By: Erin M. Hussey, Esq.

On October 23rd, the Department of Labor (“DOL”), Department of the Treasury (“Treasury Department”), and the Department of Health and Human Services (“HHS”) issued proposed regulations on health reimbursement arrangements (“HRAs”). An HRA is a tax-free account coordinated with a group health plan, funded by the employer that reimburses employees for health care costs.

The goal of these proposed rules is to provide more options for affordable healthcare. Specifically, these proposed rules allow integrating an HRA with individual health coverage, provided that certain conditions are met. In sum, the following details the Departments’ various proposed rules:

“. . . the [Treasury Department] and the Internal Revenue Service (IRS) propose rules regarding premium tax credit (PTC) eligibility for individuals offered coverage under an HRA integrated with individual health insurance coverage. In addition, the [DOL] proposes a clarification to provide plan sponsors with assurance that the individual health insurance coverage the premiums of which are reimbursed by an HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain conditions are met. Finally, [HHS] proposes rules that would provide a special enrollment period in the individual market for individuals who gain access to an HRA integrated with individual health insurance coverage or who are provided a QSEHRA.”

Under current IRS guidance via IRS Notice 2013-54 (“Notice”), HRAs fail to satisfy the Affordable Care Act’s (“ACA”) prohibition on annual dollar limits and the ACA preventive care requirements unless they are coordinated with a group health plan that satisfies those ACA provisions. The Notice further clarifies that an HRA for active employees (otherwise called a stand-alone HRA) cannot be integrated with individual market coverage, regardless of the coverage being obtained inside or outside of the exchange. However, the above-noted newly proposed HRA regulations would allow employees with HRAs to shop for coverage in the individual market. This would allow small employers and businesses to utilize this potentially cheaper option to pay for their employees’ health coverage. Additionally, the proposed rules indicate that if an applicable large employer (“ALE”) subject to the Employer Mandate utilizes their HRA to pay for their employees’ individual health insurance premiums on the marketplace, it would be considered an offer of coverage to satisfy the Employer Mandate.

It is important to keep in mind that prior to these proposed regulations, the 21st Century Cures Act, effective January 1, 2017, allows businesses with fewer than 50 employees to reimburse their workers for out-of-pocket healthcare costs and premiums on the individual market, otherwise known as Qualified Small Employer Health Reimbursement Arrangements (“QSEHRAs”). Small business owners must meet two requirements before becoming eligible to offer QSEHRAs to employees: (1) the small business owners do not offer a group health plan to their employees; and (2) the small business owners must have fewer than 50 full-time employees, as defined in IRC 4980H(c)(2) (the Employer Mandate). QSEHRAs can reimburse premiums for ACA exchange plans, individual policies and Medicare supplemental policies.  This stems the obvious question—how are QSEHRAs any different from the new HRA proposed rules? One difference is that QSEHRAs only apply to businesses with fewer than 50 employees, whereas the proposed rules apply to any size employer. Additionally, the newly proposed rules allow a plan sponsor to offer any size HRA to be integrated with individual health insurance coverage and offer a traditional group health plan, but the plan sponsor of a QSEHRA cannot offer a group health plan at all.

As detailed above, under the proposed rules an employer could offer a traditional group health plan in addition to the HRA integrated with individual health insurance. However, the concern is that adverse selection would result and unhealthy employees would be placed into HRAs so that the traditional group health plans do not take on as much risk. In order to avoid this health factor discrimination, the rules allow a form of discrimination in accordance with the different “classes” of employees when determining which classes of employees will be offered the HRA integrated with individual health insurance coverage and which will be offered the traditional group health plan (if the employer provides both). These classes are (1) full-time employees; (2) part-time employees; (3) seasonal employees; (4) employees covered by a collective bargaining agreement; (5) employees who have not satisfied a waiting period for coverage; (6) employees who have not attained age 25 prior to the beginning of the plan year; (7) non-resident aliens with no U.S. based income; and (8) employees whose primary site of employment is in the same rating area. As the proposed rules indicate “a plan sponsor may offer an HRA integrated with individual health insurance coverage to a class of employees only if the plan sponsor does not also offer a traditional group health plan to the same class of employees.”  For example, the employer could offer only the traditional group health plan to full-time employees and only the HRA integrated with individual health insurance to part-time employees, but they cannot be offered both.

