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The Complicated Issue of ACA’s Section 1557 and Gender Identity Protections

By: Erin Hussey, Esq.

Section 1557 under the Affordable Care Act (“ACA”) 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 complicated 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. Recent guidance from the Department of Justice (“DOJ”), while Section 1557 is not specifically addressed, 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 of whether there is a benefit compliance issue, there is the potential for a discrimination issue under Title VII of the Civil Rights Act of 1964 (“Title VII”) drawing unwanted attention from the Equal Employment Opportunity Commission (“EEOC”). 

Thus, whether a self-funded 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 should caution Plan Administrators when excluding treatment for gender identity or dysphoria, even if the plan is not subject to Section 1557, because the EEOC may still have a discrimination claim under Title VII.

The Buck Stops…Where? Pointing Fingers in the Self-Funded Industry

In a financial climate where saving money has to be made a top priority, so many entities within the insurance industry have fallen victim to someone trying to shift blame onto them. Regardless of fault, it’s in everyone’s best interests to work together to overcome issues rather than point fingers – but it’s not always that simple.

Join The Phia Group’s legal team as they discuss some situations where fingers have been pointed, how those situations were resolved, and how you can help insulate yourself from similar circumstances.


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Empowering Plans: P44 - The Phia Group “MVP” Post-Mortem


In this episode, our hosts discuss the recently concluded Phia Group Most-Valuable-Partners or “MVP” forum; an event that took place June 4th to the 6th at Gillette Stadium, home of the New England Patriots.   From the subject matter, to the client feedback… experiences, to comical coincidences… For those who attended, and those who wish they could have been there… This episode of Empowering Plans is not to be missed.

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May Day: Two States Enact Individual Health Insurance Mandates

By: Brady Bizarro, Esq.

Well, here we have it: the second and third states to enact individual health insurance mandates modeled after the federal mandate enshrined in the Affordable Care Act (“ACA”). While many states had been considering this kind of move (i.e. Maryland, California, Connecticut), New Jersey and Vermont grew tired of waiting around. These states have now openly defied the Trump Administration’s effective repeal of the ACA’s individual mandate at the end of 2017. They join Massachusetts, which was the first state to require its residents to purchase health insurance, and which served as the blueprint for the ACA.

Starting in 2019, New Jersey will require all of its nine million residents to obtain health insurance coverage. If they fail to do so, they will be subject to a penalty of $695, or 2.5% of a person’s income, whichever is greater (this is the same penalty as the federal mandate). The penalty amounts collected will help subsidize the cost of care for New Jersey’s seniors and chronically ill. The specifics of Vermont’s individual mandate have not been ironed out just yet, but the governor has commissioned a working group to work out the details in 2019. At this point, residents will have until 2020 to obtain health insurance coverage in Vermont.

These states are acting because they believe they will experience a significant drop in enrollment. That drop will likely drive up the cost of care for everyone due to adverse selection and the so-called “death spiral,” which leaves large numbers of very sick individuals isolated in risk pools. Naturally, opponents of state individual insurance mandates point out that imposing mandates does not lead to lower healthcare costs. Instead, they argue that mandates simply force individuals to buy plans that they cannot afford and often cannot use. 

In our industry, we know all too well that mandates alone do not lead to cost containment. That is why The Phia Group utilizes multiple, results-driven approaches to cost-containment. As with any policy initiative, though, having to follow different rules based on the state in which you live is not likely to yield positive results when dealing with an industry as large and as ubiquitous as the health insurance industry. We’ll be watching to see which states follow New Jersey and Vermont in the coming months.

Bridging the Gaps Between...Everything

By: Jon Jablon, Esq.

You may have heard about our new Phia Certification program, through which The Phia Group requires all employees to be “certified” to the company’s satisfaction. Certification is obtained by watching, reading, and listening to a series of training materials and then taking a series of tests to confirm the employee’s understanding of our industry and all aspects of The Phia Group’s operations.

One particularly noteworthy question is:

Which of the following is the most accurate?

  1. A “gap” is the amount a health plan pays for a claim between its normal specific deductible and a laser for a particular individual
  2. A “gap” is a misalignment or misinterpretation of verbiage between the plan document and any supporting document or policy
  3. A “gap” arises when the stop-loss policy contains a limitation that is not present within the plan document
  4. A “gap” arises when the employee handbook guarantees 8 weeks of vacation but the plan says it will only cover 4

As you may have surmised, the answer is option B, which is essentially an “all of the above” type of answer. This is especially noteworthy because we find that folks in our industry often think of “gaps” as occurring only between the plan document and stop-loss policy, while in practice there are lots of other gaps that can cause lots of unforeseen problems for health plans.

