Benefits In Brief

The Department of Labor (DOL) has issued new guidance on the medical loss ratio rules.  The guidance reminds plan sponsors of fully insured group health plans that there are potential plan asset considerations involved in the receipt of any MLR rebate.  As a result, plan sponsors who receive such rebates must think carefully about how to allocate them.

The agencies charged with implementing health care reform are continuing to churn out guidance for health plan sponsors.  The latest FAQs defer the effective date of the “automatic enrollment” requirement.  They also offer a number of insights into how the agencies intend to address both the employer “shared responsibility” requirement and the 90-day limitation on eligibility waiting periods.

The Trade Act of 2002 created a health care tax credit (“HCTC”) for certain individuals who become eligible for trade adjustment assistance (“TAA eligible individuals”), as well as for certain retired employees who are receiving pension payments from the Pension Benefit Guaranty Corporation (“PBGC recipients”). Under the original HCTC provisions, eligible individuals could either claim a tax credit or receive advance payment of 65% of the premiums they pay for qualified health insurance, including COBRA continuation coverage. Special COBRA rights, including a second opportunity to elect COBRA coverage, also apply to TAA-eligible individuals and PBGC recipients.

2011 has been a big year for grandfathered and non-grandfathered group health plans alike.  A number of significant changes mandated by the Affordable Care Act (“ACA”) took effect for both types of plans.  Now, 2014 looms as the next big milestone in health care reform.  But losing track of the grandfathering rules is a trap for the unwary.  While there are no major health care reform changes taking effect in 2012, sponsors of grandfathered plans should revisit the rules governing grandfathered status to ensure that they do not inadvertently lose that status in 2012.

As explained in our August 2010 article, “interim final regulations” issued under the Affordable Care Act (“ACA”) require that group health plans (other than those that are “grandfathered”) comply with a number of internal claims and appeals procedures that go beyond those previously required under ERISA. The ACA also requires group health plans to offer a new state or federal external review process to review denied claims.

As explained in our August 2010 article, “interim final regulations” issued under the Affordable Care Act (“ACA”) will require group health plans (other than those that are “grandfathered”) to comply with a number of internal claims and appeals procedures that go beyond those previously required under ERISA. Although these new requirements are generally effective for plan years beginning on or after September 23, 2010, the Department of Labor (“DOL") granted a limited extension of this compliance deadline in late 2010. Then in March of this year, the compliance deadline was further extended for certain of these requirements.

Target-date funds have become increasingly popular with 401(k) plan investors in recent years. A target-date fund (“TDF”) is typically a mutual fund that contains a mix of underlying investments and automatically adjusts the asset allocation (stocks, bonds, cash equivalents) within the fund’s portfolio according to a selected “target date” such as retirement. As a participant approaches the "target date," the fund moves its allocation to more conservative investments (e.g., bonds and cash) and away from riskier investments (e.g., equities).

The passage of comprehensive health care reform legislation under the Affordable Care Act (“ACA”) made 2010 a monumental year for group health plans. As a result, plan sponsors are faced with a dizzying array of action items for 2011.

With annual enrollment season fast approaching, now is the time to consider new 2011 disclosure obligations.  In particular, with the enactment of the Affordable Care Act (the “Act”), several new notices must be provided to plan participants.  Many plan sponsors may want to consider including these new notices in the 2011 open enrollment materials that they send to employees.  These notices include:

In the weeks and months leading up to the enactment of the Affordable Care Act, one of the oft-repeated “campaign promises” made by promoters of the legislation was, “If you like your current health care coverage, you can keep it.” In keeping with the spirit of that promise, the Act includes provisions that exempt so-called “grandfathered” plans from some, but not all, of the benefit mandates in the Act. Unfortunately, the Act leaves many questions unanswered with respect to the application of these grandfather rules.

As had been widely anticipated, Congress has extended the 65% COBRA premium subsidy yet again. Under the “Continuing Extension Act of 2010,” the subsidy will now apply to involuntary terminations occurring on or before May 31, 2010 (rather than March 31, 2010).

For years, the Department of Labor (“DOL”) has focused much of its enforcement resources on delinquent deposits of participant contributions. Under the general rule set forth in existing regulations, participant contributions to ERISA plans become plan assets “as soon as they can reasonably be segregated” from the employer’s general assets.

Over a year after the Mental Health Parity And Equity Addiction Act (“MHPAEA”) was enacted (and after the statutory provisions took effect for most group health plans), the Departments of Labor, Health and Human Services, and Treasury have finally issued interim final regulations implementing the provisions of the MHPAEA. The regulations are welcome guidance for many plan sponsors who have thus far been forced to interpret the statutory requirements on their own.

