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The Domestic Partnership Benefits and Obligations Act of 2013 Seeks to Amend Federal Law
AMICUS UPDATE
United States Senate Bill 1529, the Domestic Partnership Benefits and Obligations Act of 2013, seeks to amend federal law to provide insurance benefits for federal employees in a same-sex domestic partnership and their domestic partners. The Act’s purpose is to offer the same benefits to employees in a same-sex domestic partnership, as statutorily provided for married federal employees and their spouses. Interestingly, the introduction of the bill presented an opportunity to add provisions to Section 402, “Health Insurance”, which attempts to modify Federal Employee Health Benefit (FEHB) laws and address recovery, preemption and jurisdictional issues faced by federal employee health plans seeking to enforce subrogation and reimbursement rights.

Regarding recovery, the bill states that a contract between the federal government and a federal employee plan carrier may require the carrier to make subrogation or reimbursement recoveries for benefits provided to federal employees.

The preemption provision currently found in federal statutes would be modified to express that not only the provisions of a federal employee plan contract but, also the federal statute (5 U.S.C. 8902), preempt state and local laws and regulations which relate to health insurance or any plan.
Finally, a new section would be added to the federal statutes to specifically state that federal district courts have exclusive jurisdiction over civil actions and claims arising under the FEHB statutes, except civil actions and claims against the United States within the exclusive jurisdiction of the U.S. Court of Federal Claims.

The recovery and preemption sections would take effect in the calendar year following the end of a six (6) month period beginning on the date of the enactment of the bill. It would appear that 2015 would be the earliest plan year those sections would apply. The jurisdiction section would take effect immediately upon enactment and would apply to all civil actions pending or filed on or after the date of enactment, regardless of when the injury or illness occurred.

United States House Resolution 3121, the American Health Care Reform Act of 2013, would repeal the Affordable Care Act, make changes to various health insurance laws, and most importantly for NASP members, modify medical liability laws. The bill creates a federal statute of limitations for medical lawsuits, limits damages and attorney fees, addresses punitive and future damages and specifically applies to subrogation claims arising out of a health care liability claim. A health care liability claim is defined as a claim against a “health care provider, health care organization or the manufacturer, distributor, supplier, marketer, promoter or seller of a medical product.”

The statute of limitations in the bill is the sooner of one (1) year after the claimant discovers, or through reasonable diligence should have discovered, the injury or three (3) years after the date of manifestation of the injury. The statute of limitations shall be tolled for the following: (1) fraud, (2) intentional concealment or (3) the presence of a foreign body not having any therapeutic or diagnostic purpose in the claimant. The bill also provides for specific tolling rules for minor claimants.

The bill would limit the amount of noneconomic damages to $250,000 and limit contingent attorney fees to 40% of the first $50,000, 33/13% of the next $50,000, 25% of the next $500,000 and 15% of any amount above $600,000.
Also, the bill would generally preempt any conflicting state law but also specifically supersede state laws providing for a greater amount of damages or contingency fees, a longer statute of limitations or reduced applicability or scope of periodic payments of future damages, as well as a state law which “prohibits the introduction of evidence regarding collateral source benefits or mandates or permits subrogation or a lien on collateral source benefits”. However, the bill does not preempt a state law which provides health care providers or organizations with greater protections from liability, loss or damages than those set forth in the bill. And, the bill does not preempt a state law which specifies a particular amount of compensatory or punitive damages that may be awarded in a health care lawsuit or any defense available to a party in a health care lawsuit.

District of Columbia Bill 339, which was enacted earlier in 2013, modifies the District’s workers’ compensation law. Previously, an injured private sector worker had 6 months from the date of injury in which to file suit against a third party who caused the employee’s injury. If the employee failed to file suit within 6 months, the right to file suit against the third party passed to the employer and its insurer. Bill 339 states that if the employer or its insurer does not file suit against the third party within the six (6) month period, the right to file suit reverts to the employee for the remainder of a 3 year statute of limitations.
Missouri House Bill 339 was enacted effective August 28, 2013. The bill prohibits an uninsured motorist from pursuing noneconomic damages against an at fault driver who is in compliance with the state’s financial responsibility laws.
However, the prohibition does not apply:
• If the at fault driver is proved to be under the influence of drugs or alcohol or is convicted of involuntary manslaughter or second degree assault; or
• If the uninsured motorist’s policy was terminated for failure to pay the premium and the uninsured motorist was not given notice of termination for failure to pay the premium at least 6 months prior to the time of the accident.