A perfect example – and one that we deal with quite frequently – is when there is a gap between the plan document and a network contract. This can be one the most problematic of all gaps, since it can come out of nowhere. The issue arises like this:

A plan incurs an in-network claim, billed at $50,000. The SPD provides the plan the responsibility to audit all claims, and an audit reveals that the appropriate payable rate (the plan’s U&C rate) for this claim is $30,000. Meanwhile, the network contract provides a 10% discount off billed charges for this particular claim – resulting in the plan paying $30,000 based on the SPD, but owing $45,000 as the network rate. This is a very common scenario and not one that can be solved quite so easily; even if the plan says “oh right – the network contract! We’ll pay the network rate to avoid a fight with the network,” the dilemma may not be over, since stop-loss presumably has underwritten coverage based on the assumption that the plan’s U&C rate will be paid, resulting in stop-loss possibly denying the $15,000 paid in excess of the plan’s U&C rate. Even though there’s a network contract and the plan may have no choice but to pay it, there’s always the chance that the stop-loss policy will define its payment on other terms.

Moral of the story? Gaps in coverage can arise between the plan document and any other document – including network contracts, ASAs, stop-loss policies, employee handbooks, PBM agreements, vendor agreements, and more. Check your contracts, and make sure your SPD aligns with all of them! (Email to learn more.)

Empowering Plans: P43 - A Debrief of SIIA’s Fly-In on the Hill

In this episode of Empowering Plans, Adam, Ron, and Brady discuss their recent trip to Washington, D.C. in which they took part in SIIA’s “Fly-In” event, where SIIA members met with their elected representatives to discuss self-insurance/captive insurance issues. It was a great success, as they were able to promote the interests of self-funded health plans and their TPAs as well as advocate for a Senate version of the Self-Insurance Protection Act.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

Empowering Plans: P42 - Eliminating the Noise

In this episode, Adam, Ron, and Brady interview David Contorno, President of Lake Normal Benefits. They discuss emerging trends in the industry; from reference-based pricing to direct primary care. They also address the incentive problem and how HSAs are harming the health insurance industry.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

Empowering Plans: P41 - The Case for Collusion (Continued)

Join The Phia Group’s Sr. VP, Ron E. Peck, and healthcare attorney Brady C. Bizarro as they answer the questions that you asked during our webinar on PBMs, specialty drug prices, and lawsuits alleging fraud.

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How About Some Evidence? - Montanile v Board of Trustees

By: Christopher Aguiar

Despite the Supreme Court’s decision in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 U.S. in 2016, some benefit Plan sponsors still question the need for a robust approach to third party liability.  In Montanile, the Court stated in no uncertain terms that it would not give benefit plans a remedy if they sat on their hands and were not proactive in their efforts to recover third party settlement.  In pertinent part, the Court stated:

… The Board protests that tracking and participating in legal proceedings is hard and costly, and that settlements are often shrouded in secrecy. The facts of this case undercut that argument. The Board had sufficient notice of Montanile’s settlement to have taken various steps to preserve those funds. Most notably, when negotiations broke down and Montanile’s lawyer expressed his intent to disburse the remaining settlement funds to Montanile unless the plan objected within 14 days, the Board could have—but did not—object. Moreover, the Board could have filed suit immediately, rather than waiting half a year. …

Indeed, the Court seemed to give no deference to the Plan’s concern, i.e. it wasn’t necessarily about this case, rather it was about the burden that would be imposed on health plans if left with no remedy against a participant who takes liberties with his/her obligations and spends money that is to be held in trust on the plan’s behalf.  It should be no surprise that in all my years working on behalf of benefit plans, I can recall a handful of times where I, personally, had to step foot into a court, and virtually all of them were in jurisdictions where the law requires that the Plan be a named party to the dispute; yet in the past 6 months, I’ve had to step in front of a judge 3 times and just last week was summoned for a 4th.

It's a sign of the times.  The Court imposed a duty on Plans to be proactive in their tracking and participation in recovery and legal proceedings.  Identifying cases is the first step to recovery and if plans don’t have a good solution for it, it risks holding the bag either because it didn’t know about the recovery opportunity in the first place, or knew because the participant was forthcoming with information, but the plan didn’t have the resources and understand how to execute.

Let’s not even get started on what the Plan’s fiduciary obligations might be in these instances …