Lastly, another important component of these proposed rules is that they would establish excepted benefit HRAs. Excepted benefits include vision, dental, etc. Under current HRA guidance, HRAs can only pay for medical expenses, but under these newly proposed rules an HRA paired with a group health plan could pay up to $1800/year for “excepted benefits” such as an individual’s dental or vision premiums. However, there are conditions for an excepted benefit HRA outlined in the proposed regulations.

The Departments are asking for comments on all aspects of the proposed rules by December 28^th. It will be interesting to see how much “opportunity” commentators believe this may bring for individuals seeking more affordable healthcare.

By: Krista Maschinot, Esq.

You may think this is a ridiculous question; however, Plan Sponsors and employers may want to reconsider this inquiry in light of a recent Seventh Circuit ruling.

The case, Cehovic-Dixneuf v. Wong (7^th Cir. July 11, 2018), involved a dispute as to the true identity of the beneficiary of a life insurance policy.  The defendants argued that the policy was NOT governed by ERISA, thus the policy was not the controlling document.  However, the Court disagreed and explained that the life insurance policy was in fact subject to ERISA because it satisfied the five requirements outlined under 29 USC §1002(1) establishing that the policy was an employee welfare benefit plan that did not satisfy the requirements of the safe harbor exception contained in 29 C.F.R. §2510.31-(j).

The Court explained that the following elements must be present for an employee welfare benefit plan to be subject to ERISA:

1. A plan,
2. Established or maintained,
3. By an employer or by an employee organization, or by both,
4. For the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefit, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits,
5. To participants or their beneficiaries.

The life insurance policy at issue satisfied all five of the elements as it was an employer established plan that provided the beneficiaries of the participants with death benefits.  The Court went on to exam the four requirements of the Department of Labor safe harbor provision and found that the policy did not meet all four requirements:

1. The employer made no contributions;
2. Employee participation is completely voluntary;
3. The employer does not endorse the plan, and its sole functions are to permit the insurer to offer the program to employees, collects premiums through payroll deductions, and remit them to the insurer; and
4. The only consideration the employer receives in connection with the plan is for reasonable compensation for payroll deduction services.

The reason the safe harbor provision was not satisfied was that the employer violated the third provision by performing all administrative functions in association with the policy.  In making their determination, the Court looked to the Summary Plan Description (“SPD”) as it explained how the employer was involved with the maintenance of the policy.  With this finding, the court precluded the defendants from making any state law arguments as to why the named beneficiary should be disregarded.

So again, is your life insurance policy subject to ERISA?  Perhaps it is time to review your SPD and determine whether adjustments are necessary.

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 6^th Circuit) asserting that a well-known case in the 2^nd 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 2^nd Circuit, it does not have any binding authority on cases in the 6^th 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.

By: Jen McCormick, Esq.

On January 5, 2018, the Department of Labor (DOL) responded with a proposed regulation which would extend the circumstances in which an association may function as an “employer” under ERISA, and would alter the way in which it would be regulated.  The proposed regulations make two important modifications: (1) create a unique dual status for working owners and (2) modifies the interpretation of the commonality of interest requirements.   The “dual status” requirement would permit a working owner or sole proprietor to function as both the employer for purposes of joining the association and as the employee for purposes of being covered by the plan.  The “commonality of interest” requirement would allow formation of an association for the purpose of offering health insurance. The rule does not impose prohibitions on forming new associations (or specify size limitations), but it does provide formal organizational requirements for associations. While it may seem this rule will not have a major impact on self-funding, these two changes will expand the pool of employers who may be eligible to create, join or establish a self-funded.   This could create new opportunities.

By: Jon Jablon, Esq.