Also, in a lawsuit against an at fault driver who is in compliance with the state’s financial responsibility laws by an uninsured motorist, any aware to the uninsured motorist shall be reduced by the amount of the award designated for noneconomic damages and the trier of fact shall not be informed of the inability of the uninsured motorist to pursue or collect noneconomic damages. Finally, passengers in the uninsured motor vehicle are not subject to the recovery limitation.

Special thanks to Adrienne Johnson, CSRP and Senior Subrogation Strategist with Insurance Subrogation Group, for alerting the Amicus Committee to the Missouri Bill.

Kammy Poff, Amicus Chair

Joseph Willis, III, Legislative Affairs Chair

How the Supreme Court’s ruling on DOMA affects self-funded plans
By Jennifer McCormick, Esq. and Corrie Cripps (The Phia Group, LLC)

Background: United States v. Winsdor

On June 26, 2013, the U.S. Supreme Court in United States v. Windsor struck down “Section Three” of the Defense of Marriage Act (DOMA), which prevented the federal government from recognizing any marriages between gay or lesbian couples for the purpose of federal laws or programs, even if those couples are considered legally married by their home state. The other significant part of DOMA makes it so that individual states do not legally have to acknowledge the relationships of gay and lesbian couples who were married in another state. Only the section that dealt with federal recognition was ruled unconstitutional.

Potential implications for plan sponsors and administrators of self-funded medical plans

ERISA plans
• Nothing in Windsor appears to have altered how self-funded ERISA plans establish their rules regarding eligibility. Self-funded ERISA plan sponsors continue to have broad discretion in determining the class of beneficiaries who are entitled to benefits.
• Plan sponsors/administrators should ensure that any references to DOMA in their plans’ spouse or marriage definitions are removed.
• Plans that operate in states that recognize same-sex marriages should ensure that their plan’s definition of spouse clearly states the plan’s intent so there is no confusion among the plan’s participants.
• Regardless of the plan’s eligibility requirements, same sex partners are eligible for the FMLA in the 13 states that recognize same-sex marriage.

Non-ERISA plans
• Plan sponsors/administrators should review plan documents, summary plan descriptions, employee handbooks, benefit notices, and policy manuals for compliance with state laws, and to ensure clear communication regarding treatment of same-sex spouses.

DOL Technical Release 2013-04

DOL Technical Release 2013-04, issued September 18, 2013, provides that wherever the Secretary of Labor has authority, it is the intention of the DOL that: (1) The term spouse shall mean any individual “who is lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who were domiciled in a state that does not recognize such marriages.” and (2) The term marriage shall include “a same-sex marriage that is legally recognized as a marriage under any state law.”

TR 2013-04 indicates that recognition of “spouses” and “marriages” based on the validity of the marriage in the state of celebration, rather than based on the married couple’s state of domicile, promotes uniformity in administration of employee benefit plans and affords the most protection to same sex couples. TR 2013-04 does indicate that the term spouse and marriage do not include individuals in a formal relationship recognized by a state that is not denominated a marriage under state law, such as a domestic partnership or a civil union.

Timeline and application of DOL TR 2013-04 for ERISA plans

DOL TR 2013-04 does not indicate an application date; it states that the Department’s Employee Benefits Security Administration (EBSA) intends to issue future guidance addressing specific provisions of ERISA and its regulations.

However, IRS Revenue Ruling 2013-17 provides a prospective application date of September 16, 2013 (as it relates to tax issues). Further, the IRS provides that it is their intention to issue further guidance on the retroactive application of Windsor. In addition, the IRS ruling provides that they anticipate that future guidance will provide sufficient time for plan amendments.

• A conservative approach to the DOL TR 2013-04 application would be to align with the IRS application date of September 16, 2013. Thus, suggesting the modification of the definition of spouse and marriage for plan years beginning on and after September 16, 2013.
• An alternative approach to the DOL TR 2013-04 application is to only implement the DOL’s definitions of spouse and marriage if the plan’s current language is vague. For example, some plans reference their particular state’s definition of a legal spouse, which is acceptable; however, plans should no longer reference DOMA in their definition.