Unlike pension benefits, ERISA does not ordinarily require any vesting of welfare benefits. Over the years, however, many court decisions have held that an employer can create a vested right to welfare benefits by taking affirmative steps that indicate an intent to provide vested benefits. A recent decision by the Third U. S. Circuit Court of Appeals (Inre Unisys Corp. Retiree Medical Benefits ERISA Litigation) will make it easier for welfare plan participants to prevail on a claim that welfare benefits have vested.

As we reported in our March 2009 article, the Health Information Technology for Economic and Clinical Health (“HITECH”) Act created a new notification requirement in the event of a breach involving protected health information (“PHI”). The Department of Health and Human Services (“HHS”) recently published interim final regulations clarifying when and how such breach notices must be provided.

With annual enrollment season fast approaching, now is the time to consider 2010 welfare plan changes. We have discussed each of these changes in detail in past issues of Benefits in Brief.

After a few years of relative calm after the “HIPAA storm,” it appears that clouds are on the horizon for employers, plan administrators, and business associates.  In addition to the new COBRA subsidy requirements, another of the items included in the recent economic stimulus package (formally known as the American Recovery and Reinvestment Act, or “ARRA”) was a significant expansion of the HIPAA privacy and security rules.  While Congress has given covered entities and business associates a bit more time than it gave employers to comply with the new COBRA rules, they should still act quickly to review and digest the new HIPAA requirements.

Many group health plans provide that reimbursement of “out-of-network” claims will be based on a percentage of the “reasonable and customary” (R&C) charges. In most cases, the determination of an R&C charge is based on data obtained from third-party sources. A new investigation by the office of the New York Attorney General (NYAG) should prompt plan administrators to take a second look at the source of such data.

Most plan sponsors have become familiar with the provisions of the Mental Health Parity Act of 1996 (“MHPA”). The MHPA required group health plan sponsors to eliminate certain annual caps and lifetime limits on mental health benefits. Notwithstanding the MHPA, however, many plan sponsors continued to impose reduced coinsurance limits and frequency limitations on mental health benefits. Now, as part of the emergency economic stabilization legislation that was signed by President Bush on October 3, 2008, the mental health parity rules have been expanded significantly.

The Medicare Part D regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) require group health plans providing prescription drug coverage to Part D-eligible individuals to disclose to participants whether the coverage is “creditable” — that is, at least as good as Medicare Part D coverage. Plans must send these notices to participants each fall, prior to the beginning of the initial enrollment period for Medicare Part D coverage.

On May 21, 2008, the President signed the Genetic Information Nondiscrimination Act of 2008 (“GINA”). The new law prohibits discrimination on the basis of genetic information in health insurance and employment. The provisions applicable to group health plans and health insurance issuers are effective for plan years beginning on or after May 21, 2009.

Employer wellness programs are often touted as part of the answer to rising health insurance costs. However, a recent federal district court decision suggests that employers must tread carefully when seeking to control health insurance costs by policing employees’ conduct outside of work.

Effective January 1, 2008, the Missouri Insurance Code was amended to require all group health, dental, and vision insurance policies to offer continued coverage to dependents up to age 25, regardless of student status. Though the law is likely preempted by ERISA for any self-funded health plan, employers whose plans are fully insured must comply. For the most part, insurance carriers have already taken the steps necessary to amend their insurance policies issued to Missouri employers.

The Pension Protection Act (“PPA”) imposed many new disclosure requirements, including expanded benefit statements for defined contribution and defined benefit plans. Many plan sponsors have been expecting model benefit statements by August 18, 2007, the deadline set by the PPA.

After protracted litigation, the Third U.S. Circuit Court of Appeals has finally upheld regulations issued by the Equal Employment Opportunity Commission (“EEOC”) allowing employers to reduce, change, or even eliminate retiree health coverage when retirees become eligible for Medicare. Unless this decision is reversed by the U.S. Supreme Court (which seems unlikely), employers who coordinate, terminate, or charge different premiums for retiree health coverage upon a retiree’s Medicare eligibility should be able to retain such practices without fear of violating the Age Discrimination in Employment Act (“ADEA”).

To many group health plan sponsors, the distribution of the “Notice of Privacy Practices” required by HIPAA’s privacy regulations (the “Privacy Rule”) may be no more than a distant memory. Well, dust off those HIPAA privacy notices because, according to the Privacy Rule, “No less frequently than once every three years, the health plan must notify individuals then covered by the plan of the availability of the notice and how to obtain the notice.” Thus, those “small plans” that were originally subject to the Privacy Rule as of April 14, 2004, must comply with this “reminder” requirement by April 14, 2007.

