing to occur without doing anything about it. The plan will have no choice but to settle those claims with providers on the back-end. If, however, patients have “reasonable access” (whatever that means) to providers that will not balance-bill the patient – whether through some sort of network, or direct contracts, or even case-by-case agreements – the plan will have met its regulatory obligations, and can continue to not count balance-billed amounts toward patients’ out-of-pocket maximums.
The take-away here is that if you’re doing RBP, make sure you’re doing it right! The legal framework may be the wild west, but your own individual RBP plans shouldn’t be. Contact The Phia Group’s consulting team (PGCReferral@phiagroup.com) to learn more.
In the self-funded industry, being diligent with respect to employer groups, vendors, and contracts is always important – but sometimes knowing what to put on a checklist in the first place is more difficult than checking off the items. Renewal time means it’s time to impress prospective clients, keep existing clients happy, and make sure the vendors and contracts being utilized are the best possible fit for your groups.
Join The Phia Group’s legal team for an hour as they outline a laundry list of what employers, TPAs, brokers, and stop-loss carriers should look for this time of the year – and provide some guidance on how the industry’s players can stay ahead of the curve.
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By: Brady Bizarro, Esq.
After more than thirty-two hours of testimony (and a record number of interruptions) before the Senate Judiciary Committee, the Supreme Court confirmation hearings for Judge Kavanaugh finally concluded last Friday. Republicans have already set a date for a vote and plan to have him seated for the Supreme Court’s new term, which begins in early October. Democratic opposition to Judge Kavanaugh is multi-faceted, but for our purposes, specifically related to health law, many fear he would vote to overturn Roe v. Wade and strike down the Affordable Care Act’s (“ACA”) pre-existing condition protections. Given the fact that a case to overturn ACA protections is currently sitting before a federal court in Texas, the Supreme Court may indeed be asked to weigh in sooner rather than later.
Judge Kavanaugh, like many nominees before him, refused to give assurances on specific hypotheticals. After all, he argued, independent judges should not give a thumbs up or thumbs down before litigants have appeared before them in court. Senators knew ahead of time that Kavanaugh would answer hypotheticals about abortion rights and the ACA in this way; yet, many of them still asked such questions in a rhetorical fashion to dramatize their points. A more effective strategy, at least politically, would have been to ask rhetorical questions, but also to ask Judge Kavanaugh about specific wording he used in prior dissents to expose signals that the judge might be prepared to overturn Roe v. Wade and/or the ACA.
Of all the committee members that questioned Judge Kavanaugh (and I watched them all), Senator Richard Blumenthal (D-CT) did this most effectively. The senator asked Judge Kavanaugh about his dissent in a case called Garza v. Hargan, the only abortion case on which the nominee has ruled. In that case, Judge Kavanaugh wrote that his colleagues on the D.C. Circuit Court of Appeals had decided that “unlawful immigrant minors have a right to immediate abortion on demand.” To Senator Blumenthal, this was a coded message to the White House. The phrase “abortion on demand,” according to the senator, is often used by the anti-abortion community to refer to repeal of Roe v. Wade.
In addition, in a 2003 memo, Judge Kavanaugh noted that the Supreme Court “can always overrule” Roe v. Wade. In particular, he wrote, “I am not sure that all legal scholars refer to Roe as the settled law of the land at the Supreme Court level since [the] Court can always overrule its precedent,” adding that some conservative justices then on the Court “would do so.” Finally, Senator Blumenthal noticed Kavanaugh’s description of Roe as “existing precedent.” In his review of hundreds of Judge Kavanaugh’s prior opinions, Senator Blumenthal could not find the use of the adjective “existing” before the word “precedent.” To the senator from Connecticut, this implies that Judge Kavanaugh believes that there will be a time when Roe can be overturned and will no longer be the legal precedent on abortion.
