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Phia Group Media


Jason Ruhl
Jason Ruhl
Jason Ruhl's Blog

Responding to a IRS Letter 226J: Considerations and Common Mistakes

By: Krista J. Maschinot, Esq. and Pat Ouellette, Esq.

If you are an applicable large employer (ALE), the Internal Revenue Service (IRS) could possibly be sending a Letter 226J notice your way. Will you be ready to respond accurately within 30 days of receipt if needed?

We discussed in a recent blog post that IRS enforcement of the Employer Shared Responsibility Provision of the Affordable Care Act (ACA) is very real and ALEs should be prepared as such.

There are two types of ESRP penalties that the IRS will assess based upon the information the ALE provided on Forms 1094-C and 1095-C:

§4980H(A) – Assessed when an employer fails to offer minimum essential coverage to enough of its full time employees

§4980H(B) – Assessed when an employee enrolls in the Marketplace and qualifies for the premium tax credit because the employer failed to offer affordable coverage

We recommend comprehensively reading and reviewing the information provided in the Letter 226J as to the reasoning for ESRP penalties and ensuring that this matches up with your internal documentation. This review is particularly significant because it will help you determine whether you have made an administrative/filing oversight or if there are larger compliance issues to deal with.

There are common mistakes to be aware of based on how Forms 1094-C and 1095-C were filled out that could trigger a Letter 226J. An ALE could, for instance, forget to check the “Section 4980H Transition Relief” box (Box C of line 22) on Form 1094-C. It may also fail to correctly code Line 14 of Form 1095-C regarding offer of coverage based on months offered coverage, as opposed to months of actual coverage. These types of errors are easy enough to make, but it is important to identify that they have been made prior to responding to the IRS. The monetary penalties will be assessed much differently based on filing mistake rather than actual ESRP non-compliance.


Transparency: Using it to Your Advantage


This industry is full of “regular” agreements, complex multi-party arrangements, handshake deals, and everything in between. For years The Phia Group has preached that transparency is a best practice for everyone from medical providers to TPAs to stop-loss carriers; that is still by far our prevailing opinion, but recently we have begun to see that transparency can also have some potentially  damaging effects on the industry as a whole, stemming primarily from changes in patient behavior.

Join The Phia Group’s legal team as they discuss the need for, and effects of, contractual and price transparency on the self-funded industry – and how health plans, TPAs, and brokers can use transparency to their advantage.

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Empowering Plans: P33 - Partners in Empowerment – A Prescription for Savings

In this episode Ron and Brady are thrilled to interview LG Hanzel of Rx Results.  LG digs deep on topics ranging from Specialty Drugs to PBMs, and what benefit plans can do to curb the cost of drugs in America – an issue that is big, and getting bigger every day.

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


Freedom Fighters Abound…

By: Chris Aguiar, Esq.

There is no question that the vast majority of folks in self-funding, whether benefit or service providers, have a goal in mind; providing cost effective benefits to the insured.  Ask many in academia or even representatives of government agencies, and the story they tell about self-funded plans isn’t quite so favorable.  Despite our mission and mandate in the law, to make decisions pursuant to the terms of the benefit plan to protect ALL plan beneficiaries, decisions that plans need to make quite often put all of us on this side of the isle in contentious situations.  It’s always important to remember that the personalities and agenda often drive action and decisions must be considered carefully not only for their impact today, but their impact into the future.  Every decision can  have a ripple effect, either financially or on future treatment of claims.  On top of that, every decision has the potential to end up in Court.