As with all general guidance, each employer should consider these issues in light of its own business needs and plan designs. Phia Group Consulting can assist plans in determining which approach best meets the plan’s needs.

Attack of the Killer P’s – Providers Paying Patients’ Premiums
By: Sean Donnelly (The Phia Group, LLC)

A recent and unsettling trend in the healthcare industry involves medical providers paying insurance premiums or contributions on behalf of their patients in order to ensure that the patient’s coverage remains active. Providers engage in this practice because it is largely cheaper and easier to prolong a patient’s coverage and continue charging exorbitant amounts to the patient’s health plan or policy than to try and collect directly from a patient who would otherwise no longer qualify for coverage – a struggle that providers view as being akin to squeezing blood from a stone.

Surprisingly, the Internal Revenue Service (IRS) actually condones this practice as reflected in its Final Rule issued in 64 Fed. Reg. 5160-01 (Feb. 3, 1999). The IRS’ Final Rule, which clarifies the accepted methods for paying for COBRA continuation coverage, makes it clear that employer-sponsored health plans must accept premium payments made by a provider on a qualified beneficiary’s behalf. The Final Rule states:

“Many plans and employers have asked whether they must accept payment on behalf of a qualified beneficiary from third parties, such as a hospital or a new employer. Nothing in the statute requires the qualified beneficiary to pay the amount required by the plan; the statute merely permits the plan to require that payment be made. In order to make clear that any person may make the required payment on behalf of a qualified beneficiary, the final regulations modify the rule in the 1987 proposed regulations to refer to the payment requirement without identifying the person who makes the payment.” (emphasis added).

Accordingly, it does not appear that providers are engaging in any unlawful practice by paying premiums or contributions on behalf of their patients, at least from the perspective of the I.R.S. However, group health plans may be able to discourage this practice by arguing that such payments by medical providers constitute taxable income to the patient.

The starting point for the determination of “taxable income” is the computation of “gross income.” Internal Revenue Code § 61(a) defines gross income as “all income from whatever source derived.” Gross income includes “income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as cash.” 26 C.F.R. § 1.61-1. There is no provision in the law that excludes insurance premiums from the category of “income realized in any form,” and insurance premiums fit in very well with the examples of income provided in the regulation.

Furthermore, the doctrine of “assignment of income” posits that money paid to and received by a designated agent, but which is really intended for and paid for the benefit of a third person, is considered taxable income for that third person. Thus, when a hospital pays an insurance premium or contribution on behalf of a patient, the patient is considered to have “constructively received” that income, and it ought to be reported on the patient’s income taxes. Consequently, insurers and group health plans should argue that a provider paying an insurance premium or contribution on behalf of a patient amounts to nothing more than a provider giving money indirectly to that patient.

Finally, insurers and group health plans can also argue that when a provider pays a premium on behalf of the patient, the patient is thereby relieved of his or her obligation to continue making payments in order to maintain coverage. As such, a patient who is relieved of his obligation to make premium payments realizes an economic benefit – namely, the provider’s assumption of the patient’s obligation to pay the premium amount.

Next time a provider tries to pay the premium or contribution for one of your policyholders or plan members to further their own commercial interests, make sure they know that the patient may not be off the hook financially – money indirectly received is nothing more than income for tax purposes.

2014 & Beyond - Reacting to PPACA's Volatile Evolution
2014 & Beyond - Reacting to PPACA's Volatile Evolution

Health Insurance Reform (aka Obamacare, aka PPACA, aka Healthcare Reform) has not enjoyed a smooth implementation.  In fact, its birth has been quite turbulent.  Are you surprised?  Like many in our industry, The Phia Group’s CEO – Adam V. Russo, Esq. – as well as its Sr. VP & General Counsel – Ron E. Peck, Esq. – were not shocked to see the many issues developing in the law’s rollout, but even we have been impressed by some of the hurdles.  From the “Pay or Play” employer mandate being delayed by a year, to a complete lack of guidance regarding the many costs, fees, and expenses of the law, join us as we – along with our special guest – The Phia Group’s legal counsel and VP of Consulting, Jennifer McCormick, Esq., analyze the volatile evolution of this controversial law.