Regardless of the Democratic opposition, the simple fact remains that Republicans, in solidarity, have enough votes to confirm him. Unless something dramatic happens between now and the end of September, we can expect Judge Kavanaugh to soon become Justice Kavanaugh, the newest member of the United States Supreme Court. When cases reach the Court that deal with abortion rights and the ACA, we will learn whether or not Senator Blumenthal’s concern was warranted.
Patrick Ouellette, Esq.
This week has featured opening oral arguments in Texas v. U.S. as part of the latest formal attack upon the Affordable Care Act (ACA). The case features 20 Republican governors and state attorneys general pursuing a preliminary injunction on the ACA. Despite technically serving as the defendant, the Trump Administration is defending the law and instead a group of Democratic attorneys have intervened in the case to defend the ACA. Among the key items at stake is the federal law’s guarantee that those with pre-existing conditions will not be denied coverage.
Congress eliminated the ACA’s individual mandate penalty starting in 2019, but the individual coverage mandate remains part of the law even if there technically are no “teeth” to this part since the tax penalties were essentially “zeroed out” by the Trump Administration. However, in their complaint filed on February 26, 2018, the plaintiffs argue that the “individual mandate to buy health insurance that lacks any constitutional basis”. For the mandate to be considered unconstitutional, according to the group, would have far-reaching ramifications that mean “the remainder of the ACA must also fall.” If successful, the governors and state attorneys general would abolish the ACA entirely along with its protection of those with pre-existing conditions.
Employers with self-funded health plans will be watching the results closely, as the pre-existing condition safeguards afforded to members would be removed completely along with the rest of the ACA. Concurrent with this court battle, North Carolina Sen. Thom Tillis led a group of Republican senators in introducing a bill recently that would apparently ensure coverage for those with pre-existing conditions. “This legislation is a common-sense solution that guarantees Americans with pre-existing conditions will have health care coverage, regardless of how our judicial system rules on the future of Obamacare.” However, the “Ensuring Coverage for Patients with Pre-Existing Conditions Act” only provides that insurers must accept those with pre-existing conditions, not necessarily that they need to treat them. This is an important distinction for insurers, as it would allow them far more liberty to deny coverage based on cost than what the ACA currently permits.
Stakeholders in the self-funded industry should pay attention to the progression of both Texas v. U.S. and the Tillis bill.
In this episode of Empowering Plans, Adam Russo and Jennifer McCormick interview Laura Hirsch, President of Nova Healthcare Administrators. They discuss the latest stop-loss trends, patient assistance programs for prescription drugs, and other issues facing the self-funded industry.
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By: Kelly Dempsey, Esq.
That’s a pretty big question as we learn more about the Trump Administration’s attempt to reduce drug costs.
We all know drug prices are off the charts and several attempts to control pricing have failed to get up and running. As you may recall, President Trump indicated during his campaigning that he would develop a plan to lower prescription medicine costs. The U.S. health secretary (Azar) is making some moves and has indicated that eliminating drug rebates may help reduce costs.
Cost containment is key to self-funding and high drug costs have caused employers and plans to explore options to keep plan costs down, including utilizing vendor programs that obtain drugs from outside the U.S. and/or build certain rebate programs into the customized plan design. While there’s still a lot that must be worked through before changes are implemented, these four key takeaways may give plans, employers, brokers, PBMs, and other vendors some heart burn:
Plans and vendors that utilize these types of programs should be on the look-out for rule changes to ensure continued health plan compliance.
By: Erin M. Hussey, Esq.
Since the final Association Health Plan (AHP) rules were issued in June, many states have opposed them arguing they would create adverse selection. The argument is that healthy individuals would join AHPs as a cheaper option, because they do not have to cover certain benefits such as essential health benefits (EHBs), while unhealthier individuals would join the individual and small group markets for more robust coverage. As a result, the more people that move from the individual and small group markets, in order to join AHPs, will cause an increase in premiums for those markets making it less affordable for unhealthy individuals who stay on them. In addition, Massachusetts Attorney General Maura Healey argues that the new rules are unlawful as they will create deception, fraud and mismanagement.
