By: Corrie Cripps
In June, the US Food and Drug Administration (FDA) issued the nation’s first approval for a drug derived from marijuana-based compounds. The drug’s name is Epidiolex, and is used to treat patients with forms of severe epilepsy (Dravet syndrome and Lennox-Gastaut syndrome).
The drug uses CBD, or cannabidiol, which is an oil that comes from resin glands on cannabis buds and flowers.
Prior to the FDA marketing Epidiolex, the Drug Enforcement Administration (DEA) must reclassify CBD, since it is currently listed as a Schedule I drug. Schedule I drugs are considered to have “no currently accepted medical use and a high potential for abuse.” The DEA is expected to make this change for CBD, but will likely leave cannabis itself at Schedule I.
Currently CBD is legal to purchase in only some states. In the states where medicinal or recreational marijuana is legal, CBD is legal. In 17 other states, there are specific laws about what CBD products can be used by whom and for what.
If the DEA reclassifies CBD so that it is no longer a Schedule I drug, thus making CBD legal at the federal level, plan sponsors will need to determine if/how they want to address this in their plans (i.e., if they want to specifically exclude or cover it). Plan sponsors will need to determine how this change will impact their plans, including stop loss.
By Patrick Ouellette, Esq.
The Federal Drug Administration (FDA) recently issued the nation's first approval for medicine derived from marijuana-based compounds, cannabidiol (CBD). Given this news, the next reasonable question for the self-funded industry is how it will impact health plans’ coverage and exclusions of medicinal marijuana.
This has been and continues to be an unsettled area of law between federal and state statutes. Up until now, medicinal marijuana was not approved by the FDA and thus typically would either not fall under a plan document’s definition of a drug or otherwise be excluded. Traditionally, a plan offering CBD as a benefit had, on the surface, appeared to violate federal law because marijuana has been illegal at the federal level. Simultaneously, CBD was considered legal in many states, creating a conflict between federal and state law.
The FDA approval will likely not affect plans that want to continue to exclude all types of marijuana; if such plans have not already, they would only need to broaden their plan document exclusion language a bit to account for medical marijuana. Plans that do want to cover medical marijuana, however, may now see less risk in doing so now that a CBD product has been approved by the FDA. From a statutory perspective, these plans have the authority to dictate whether or not they want to cover FDA-approved CBD. Importantly, despite the fact that these plans will now have more flexibility to cover CBD, there are still administrative consequences to consider.
You can reach out to the Phia Group Consulting team here to discuss the effect of the FDA’s approval on your plans or clients.
By: Jen McCormick, Esq.
Massachusetts Governor Charlie Baker signed landmark legislation on June 28, 2019. The legislation, referred to as the “Grand Bargain” Act will increase the minimum wage and create a generous paid leave program. Massachusetts employers should begin to prepare for the impact of this new paid leave program.
The new paid leave program will be available for eligible individuals as of January 1, 2021. All private Massachusetts employers will need to provide eligible individuals with paid family and medical leave, funded via the payroll tax (discussed below). In general, eligible individuals include (a) current (full-time) employees of a Massachusetts employer; (b) self-employed individuals who elected coverage under the law and reported self-employment earnings; and (c) certain former employees. Generally, these individuals will be entitled to 12 weeks of paid family leave to (a) provide care for a family member due to the family member’s serious health condition; (b) bond with their child during the first 12 months after the child’s birth or during the first 12 months after placement of the child for adoption or foster care; or (c) attend to obligations arising because a family member is on active duty or been notified of an impending call to active duty in the United States armed forces. Upon return from paid leave, the individuals must be restored to their equivalent position with the same status, pay, benefits and seniority.
Pursuant to the regulations, a new state agency (the Department of Family and Medical Leave) was created to assist in the administration of this new program. This agency is required to issue proposed regulations regarding the implementation and administrative processes for this new paid leave program by March 31, 2019. The new paid leave program will be funded by a mandatory .63% payroll tax contribution (as adjusted by the agency on an annual basis), which is to be collected by the agency. Employers and employees may contribute towards the cost of the tax. Note, however, that certain small employers will be exempt.