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2nd Quarter Newsletter 2013
It’s been a crazy few months for the health insurance industry as you all know.  All I can tell you is that we are here for you with your questions and needs.  We attempt to stay ahead of the curve and I can tell you confidently that more changes are ahead, so be sure to tune into our webinars over the next few months.  
 

As always, thank you for your support of The Phia Group.  We promise to keep you informed so you can protect yourselves and your clients. Happy reading. 

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Insurers Commissioners Signal Retreat on New Stop-Loss Insurance Regulation and Discuss MEWA Issues

August 26, 2013 – Comments made by regulators over the weekend at the summer meeting of the National Association of Insurance Commissioners (NAIC) in Indianapolis made it clear that ongoing pushback by SIIA and other stakeholder groups has dampened enthusiasm for new stop-loss regulation.

As an alternative, the NAIC ERISA Working Group agreed to move forward with the preparation of a white paper discussing regulatory issues associated with small employer self-insurance and the use of stop-loss insurance. To initiate this project, the Working Group recently surveyed all 50 states to obtain preliminary data regarding perspectives on regulatory activity.  
Survey results included the following:

  • 23 states responded to the survey (AK, AL, AR, CT, CO, GA, HI, MI, MD, ME, MO, NC, ND, NE, NV, OK, OR, TN, UT, VA, WA, WI, and WY);
  • 16 of the states responding (AK, AR, CT, CO, MD, ME, MO, NC, ND, NV, OK, OR, TN, UT, WA, and WI) reported having laws or policies regarding medical restrictions;
  • The remaining seven states (AL, GA, HI, MI, NE, VA, and WY) reported either not having specific stop loss insurance laws or did not include specific requirements beyond filing requirements for stop loss;
  • 12 states (CT, CO, GA, ME, MI, NC, NE, NV, OR, TN, UT, and WI) indicated some level of interest in self-funding in the small employer market since the passage of the ACA;
  • 11 states (AK, AL, AR, HI, MD, MO, ND, OK, VA, WA, and WY) responded that the level of interest in self-funding in the small employer market was unknown or very little;
  • One state (MI) indicated that it has seen an increase in self-funded MEWAs;
  • Five states (AR, CO, NC, RI, and UT) have changed their stop loss rules recently in response to the ACA; These changes affect stop loss by either imposing specific limits or introducing restrictions or caveats regarding the writing of this risk.

​It was reported that work will continue on this White Paper, with the goal of completion by the end of the year. Individual states could then utilize the findings on an advisory basis.

In Other ERISA Working Group News….
DOL Presentation on New Employee Benefits Security Administration Final Rule on Ex Parte Cease and Desist and Summary Seizure Orders for MEWAs.  The DOL made a presentation to the Working Group and reminded them that the ACA authorizes the DOL to issue a cease and desist order ex parte (without prior notice or hearing), and the DOL may issue a summary seizure order when it appears that a MEWA is in a financially hazardous condition.  The DOL talked about MEWA regulations, and there was significant discussion regarding insolvent plans and the need to identify and police these better.  The DOL mentioned with regard to cease and desist orders and summary seizures that it has expanded its breadth of financial review to include the brokers as well as the fiduciaries of the plans.  However, the DOL noted the distinction between unfunded health plans, which pay claims out of their operating budgets, and self-funded health plans, which pay claims from a trust or separate account.  The DOL noted that it does not have a good method to locate these unfunded plans prior to an insolvency event.  Members of the Working Group asked if the DOL could develop regulations to address this deficiency, but the DOL said it did not think it was feasible to write such regulations.

Sham MEWA Plan Investigations.  The regulators then met afterwards in a private session to discuss sham MEWA plan investigations.


What's Good for the Goose is Good for the Gander? Analyzing BUCA-ASO PPO Agreements!
What's Good for the Goose is Good for the Gander? Analyzing BUCA-ASO PPO Agreements!

We are all familiar with the contractual restrictions, limitations, and prohibitions imposed upon independent benefit plans and third party administrators utilizing major PPO networks.  Whether it is restrictive deadlines, an inability to negotiate directly with providers, a prohibition on audits, or an obligation to pay in accordance with terms you’ll never see, many have complained about the apparent inequity established by these contracts.  Few, however, have analyzed the network contracts existing between major carriers and their own network providers.  One might be surprised to learn that these major carriers and ASOs not only recognize the importance of these items, but assert these rights for themselves!  Join The Phia Group’s CEO – Adam V. Russo, Esq. – as well as its Sr. VP & General Counsel – Ron E. Peck, Esq. – as they dissect contractual terms existing between carriers and their network providers, and share the realization that they know exactly what is important to you.