Over five years after regulations were first proposed, the Departments of the Treasury, Labor, and Health and Human Services have finally issued final HIPAA nondiscrimination and wellness program regulations. While the final regulations clarify certain aspects of the 2001 interim and proposed regulations, other questions remain unanswered.

The Pension Protection Act of 2006 (PPA) made several changes intended to facilitate automatic enrollment plans, including new ERISA Section 404(c)(5), which provides fiduciary relief for certain default investments under participant-directed individual account plans. The DOL has now issued its proposed implementing regulations. The regulations will be effective 60 days after the final regulations – expected early in 2007 – are published.

After years of compliance efforts relating to the electronic transaction rules, privacy rules, and security rules under the Health Insurance Portability and Accountability Act (“HIPAA”), yet another requirement looms on the horizon. The National Provider Identifier (“NPI”) was adopted as the standard health identifier for health care providers in order to fulfill a requirement in HIPAA for the adoption of such a standard. The purpose of the NPI is to establish a single, unique identifier for health care providers to use in standard health care transactions.

A nonqualified deferred compensation plan can be an important part of an employer’s overall compensation program. Unlike qualified retirement plans, which limit benefit amounts and require broad coverage, nonqualified plans provide a virtually unlimited opportunity to defer income and may be targeted to key individuals. Additionally, nonqualified plans are generally exempt from ERISA’s fiduciary, funding, and vesting requirements.

The IRS has issued additional guidance regarding the use of debit cards, credit cards, and stored value cards for flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”). The new rules may spark a renewed interest among employers in offering an electronic payment card feature with their FSAs and HRAs. The IRS had previously addressed substantiation of electronic payment transactions for health FSAs and HRAs in 2003. Under the old rules, automatic substantiation for debit or credit card transactions linked to health FSAs and HRAs was subject to the following key conditions:

Under ERISA’s claims and appeals regulations, participants and beneficiaries are entitled to a “full and fair” review process. In St. Joseph’s Hospital of Marshfield Inc. v. Carl Klemm Inc., a federal district court in Connecticut ruled that a plan beneficiary was not given a full and fair review when the plan’s third-party administrator (“TPA”) made both the initial decision to deny benefits and the appeal determination.

As we reported in our July 2005 issue of Benefits in Brief, the Medicare Part D regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) require group health plans providing prescription drug coverage to Part D-eligible individuals to disclose to participants whether that coverage is “creditable” – that is, at least as good as Medicare Part D coverage. Most plans sent these notices to participants last fall, prior to the beginning of the initial enrollment period for Medicare Part D coverage.

The method of delivering required COBRA notices is always a popular topic among plan administrators. COBRA contains no specific requirements as to the manner in which notice must be given. Generally, however, the plan administrator’s good faith effort to notify the participant, by mailing a notice to the participant’s last known address, is sufficient.

As we reported in our July 2005 issue of Benefits in Brief, regulations issued by the Centers for Medicare and Medicaid Services (“CMS”) require group health plans providing prescription drug coverage to Medicare Part D-eligible individuals to disclose to participants whether that coverage is “creditable.” Plan sponsors were required to send these notices by November 15, 2005. CMS has now released guidance regarding the plan sponsor’s obligation to disclose information regarding the plan’s creditable coverage status to CMS.

To many plan sponsors, the distribution of the “Notice of Privacy Practices” required by HIPAA’s privacy regulations (the “Privacy Rule”) may be no more than a distant memory. Well, dust off those HIPAA privacy notices because, according to the Privacy Rule, “No less frequently than once every three years, the health plan must notify individuals then covered by the plan of the availability of the notice and how to obtain the notice.” Thus, those plans that were originally subject to the Privacy Rule as of April 14, 2003, must comply with this “reminder” requirement by April 14, 2006.

Although many health plans completed their HIPAA Security Rule compliance efforts last spring, small health plans were given an additional year in which to comply. A small health plan is defined as a plan with annual receipts of $5 million or less. These small plans now have only three months remaining, or until April 21, 2006, to comply with the HIPAA Security Rule.

As we reported in the November 2004 issue of Benefits in Brief, the Working Families Tax Relief Act (WFTRA) took effect January 1, 2005. The WFTRA changed the definition of dependent found in Section 152 of the Internal Revenue Code (the Code). One key change included the addition of a gross income limitation to the Code’s definition of a qualifying relative. As we reported in the November 2004 issue of Benefits in Brief, the Working Families Tax Relief Act (WFTRA) took effect January 1, 2005. The WFTRA changed the definition of dependent found in Section 152 of the Internal Revenue Code (the Code). One key change included the addition of a gross income limitation to the Code’s definition of a qualifying relative.