The paid leave will be subject to a one-week waiting period during which no benefits will be paid, however, employees may (but are not required) to use other paid leave (i.e. sick or vacation time). Eligible individuals may receive up to a weekly benefit cap of $850 (as adjusted by the agency). In certain instances, paid leave taken under this program may also qualify under the Family Medical Leave Act (FMLA) or the Massachusetts Parental Leave Act. The new paid leave program is to run concurrent with those protected leaves.
Importantly, pursuant to this program employers must maintain an employee’s existing health insurance for the leave. As the qualifications for this program do not necessarily align with those under FMLA, employers will need to review their existing employee handbooks and health insurance plans to ensure this will not create a gap in coverage. In addition, the regulations note that this program is not intended to interfere with any existing employer programs that may offer greater benefits. For impacted Massachusetts employers, in addition to reviewing current handbooks and materials, this regulation may create the opportunity to expand upon current benefit offerings to ensure compliance with the new law. For example, maybe an employer will want to investigate a self-funded paid leave program.
Stay tuned as administrative regulations are expected in early 2019 to assist employers with the implementation of this new paid leave program.
By: Chris Aguiar, Esq.
A few years ago, the 2nd Circuit threw the subrogation industry a bit of a curveball when it ruled that, effectively, a benefit plan could not preempt application of a state law anti subrogation provision because enforcement of the provision did not “relate to” the provision of employee benefits. This made the 2nd Circuit a bit of a difficult Federal Jurisdiction for a bit, if for no other reason than that reading how the Court somehow used “logic” to find its way to a completely illogical decision; that a provision that allows a plan participant to keep plan assets, thereby accessing benefits to which it isn’t entitled because of Its obligation to reimburse the plan, doesn’t “relate to” benefits and therefore is not subject to preemption. Given how the Court was able to justify that decision, how would they rule in the future on issues of subrogation and third party recovery?
The silver lining of that decision is that it was a fully insured benefit plan, so it really shouldn’t have adversely impacted the rights of private, self-funded benefit plans. That reality, however, didn’t stop every single lawyer in New York and the 2nd Circuit to argue that our private self-funded clients no longer had recovery rights in that area of the County. Thankfully, a recent decision in the Eastern District of New York, COGNETTA v. Bonavita, though not binding on all Federal Trial Courts in the 2nd Circuit, present the first step towards correcting this problem in the 2nd Circuit. Perhaps the 2nd Circuit won’t be so difficult moving forward.
By: Kelly Dempsey, Esq.
A few weeks ago I wrote a blog about Mental Health Parity (MHP) violations and a summary of a recent court case out of the Southern District of New York. In this short amount of time, as predicted, another court has weighed in on the same topic – this time out of the United States Court of Appeals for the Ninth Circuit (the Ninth Circuit is the federal court circuit that oversees the majority of the west coast). The Ninth Circuit heard the case on appeal from the Western District of Washington State.
In Danny P. v. Catholic Health Initiatives, 2018 WL 2709733 (9th Cir. 2018), the employer and self-funded medical plan were sued by a participant for excluding coverage for the participant’s daughter’s room and board at a residential treatment facility. The participant argued that the plan’s coverage for mental health was not in parity with the medical surgical benefits. The trial court sided with the employer, finding that the interim final regulations in effect at the time of the treatment did not prohibit the denial or exclusion in general.
As noted in the prior blog, while the interim final rules were not clear, the final regulations provide a clear explanation that plans must treat residential treatment facilities the same as skilled nursing facilities to show parity between MHP and medical/surgical benefits.
The Ninth Circuit reversed the trial court decision and held that the MHP statute precludes the plan from providing coverage for room and board for a licensed skilled nursing facility (i.e., medical and surgical treatment) but not at a residential treatment facility (i.e., mental health and substance abuse treatment). The court did acknowledge that the interim final regulations did not provide definitive guidance, but those regulations “strong suggested” a lack of coverage for residential treatment facilities when skilled nursing facilities were covered would be impermissible. The case has been sent back to the trial court for further proceedings consistent with the Ninth Circuit Court of Appeals’ decision – in other words, the Ninth Circuit Court told the trial court they were wrong (that the denial was impermissible under MHP) and to reassess the resolution.