A few months ago, Montana passed SB44, which created a new part of the Montana Code Annotated (the MCA). The new provisions have been added because, according to the legislature’s statement of purpose, “in many cases the high charges assessed by out-of-network air ambulance services and limited insurer and health plan reimbursements have resulted in Montanans incurring excessive out-of-pocket expenses….” For once, I don’t disagree with a state law’s purpose. Unlike many other states’ laws, which justify themselves as correcting health plan coverage deficiencies, this law exists because of high provider charges, and the legislature acknowledged that, at least to some extent. The “limited insurer and health plan reimbursements” is a byproduct of high provider charges, rather than a separate problem; it’s a problem created by the medical provider who have gouged payers for decades.

To start, note that it is likely that ERISA will preempt this law as it relates to self-funded health plans governed solely by ERISA, since the primary purpose of this law is to determine reimbursement by a health plan to a medical provider. Courts have consistently interpreted ERISA as preempting state laws purporting to change the allocation of risk between the insurer and the insured, and this apparently does exactly that by dictating what the insurer must pay. Seems like a textbook candidate for preemption.

According to the “Hold Harmless” section of the law (MCA 33-2-2302), a health plan is required to tender payment to an air ambulance provider within 30 days of claim receipt based on either (i) billed charges, (ii) a negotiated rate with the provider, or (iii) the median amount the insurer or health plan would pay to an in-network air ambulance service for the services performed.

The law goes on to provide for dispute resolution, which applies after payment is made, and if a party disputes the other party’s contention of whether any further payment obligation exists. This is potentially troublesome because it does not say that the parties can engage in dispute resolution right off the bat if either party disputes the reimbursement allegedly due; this implies that payment must first be made, and then the parties can engage in dispute resolution. Needless to say, that’s not ideal for a health plan.

The dispute resolution provisions start out on a high note (the procedure outlined in the law “is to be used to determine the fair market price of the services”). Then there’s another very sensible provision (“[p]ayment of the fair market price calculated pursuant to 33-2-2305 constitutes payment in full of the claim”). Those factors include fees usually charged and accepted as payment in full by the provider and other providers, Medicare rates, the context of the flight, and crew qualifications. This is all looking good!

But then it takes a turn.

The very next provision, referring specifically to dispute resolution, says “[a] determination under this section is not binding on the insurer or health plan and the air ambulance service.”

I am dumbfounded. That’s as anticlimactic a statement as any law can contain. The legislature’s inclusion of that last bit undermines the entire provision; once you find out that it’s not binding, you can basically just stop reading and forget what you read. It’s like reading something purporting to be a “true story” and then at the end there’s a disclaimer saying “none of this actually happened.” Not good.

So, then, where do we stand regarding payment amounts due to out-of-network air ambulance providers in Montana based on this law? It’s hard to know. Payment is apparently required to be made within 30 days, and then it can be challenged (with non-binding dispute resolution…?) – but if a health plan is first required to tender payment based on either billed charges, a negotiated rate, or the median network rate accessed by the plan, then it seems that this law is going to do more harm than good.
I wonder if Montana’s penal code is non-binding, too?

By: Chris Aguiar, Esq.

Self-funded benefit Plans are offered an exclusive equitable remedy.  Equity is really just a fancy word for “fair”, but most of the time – the outcomes in equitable claims aren’t really viewed as fair by anyone involved.  This week I handled a $3.5 million case for which the recovery was limited to $250,000.00.  I couldn’t help but think that no matter the outcome on this case, there is no way for anyone to feel like they got a fair share.

From the Plan’s perspective, It paid $3.5 million and even if It’s are able to recover the entire $250,000.00, it’s not fair that the party at fault for the accident is allowed to walk away without any loss except for those policy insurance limits, which to the insured only really means a premium increase for the next few years.  This sense of a lack of fairness is rooted in a very basic concept – that is, health insurance in a health care reform world is effectively unlimited while auto insurance minimums are governed by the states, with maximums decided by those who purchase the policies; they are really just looking to protect themselves from financial ruin, not those they may harm.

Of course, the Plan participant doesn’t feel like the outcome is fair, either.  This injured party was the son of a plan participant whose life was forever changed for the worse the day he found himself in the wrong place at the wrong time.  Certainly, after being resuscitated 4 times in the emergency room, he and his family are thankful he is still alive, but the stark reality that the responsible party doesn’t really have to suffer for the pain they caused that day, and that they may also lose out on any of the small pool of funds available because it may be taken completely by the Plan cannot be easy to swallow.