“Freedom Fighters” feed on this dynamic.  We’ve all dealt with them before;  Attorneys who believe “justice” must be done for their clients and will stop at nothing, even waving fees or taking on costs, to have their name on the case that potentially changes the game.  Just this week, a member of The Phia Group’s Subrogation Legal team approached me about a case in Ohio (the 6th Circuit) asserting that a well-known case in the 2nd Circuit (Wurtz v. Rawlings) stands for the proposition that a self-funded ERISA plan cannot obtain ERISA preemption when the plan participant brings an action to enforce a state anti-subrogation law.  There are several things wrong with this his argument that Wurtz applies to this Ohio Case.  First, since the Wurtz decision arose in the 2nd Circuit, it does not have any binding authority on cases in the 6th Circuit.  Second, the decision makes clear in footnote 6 that the benefit plan in that case was fully insured, and not a private self-funded benefit plan – accordingly, the analysis (and possibly the outcome) would likely be different.  Finally, the Court in Wurtz went to great lengths to stretch the applicable law holding that a plan cannot claim preemption on a defensive pleading when the participant brings an action to enforce a state anti-subrogation law. These holdings by the court fly in the face of everything we understand about self-funded plans – since a claim on the basis of an anti-subrogation law is essentially a claim to which the Plan participant is not entitled to benefits under the Plan, it would appear that it is without doubt “related to” the provision of benefits. Yet, the court found a way to work its way through the analysis to hold the exact opposite.

What’s more, this “Freedom Fighter” has waived his fees and costs and indicated he has no intention of reimbursing the Plan and that if the Plan wants to be reimbursed, it should bring suit and face the argument brought forth in Wurtz v. Rawlings.  Now, whether his intent is to fight for his client and ensure that justice is done, or that he can bolster his resume as the lawyer that expanded that interpretation of the law to another area of the Country, is of limited consequence.  The Plan is left with the prospect of brining suit on a case worth $50,000.00, and enduring the costs, time, and risks associated with litigation.

There are several strategies that can be utilized here, but it's important to understand that every action has an opposite and immediate reaction, and decisions made in this case could not only cost the plan money, but change the law in a meaningful way with respect to future claims.  Being able to seamlessly maneuver all of these issues is imperative to a successful outcome.  Plans also must be cognizant of their definition of success and understand the risks of making any meaningful decision.


Contraceptive Update – Appeals and Intervenors

By: Kelly Dempsey, Esq.

A few weeks ago we reported the two lawsuits that have challenged the contraceptive coverage rule changes issued by the Trump administration. For the purposes of this blog, we will skip a review of the procedural process that allows parties not subject to a lawsuit to appeal an injunction – just note that there is a process that must be followed before a party can intervene.

With that said, an appeal was filed by the Little Sisters of the Poor, Jeanne Jugan Residence (“Little Sisters”) that challenges the preliminary injunction obtained by California and four other states. As a reminder, the injunction blocks the implementation of the interim final rules from October 2017 that broadens the exemptions from the contraceptive mandate. The Little Sisters have also appealed the Pennsylvania case.  

At the same time as the appeals from the Little Sisters, the March for Life Education and Defense Fund has also been granted permission to intervene in the California case and has subsequently filed an appeal.  

Movement through the courts on these types of cases can be slow, but movement is movement. We will continue to watch these cases as the develop and will further address the implications for self-funded plans when action needs to be taken.
 


Clearly it’s (Not) Transparency

By: Ron Peck, Esq.

I’ve been reading articles about the Amazon / JPMorgan / Berkshire Hathaway foray into healthcare, and how this alliance will likely disrupt the market.  The analysts seem to think these powerful entities will “fix” what’s “broken” by collecting data, analyzing the data, and customizing benefits to match user need.  Forgive me, but isn’t that already something self-funded employers can do today?  Indeed, for decades, the ability to collect usage information, and customize your self-funded plan to meet the specific needs of your population has been a benefit of self-funding.  If you’ve not already leveraged this to your advantage, shame on you.  You already have the same tools at your disposal that the likes of Amazon tout as what makes them special, and you’ve done nothing with it?  Ouch.

Another “advantage” these new players in the market supposedly have is the “power of transparency.”  They will publish the prices of medical care, for all to see.  Setting aside the legal and contractual hurdles one must overcome to “publish prices,” and ignoring the fact that there IS NO FIXED PRICE to publish, as the amount charged varies from payer to payer, day to day, depending upon the weather and logo on the card… forgetting all of that and pretending that there actually is a readily available fixed fee for services to “reveal,” why (or how) will this change anything?  If the consumer of healthcare (the patient) is different than the purchaser of healthcare (the plan or insurance carrier), how will knowing the price change the consumer’s behavior?