By Ron E. Peck
From June 4th to June 6th we hosted The Phia Group’s Most Valuable Partners at our annual MVP Forum. This year, it took place at Gillette Stadium, located at Patriot Place in Foxboro, Massachusetts – home of the New England Patriots. I personally love the Pats, and have been a huge fan since I was a pre-teen growing up in a suburb of New York; (ask me to explain it someday, and I will do so happily). Likewise, company co-owner and CFO, Mike Branco, is a huge fan. The other co-owner and CEO, Adam Russo, however, is not a fan – and by that, I mean he hates the team. Yet, we can all agree the venue, people, and event were exceptional. Above all else, however, I think the guests are what made the event such a success. Speaking of guests, one guest in particular volunteered to act as a presenter; (in fact, he was the only non-Phia Group speaker). That gentleman is Jeffrey S. Gold, MD, of Gold Direct Care; a direct primary care provider located in Marblehead, MA (http://golddirectcare.com/). Amongst the many interesting things Doctor Gold presented, one thing he mentioned that really struck home for me is that we – as a nation – have an addiction to health insurance. Wow.
I took this to heart, and recently asked a newly hired employee of The Phia Group the following series of questions: “Do you own a car? Yes. Do you get oil changes, and fill the gas tank? Yes. Are you going to have a car accident? Uh… I don’t know. I hope not. Maybe? Do you have auto insurance? Yes. Will auto insurance pay for the oil changes? The gas? No. Will they pay for the accident? Yes – that’s what it’s for. Ok. Do you get a flu shot every year? Yes. A physical; a regular check up? Yes. Do you routinely purchase a prescription drug? Yeah… Are you going to be diagnosed with cancer? Oh man. I hope not! Me too! But… answer the question. I don’t know. Ok; are you going to break a leg? Maybe? I don’t know. What does health insurance pay for? Uh… all of it. If auto insurance only pays for unforeseen, but admittedly costly risk, and lets you pay for the routine, foreseeable stuff… why does health insurance pay for everything? I don’t know. Wow. Good question. Uh huh. And if the gas station charged $50 a gallon, would you still fill your tank, or go to the competition? I’d go elsewhere. That’s nuts. Ok… So why do you pay $50 for a tissue box when you go to a hospital? Uh… I don’t. Health insurance does.”
This exchange encapsulates one of the issues driving the cost of healthcare through the roof. Health insurance isn’t insurance. It’s a community funded piggy bank that we use to pay for everyone’s healthcare – foreseeable and not. Because some people’s care is more costly than others, but they can’t afford to pay their pro-rated share, everyone needs to chip in something extra to pay for those people. Frankly, I morally don’t have an issue with that. I understand the value of everyone pitching in to lift up society in general. Furthermore, that person in need could be you, or someone you love, with the snap of a finger. So I see the need. My issue is that the concept – collecting funds from everyone to care for a society’s need – is by definition, a tax. The fact that we’re forcing that square peg through the round hole of private insurance is foolish. Insurance was invented to shift unforeseen (and unlikely) but extremely costly risk onto an entity willing to gamble that the loss won’t occur, but who can afford the hit in the unlikely scenario that it happens. Forcing a private entity to pay for foreseeable, absolutely certain events – without adequately funding them – is just passing the buck in its worst form.
Furthermore, by removing the consumer of healthcare from the exchange, the person picking the care has no incentive whatsoever to consider price when assessing providers of the good or service. It’s unnatural not to balance cost against benefit. When a young male lion wants to mate with a female, but first he needs to defeat the alpha male of the pride, he has to weigh the cost against the benefit. If that lion had insurance akin to our health insurance, he’d be chasing every female he sees – after all, his insurance will fight the alpha male for him, right? Isn’t that what insurance is for?