No matter what, someone leaves the table unhappy – but parties should to be sure they don’t throw good money after bad.  Doubling down on a bad situation only makes it worse.  If that same participant above gets a lawyer, for example, he likely gives away 1/3 of the $250,000.00, but hasn’t really changed his rights at all – so what was the point?  Benefits plans may have legal doctrine that limit their ability to push for more money – after all, ERISA requires plan fiduciaries to be prudent with Plan assets.  

I can’t stress the importance of having advisors who truly understand the rules of the game and, most importantly, that you trust.  Experienced, trusted advisors are in the best position to maximize the Plan’s recoveries as prudently as possible so that plans don’t end up spending valuable plan assets for nothing.  Equity isn’t always fair, but it is the law, and what’s the point of equity if it leaves you worse off than if you had done nothing at all?

By: Kelly Dempsey, Esq.

The last few weeks have been difficult for several states and U.S. territories.  Hurricanes Harvey and Irma have caused significant flooding and damage.  In addition to the loss of power, many people are homeless and corporations/employers are without a place to conduct business.  Depending on the level of damage, it may take a long time for different areas of the country to rebound and rebuild.  Chances are that employee benefits, specifically the health plan, are the last thing on employers’ and employees’ minds, but there are some very important considerations.  So what do Hurricanes Harvey and Irma mean for employers, employer sponsored health plans, TPAs, and employees?  

Self-funded health plans are required to comply with various federal laws that carry different responsibilities including, but not limited to, ERISA, COBRA, FMLA, HIPAA, and the ACA.  These federal laws come with a wide array of notice requirements and time frames for processing claims and appeals and other requests for documents or information.  As such, the Department of Labor and the Department of Health and Human Services (collectively referred to as “the Departments”) have issued press releases and bulletins that provide general guidance and limit exposure to penalties.  These press releases were specifically issued after Hurricane Harvey; however, it’s likely that additional releases will be issued to address Hurricane Irma.  Below are links to important press releases; however, the following is one of the key summary statements:

The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time-frames.

Health plans and their supporting vendors will likely need to review situations on a case by case basis to determine what is reasonable for each plan and employer.

If you’ve listened to any recent Phia Group webinars, presentations or podcasts, or read our blog or published articles, you already know we’ve been focusing on leaves of absence and gaps between handbooks and plan documents.  You’re probably thinking, “Yes, I know, so what’s your point?”  With all the damage to homes and job sites, it is possible employees may seek leaves of absence and/or employees will ask questions about existing leaves of absence and how the leave is impacted if an employer ceases operations.  While FMLA is generally not available for employees to use as time off to attend to personal matters such as cleaning up debris, flood damage, home repair, etc., FMLA may come into play if an employee or their family member suffers a serious health condition as a result of the hurricane.  For those employees that were already out on FMLA, if an employer ceases operations, the time operations are stopped would not count towards FMLA leave.  As always, FMLA and other leave situations should also be reviewed on a case by case basis.   

In summary, the Departments have issued guidance specifically related to Hurricane Harvey; however, we anticipate additional guidance associated with Irma as well.  The bottom line is that employers, health plans, and applicable vendors will need to act reasonably when administering the health plans (i.e., processing claims and appeals, issuing notices such as COBRA notices, etc.) and take into consideration the locations and entities that were impacted and allow grace periods or other relief as applicable.

Important Press Releases and Relevant Guidance:
- U.S. Department of Labor Issues Compliance Guidance For Employee Benefit Plans Impacted by Hurricane Harvey
- Secretary Acosta Joins Vice President Pence in Texas
- FAQs for Participants and Beneficiaries Following Hurricane Harvey
- Hurricane Harvey & HIPAA Bulletin: Limited Waiver of HIPAA Sanctions and Penalties During a Declared Emergency

By: Jen McCormick, Esq.