If I go to a baseball game, and am paying for beer and hot dogs out of my own pocket – if the prices are “transparent” – I may hesitate to drop $20 on solo cup of watered down “beer?” But… if someone else is paying?  Give me the keg!  Until the consumer actually benefits or suffers based on their purchasing decisions, transparency – means – nothing.

Wait … strike that.  Transparency means something… something BAD.  In psychology, we’ve identified a certain human behavior and titled it, “the irrational consumer.”  In a nutshell, this behavior is seen when a person purchases a more expensive option for no other reason than it’s more expensive.  They believe that the higher price must be associated with higher quality.  Additionally, it’s an opportunity to use the purchase as an indicator of status.  Thus, even when an “as good” or “better” option is offered for less, people will purchase the less-good/more-expensive option, either to impress people with their ability to spend, and/or because it must be better – it’s more expensive.

Introduce transparency into healthcare (intending to get patients to be better about spending) and you run the risk of seeing irrational consumerism in healthcare.  People will ignore indicators of quality, and – (horror) – simply seek care from the most expensive provider.

“Clearly” this isn’t what we intended when we all started singing transparency’s praises.  Let’s figure out how to achieve rational pricing in healthcare, and teach consumers what is truly “good” healthcare, before creating plans that force patients to have skin in the game.  Then and only then would transparency make sense to me.


Empowering Plans: P32 - Red Cross Blood Drive Special Episode

Today The Phia Group in partnership with the Red Cross hosted an on-site blood drive.  Join Ron Peck as he interviews members of The Phia Group staff and Red Cross leadership as we discuss the event, personal experiences, and the ever present need for donors.  This moving and important episode will hopefully drive you to action!

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


What do All These New Paid Sick Laws Mean for Employers?

By: Jen McCormick, Esq.

As many states (and cities) are starting to beginning to enact paid sick and/or leave time regulations, employers will need to understand the impact and implications.  The regulations vary by state (and city), but require eligible employers to grant certain employees paid sick time.  Various regulations are in effect already, and some are yet to become effect. Regardless of the effective date of these regulations, it’s clear that employers will need to make changes and consider how the regulations will impact their employer handbooks, plan documents (i.e. continuation of coverage) and stop loss.  Now is the time to get the ball rolling in reviewing these materials so employers can be prepared.


Evolve or Dissolve – Responding to Today’s Tax Law to Save the Health Benefit Plan Industry Tomorrow


You either keep moving, or get out of the way. As changes in the tax law threaten all benefit plans, removing the individual mandate and making enrollment optional, the threat of economic unviability looms. To remain intact, benefit plans must maintain their risk pools, and to maintain their risk pools they must attract low risk lives. Without an individual mandate, how is this achieved? With passion and determination, solutions exist for benefit plans that choose to empower themselves. Those that are unwilling to sacrifice the security of the "status quo" face financial ruin. Instead, today you can take the challenging steps needed to make benefit plans attractive to all participants, and thereby protect plan assets.

Join The Phia Group's Adam Russo, Ron Peck, and Brady Bizarro as they discuss what you need to know about the new law, and how to navigate the treacherous path that lies ahead.

Click Here to View Our Full Webinar on YouTube

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Empowering Plans: P31 - 3 Scoops of Knowledge

In this episode, Adam, Ron and Brady celebrate the forthcoming change in seasons and warming weather, by each selecting a unique topic that is bugging them, and offering their opinions regarding how we should react. This is one cool sampling of self-funded flavor you won’t want to miss.In this episode, Adam, Ron and Brady celebrate the forthcoming change in seasons and warming weather, by each selecting a unique topic that is bugging them, and offering their opinions regarding how we should react. This is one cool sampling of self-funded flavor you won’t want to miss.In this episode, Adam, Ron and Brady celebrate the forthcoming change in seasons and warming weather, by each selecting a unique topic that is bugging them, and offering their opinions regarding how we should react. This is one cool sampling of self-funded flavor you won’t want to miss.

In this episode, Adam, Ron and Brady celebrate the forthcoming change in seasons and warming weather, by each selecting a unique topic that is bugging them, and offering their opinions regarding how we should react.  This is one cool sampling of self-funded flavor you won’t want to miss.

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