For too long insurance has been treated as a shield, blinding people from the cost of their care. I don’t begrudge providers of healthcare their profits; as someone with my own medical needs, and whose family has had its share of health issues, I value our nation’s providers above all others. I think, however, that the system – as currently constituted – does no one any favors. Providers who achieve maximum effectiveness and quality of care should are able to charge less for their services, while those who are routinely wasteful or fixing their mistakes, need to charge more for the same services. As with the competing gas stations, so too here, we need to reward the provider that can do more for less, and the first step in doing that is to shake our addiction to insurance. Until people see how the cost of care ultimately trickles down to their own pocket, they won’t care enough to pick the better options.
Lawsuits and Department of Labor audits related to Mental Health Parity (MHP) violations are still arising. MHP is a shortened term that refers to the Mental Health Parity Act of 1996 (MHPA) and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), collectively, the mental health parity provisions in Part 7 of ERISA.
A recent case out of New York (Munnelly v. Fordham Univ. Faculty and Admin. HMO Ins. Plan, 2018 WL 1628839 (S.D.N.Y. 2018)) provides another court’s opinion on one of the hot topics of MHP – residential treatment facilities. The plan at issue denied participant claims for a residential treatment facility indicating that the plan contained exclusions for both residential treatment services and out-of-network inpatient mental health treatment. The plan contended that the interim final regulations were in effect at the time of the claims and thus the plan was in compliance with the rules (as the guidance that clarified MHP compliance with respect to resident treatment facilities was issued after claims were incurred). Additionally, the plan indicated the participant did not comply with the plan’s pre-certification requirements.
For certain portions of the case, the court decided in favor of the participant. The court found that the plan did violate MHP by placing a treatment limitation (excluding coverage for residential treatment facilities) on mental health/substance abuse benefits that was more restrictive than the medical/surgical benefits – in other words, there was no comparative medical/surgical exclusion. Ultimately the plan did not provide a remedy for the participant as there were still questions surrounding the precertification requirements and the application of the out-of-network treatment exclusion.
While the interim final rules were not clear, the final regulations do provide a clear explanation that plans must treat residential treatment facilities the same as skilled nursing facilities to show parity between MHP and medical/surgical benefits. This isn’t the first case about residential treatment facility exclusions and likely won’t be the last if plans do not review and update their plan documents to ensure compliance.
Like most hot topics, until it happens to your plan or your client, this issue isn’t in the forefront of our minds. There are strategies to control these costs which we know can be outrageous; however, plans must be careful when implementing cost containment as some ideas may not comply with MHP.
By: Brady Bizarro, Esq.
Let’s face it: fax machines are horrible and outdated. From busy signals to unreadable printouts to incorrect destinations, it is no wonder most industries abandoned them last century. In our industry, which deals extensively with providers, it’s the primary way to communicate. Understanding why can give you a glimpse into the broader problems with healthcare policy in this country today; a misalignment of economic incentives.
Almost all providers have digitized their own patient records. This was done largely thanks to the Obama administration. In 2009, as part of the stimulus bill, the government passed the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), which included nearly $30 billion to encourage providers to switch to electronic records. Statistics reveal that the number of hospital systems using electronic records went from nine percent in 2008 to eighty-three percent in 2015. So far so good. So, what went wrong? Why is the fax machine still the primary way doctor’s offices communicate?
The issue is not digitizing records: the issue is sharing them. When doctors want to retrieve patient records from another doctor’s office, they turn to the fax machine. They print out records, fax them over to the other provider, and that office scans them into their digital system. Needless to say, this is inefficient, and a misreading of economic incentives is to blame.
The government, at the time, assumed that providers would volunteer to share patient data amongst themselves. This data, however, is considered proprietary and an important business asset to most providers. If other hospital systems could easily access and share your medical record, you could more easily switch providers. Switching providers may be a good thing for a patient who is shopping for better value care, but most providers perceive this ability as a threat to steerage. After all, hospital systems compete with one another for steerage.
As in the case of other healthcare policy problems, chief among them out-of-control spending, doctors, nurses, patients, lawmakers, everyone is frustrated; yet, a solution has thus far been out of reach. The proposed solutions divide policymakers among ideological lines as is often the case with healthcare spending: some feel that more government regulation is needed; others feel that fewer regulations are needed. The Trump administration has so far proposed deregulation in this area and giving patients more control over their own medical records. This is one of the four priorities recently accounted by the Department of Health and Human Services (“HHS”). Time will tell if this approach will finally lead to the demise of one of the most despised pieces of technology in medicine.