As we are closing in on the calendar year, Plan Administrators are starting to reflect on the past year.  In relation to self-funded health and benefit plans, they consider the laws and regulations that changed (or didn’t change) over the past year and how they might impact the plan.  Also, they consider claim occurrences – good and bad – that may impact benefit changes for the following plan year.  The most important question, however, when considering renewal changes is how to offer a valuable benefit plan to employees which takes advantage of as many cost containing opportunities as possible.
 
ERISA plans do have minimum standards as far as basic information which must be included within the documentation (i.e. benefits and eligibility, claims procedures, COBRA information, fiduciary information, etc).  As Plan Administrators, however, there is great flexibility to design a benefit program that captures the compliance information but also is tailored to the specific needs of an Employer.  Remember that ERISA does not mandate a specific format for how a benefit plan must be presented.
 
In light of the requirements, and notable flexibility, consider that change is good. Many entities specialize in the creation and administration of plan design documents, and happily wish to share the value of why certain provisions should be outlined or presented in particular fashion.  As a result, may it’s time to consider reviewing the benefit structure and organization to ensure that it’s organized in a fashion that truly meets the needs of participants. Consider reviewing the text to ensure it offers the best possible cost containing opportunities for participants.  A refresh of a document can be advantageous for the plan, and so remember to keep an open mind at renewal!

By: Chris Aguiar, Esq.

Subrogation added another case to the win column last week when the 5th Circuit ruled in favor of a benefit plan’s reimbursement rights even though the Plan only had an SPD, and that SPD referenced another, nonexistent document.  I know what you are thinking … “Wait a minute, Chris, most of my clients only have an SPD, so why should I care about this?”  The answer is because in 2011, the Supreme Court gave us a decision in Cigna v. Amara that muddied the waters on whether an SPD alone can be the governing document for an ERISA health benefit plan.  In short, the late Justice Antonin Scalia indicated that it couldn’t be, but that case was about pension benefits that were being altered and it included a plan that did in fact have two documents.  The truth is ERISA requires “a written instrument”; nowhere in the statute is that requirement defined to mean that multiple documents are required, but that didn’t stop Justice Scalia from writing in his opinion that a summary by definition implies that a more comprehensive document is available.   Many attorneys attempt to use that decision to argue that if a plan doesn’t have a “plan document” and only an SPD, it cannot enforce its rights.  In some areas of the country, where a plan’s subrogation rights are always under attack (e.g. the 9th Circuit), decisions like this cause problems.  Anytime the Supreme Court makes statements that may be subject to interpretation, a plan’s rights can be called into question until a court in that plan’s jurisdiction (or the Supreme Court itself) provides clarification.  The 5th Circuit gave us that clarification with this decision and it gives us another tool to fight the argument we contend with every day.

By: Brady Bizarro, Esq.

On April 5th, the House of Representatives passed the Self-Insurance Protection Act (SIPA; H.R. 1304) by a vote of 400 to 16. This was the third iteration of this bill, originally introduced at the suggestion of the Self-Insurance Institute of America (“SIIA”). This legislation is very important for our industry because it blocks federal efforts to regulate small stop-loss plans as health insurance by excluding the plans from the federal definition of “health insurance coverage.” If you were struggling to think of a federal law which redefines stop-loss as health insurance, that is okay. There is no such federal law on the books. Indeed, there has been no legislative proposal at the federal level to redefine stop-loss insurance in this way. This was defensive legislation, designed to ensure that federal regulators do not try to redefine stop-loss insurance. State legislatures around the country should take notice of this approach before it’s too late.

At the state level, we have already seen numerous efforts (often successful) at redefining stop-loss insurance or placing restrictions on coverage. Why are states pushing this kind of legislation? One development that added fuel to the fire was the U.S. Department of Labor’s Technical Release on November 6, 2014. It expressed the opinion that states should not be concerned that stop-loss regulation restricting policies based on attachment points would be preempted by the Employee Retirement Income Security Act (“ERISA”). Since that time, we have seen efforts to restrict stop-loss coverage in California, the District of Columbia, Maryland, New York, New Mexico, Florida, Delaware, Washington, Connecticut, and Utah.

In states where restrictions have not been put in place, or where the restrictions are not severe, employers and insurers alike should be pushing for defensive legislation to reaffirm that stop-loss insurance is not health insurance.