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What Does FDA CBD Approval Mean For Self-Funded Plans?

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.


Expansive Paid Leave Legislation for Massachusetts Employers

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.


Empowering Plans: P46 - You’ve Gotta Fight, For Your Right, to Try!

In this very special episode, our hosts embark on a maiden voyage – their first ever video podcast!  Listen in, and even better – watch – as the team addresses the recently passed Right To Try Laws, and dissect the impact it may have – if any – on your health benefit plans.  Whether you choose to cover these treatments or not, there is action you must take… tune in to find out what you need to do.

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


A Bit of Relief From the 2nd Circuit

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.


Empowering Plans: P45 - Super-Empowerment

Sitting with Our Most Empowered Plan Award Winner.  In this episode, our hosts chat with none other than Brooks Goodison, President & Principal Partner at Diversified Group.  Brooks and his team won The Phia Group’s Most Empowered Plan award at the recent MVP Forum, and we are all excited to learn more from this cutting edge thinker.  From internal vision to lobbyist efforts taken on behalf of the entire industry, you’ll be glad you tuned in.

You can visit Diversified Group's website, here: www.dgb-online.com

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


Final Rule on Association Health Plans and YOU: Phia's Take

On Tuesday, June 19th, the Department of Labor issued a final rule on Association Health Plans. Supporters claim the rule will allow millions of Americans to access more affordable coverage options. Critics contend that it will reduce patient access and weaken the insurance markets, leading to increased costs for all. Join The Phia Group's legal team in this special edition webinar in which they will break down the final rule and explain the significant impact it is expected to have on the self-funded industry. 

Click Here to View Our Full Webinar on YouTube

Click Here to Download Webinar Slides Only


Right to Try... Right for You? Understanding What is Right, and Wrong, for Self-Funded Plans in Response to the New Right to Try Law

The new Right To Try (RTT) legislation presents an alternative for eligible individuals to seek drug coverage for treatment options which have only passed Phase I clinical trials.  Specifically, the RTT law will allow terminally ill patients with physician approval to request access to experimental drugs which have completed Phase I clinical trials while protecting manufacturers and physicians from liability stemming from such use.  Existing regulations have been in place for years regarding the expanded use of certain drugs, so how might this RTT legislation impact the current rules.  Many wonder whether the new RTT law could be an opportunity that plans may leverage when it comes to benefit coverage.  If coverage is extended by plans for drugs covered pursuant to the RTT regulations, what possible impacts may exist and what language may need to be modified within the plan materials?  These questions and more are addressed within The Phia Group’s analysis on the issue.  Click HERE to download The Phia Group’s comprehensive memo regarding the new RTT regulations. The Phia Group will also be hosting a podcast on this very issue, which will be available early next week.


The MHP Hits Just Keep on Coming

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.


An Addiction to Health Insurance

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.


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.