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Ensuring Cost Containment Success - Member Outreach & Support
Ensuring Cost Containment Success - Member Outreach & Support

On July 31st at 1 PM EST, The Phia Group’s CEO – Attorney Adam V. Russo – and The Phia Group’s Sr. VP and General Counsel – Attorney Ron E. Peck – will address one of the most pressing issues facing our industry today – balance billing.  In particular, they will discuss what benefit plan administrators can do to assist their participants and push back against this problem.
To maintain benefit program viability, employers are cracking down on excessive spending through auditing and implementing new methodologies, such as cost based reimbursement and Medicare pricing, in addition to traditional network policies.  In this new environment, participants will be thrust into the fray like never before; exposed to the threat of balance billing.

Topics that will be discussed include, but are not limited to –

•           When strict enforcement of the plan terms and preventing balance billing may not be harmonious goals

•           Undertaking efforts on behalf of benefit plans to resolve disputes with providers so that participants benefit as well, compared to “patient advocacy”

•           Providing support to participants facing balance billing by explaining why the payments were capped, describing the appeals process in detail, and providing arguments they can raise against the provider

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Rain Delay – Postponing Play (or Pay)

A Delay In Play (or Pay) – The News Isn’t As Good As You May Think

The Obama administration announced that it is postponing the requirement that employers provide employees robust, affordable health plans; also known as “pay or play.” You may think that this is good news… It’s another year to consider options, prepare funds, and study the intricacies of PPACA. DON’T BE FOOLED!

Regulatory officials have stated that the delay was prompted by so-called “compliance complexity concerns.” Employers have attacked the rule from every angle; targeting unrealistic expectations, costs, and difficulties in reporting. In addition, many employers have threatened to “trim” their employment rosters. Employers with fewer than 50 employees (or full-time equivalent employees) are exempt from the rule. It should have come as no surprise, then, that some employers were going to cut employees’ hours or terminate staff, dropping below 50 lives. With all of this in mind, the administration – “thankfully” – pulled back on the reins. Great news, right? Wrong!

At The Phia Group, we hope for the best but plan for the worst. For the following reasons, now is not the time to disregard cost containment efforts.  – Read More


New York Assembly Bill 7828 (Companion Senate Bill 5715)
Article Taken From: The National Association of Subrogation Professionals AMICUS Updates

As you may recall, New York introduced a bill which would close perceived loopholes which allowed a fully insured ERISA plan to pursue subrogation or reimbursement. New York General Obligations 5-535 prohibits a health carrier from pursuing a subrogation or reimbursement claim that is not protected by ERISA preemption. One federal court in the case of Wurtz v. Rawlings, 2013 WL1248631 (E.D.N.Y.), recently held an insured ERISA plan was protected by preemption and the carrier was able to pursue subrogation and reimbursement claims. TheWurtz court found the NY statute was not “saved” from preemption as the regulation of insurance. The case is currently on appeal and the National Association of Subrogation Professionals (NASP) has been requested to write an Amicus Brief.

In response to this decision, Assembly Bill 7828 was introduced to clarify that health insurers and fully insured ERISA plans fall under NY General Obligation 5-535.Bill 7828 specifically claims that 5-535 is directed to the health insurance industry necessary to qualify under ERISA’s savings clause.This means NY General Obligation 5-535 would apply to fully insured ERISA plans as it involves a state’s right and ability to regulate insurance. Essentially, the bill seeks to reverse the Wurtz decision and barring fully insured ERISA plan’s right to subrogation or reimbursement. This bill further clarifies that the anti-subrogation law applies to not only claims in suit, but pre-suit claims.

Last minute amendments to the bill appear to protect personal injury protection (PIP) subrogation rights. However, short term disability carriers and municipalities did not fare as well and certain subrogation rights of theirs may be in jeopardy. The bill is headed to the Governor’s desk for his signature and seems a foregone conclusion that the bill will be signed.

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