By: Kelly Dempsey, Esq.
In past blogs, we’ve looked at eligibility issues from the perspective of leaves of absence, continuation of coverage, and the subsequent gaps that can arise if the plan language is not clear. For this blog, we’ll back up a bit and look at the bigger picture.
Eligibility issues are typically very fact specific – meaning employers and TPAs have to look at the details of an individual’s situation in order to determine if someone can join the plan, modify enrollment, and/or leave the plan during the plan year. Joining the plan involves HIPAA special enrollment rights and plan obligations – the requirements are clearly defined. Special enrollment rules also come into play when an employee’s life situation changes and the employee seeks to add dependents to the plan. At first thought leaving the plan seems to be a no brainer situation – if the employee wants to leave, let them leave…right? Not so fast.
More often than not, health plan contributions are made pre-tax through a cafeteria plan. If a cafeteria plan is involved, the situation can get complicated with the additional consideration of permitted election change rules. Section 125 permitted election change rules can limit an employee’s ability to leave the plan or make other modifications to elections, such as changing the amount of an FSA contribution. To add one more layer, Section 125 is essentially a ceiling and not a floor – meaning it is up to the employers whether or not to include only some of the permitted election changes instead of all permitted election changes available under Section 125.
Now an employer and TPA not only have to review specific facts, but they have to apply two sets of rules and two plan documents (the medical plan and the cafeteria plan). For example, an employee asks the employer to drop health plan coverage saying that “it’s too expensive.” Without a change in status, cost change, or other situation outlined in the permitted election change rules, the employee could very well be stuck in the “web.”
It can be tricky to reconcile rules that overlap each other (side note, overlapping rules happen a lot in this industry…). If you need an extra set of eyes (since we aren’t spiders and don’t have 8), don’t hesitate to reach out to The Phia Group – our consulting team can help get you untangled.
Who knew eligibility could be so difficult?
By: Ron E. Peck
As the winds gust and snow continues to fall this first week of April (seriously?) I won’t allow myself to despair. I remind myself that warmer days are around the corner. My son and I gaze out the frosted window, looking to the skies hoping to see a ray of light, and a warming air, melting the frozen tundra that is our lawn. Our beloved New York Metropolitans aka “Mets” somehow continue to pull off win after win, and I know that – despite things seeming tough now – better days lie ahead. I could be talking about the weather, or I could be talking about a different climate. Do I have a (frozen) finger in the breeze, or, am I measuring the temperature of our industry? At the risk of uttering a cliché, in our industry, it truly is the best of times and the worst of times. Employers are moving to a self-funded model for their health benefits in heretofore-unknown volume; results are benefits that are more robust, at less cost for employees and employers. Yet, as this newly discovered bounty enriches the lives of its members, we also see a rise in regulation, and scrutiny. Consider the attorney, fresh from his or her attack against financial advisors – looking for another kill. Brokers who sold 401K plans and managed pensions suddenly found themselves the target of fiduciary breach lawsuits by the people they had previously served. All it took was an economic downturn, lost funds, and the employees suddenly asked, “Hey! What happened to my money, and who’s responsible for its absence?” If you think an advisor who is penalized for a few mistakes in their asset management services is bad, wait until those same employees ask, “Hey! Who used my money to buy a $500 box of tissues???” As the floodgates open, and more people join the happy ranks of the self-insured, let’s recall the words of “the bard” himself, The Notorious B.I.G.: “Mo money, mo problems.” As we service more plans, help more people, and work with more funds – we must (I believe) adopt a new level of prudent asset management. Sooner or later, someone will ask, “What did you do with my money?” And we must all be proud to report the truth. Like spring, we too need to weather the bad to enjoy the good. I see – like flowering flora in it’s infancy, poking forth from the thawing earth – members of our industry also emerging with ideas, drive, and an eye toward the best days to come. Offering advice, new services, and ways to do more with less, we must confidently say: I am a fiduciary that has done his or her duty, and then some!