The final AHP rules have also left states with more questions than answers. As a result, states have recently been taking their own actions with the continued lack of guidance from the U.S. Department of Labor (DOL). For example, Michael Pieciak, Vermont Commissioner of the Department of Financial Regulation, issued an emergency regulation on August 1st stating, among other things, that fully-insured AHPs must offer EHBs. Additionally, on August 2nd Jessica Altman, the Pennsylvania Insurance Commissioner, sent a letter to the secretaries at the DOL and Health and Human Services (HHS) stating that AHPs must comply with ACA individual and small group market rules and ACA benefits and protections. This is in stark contrast to the AHP final rules which detail that an employer member who is considered a small employer would be able to avoid the small group market rules, such as covering EHBs, by joining an AHP that would constitute as a large employer or by joining a self-funded AHP. The final AHP rules attracted small employers since they would have the opportunity to offer large group market health coverage to their employees, but some states could make it difficult to do so.
With the final AHP rules becoming effective on August 20th, it is expected that states will continue to take matters into their own hands without further guidance from the DOL. As states continue to challenge the ability for AHPs to operate under the new rules, it is likely that lawsuits will be brought by business groups and individuals who seek to operate an AHP under the new rules.
In this episode, Adam Russo and Brady Bizarro speak with Ryan C. Work – Vice President of Government Affairs at the Self-Insurance Institute of America (“SIIA”). They talk politics, D.C., and more importantly, about the efforts of the Government Relations Committee to advocate for the self-insured industry. From stop-loss protections and an updated “ERISA Notebook” to new wellness program rules, Ryan reveals the top issues on SIIA’s political agenda and explains how member engagement can really make a difference.
Prescription drugs are some of the most costly benefits for any health plan, especially for those plans that are self-funded. In 2017, total spending on prescription drugs in the U.S. reached $453 billion. Specialty drugs are particularly culpable, accounting for more than one third of all drug expenditures in 2016 despite making up less than one percent of all written prescriptions. In May, the Trump administration released a forty-four-page blueprint for executive action on prescription drug prices, entitled “American Patients First.” The document contained many strategies for combating rising drug costs; but it also focused in on the use of patient assistance programs (“PAPs”) and considered whether they might be driving up list prices by limiting the transparency of the true cost of drugs to patients.
Plan sponsors originally utilized the typical tools available to them to try to offset the cost of specialty drugs: higher copayments, coinsurance, and deductibles. In an effort to mitigate the impact on patients, several pharmaceutical manufacturers developed PAPs to help offset patients’ out-of-pocket drug costs. Some of these programs are very generous. For example, a PAP run by Enbrel offers up to $660 per month toward the cost of a specialty drug for members who would not otherwise qualify for financial assistance.
Assistance programs are marketed as a kind of altruism for patients, which has great public relations benefits. They can also increase the demand for specialty drugs, even when generic alternatives are available. This results in a huge cost to the patient’s health plan. Consider the following scenario: a specialty drug’s list price is $10,000. A generic alternative is available that has a list price of $2,000. The health plan imposes a $500 copay for specialty drugs when generics are available and a $100 copay for generics. In this case, however, the specialty drug manufacturer offers the patient a $450 copay card. For the patient, the out-of-pocket cost for the specialty drug is $50 cheaper than the copay for the generic alternative. The patient chooses the specialty drug, and the health plan pays $9,500. Had the patient selected the generic alternative, the plan would have only paid $1,900.
As the scenario above reveals, PAPs can incentivize patients to choose specialty drugs even when cheaper, generic alternatives are available. For most patients, the only price they are aware of is the amount they pay at the register. The cost to their health plan remains hidden to them, although they eventually feel the effects downstream. In other words, PAPs can save patients money on the front end while driving up the cost to patients on the back end through increased premiums and cost-sharing. With PAPs now in the crosshairs of both plan sponsors and the Trump administration, we should expect new regulations on their use in the coming months.