Wednesday, September 13, 2017

Wellness Plans Face Significant New Scrutiny from the Department of Labor

 From EBN:
Employers who sponsor a wellness plan and service providers that offer wellness plans to their customers should be aware of recent enforcement activity by the U.S. Department of Labor, as well as a recent court ruling regarding Equal Employment Opportunity Commission regulations applicable to wellness plans. 
The DOL recently brought suit for various violations under the Employment Retirement Income Security Act of 1974, as amended against Macy’s Inc., along with the third-party administrators of the retailer’s health plan. 
The suit alleges that the Macy’s wellness plan does not meet the applicable wellness plan non-discrimination requirements because the plan failed to provide a reasonable alternative standard for participants to avoid the tobacco surcharge levied by the wellness plan. It also alleges the plan continued to charge participants a tobacco surcharge even when they participated in the tobacco cessation program offered under the plan. 
The non-discrimination rules under the Health Insurance Portability and Accountability Act, as amended by the Affordable Care Act, require participatory wellness programs to offer a reasonable alternative standard to participants who cannot meet the initial standard. 
According to the complaint, the Macy’s plan did not offer an alternative to the tobacco cessation program for those individuals for whom it was unreasonably difficult to complete the offered tobacco cessation program due to a medical condition, or for whom it was medically inadvisable to attempt to achieve the standards of the tobacco cessation program. 
In addition, the complaint alleges that the plan continued to charge the tobacco surcharge to participants who entered a tobacco cessation program. The only way for a participant to avoid the surcharge was to remain tobacco free for six consecutive months during the plan year. 
The DOL claims that amounts collected by the plan in the form of tobacco surcharges were used by Macy’s to pay claims and administrative expenses associated with its self-insured medical plan. 
The complaint asserts that these actions resulted in Macy’s violating several of ERISA’s fiduciary and prohibited transaction requirements, including failing to act solely in the interest of the participants and beneficiaries of the medical plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of plan administration, and engaging in transactions that constituted a direct or indirect transfer to, or use by or for the benefit of a party in interest, of plan assets. 
The DOL also alleged HIPAA non-discrimination violations in Macy’s requiring participants to pay a premium or contribution that was greater than the premium or contribution for a similarly situated participant enrolled in the medical plan on the basis of a health status-related factor. 
The suit also alleges that Macy’s and the third-party administrators of its health plan breached their fiduciary duties under ERISA based on changes made to the plan’s methodology for calculating reimbursement of out-of-network claims. 
In the complaint’s prayer for relief, the DOL requests that Macy’s be ordered to reimburse all participants who paid a tobacco surcharge during the time period at issue, with interest, and be enjoined from collecting any tobacco surcharge until it revises its wellness plan to comply with the nondiscrimination requirements for wellness plans, including the requirement to offer a reasonable alternative standard. 
In addition, the DOL requests that Macy’s be required to disgorge all unjust enrichment or profits received as a result of the alleged fiduciary breaches it committed or for which it is liable.

More employers are requiring same-sex couples to marry to receive health benefits

From Wolters Kluwer: 
Employers are increasingly requiring same-sex couples to legally marry to receive health care benefits, data from the International Foundation of Employee Benefit Plans reveals. The trend follows the June 2015 Supreme Court ruling that legalized same-sex marriage. 
Immediately after the 2015 Supreme Court ruling that legalized same-sex marriage, three in ten employers reported they were likely to discontinue providing benefits to same-sex domestic partners. 
Findings were drawn from Employee Benefits Survey: 2016 Results, Domestic Partner Benefits After the Supreme Court Decision: 2015 Survey Results and Employee Benefits for Same-Sex Couples: The DOMA Decision One Year Later. 
Larger organizations are the most likely to be maintaining same-sex domestic partner benefits. Three in four organizations (77 percent) with 10,000 or more employees continue to offer domestic partner benefits. 
In 2014, one year before the ruling, employers reported that:
  • 51 percent provided benefits to same-sex partners in a civil unions
  • 59 percent provided benefits to same-sex domestic partners
  • 79 percent provided benefits to same-sex spouses.
In 2016, one year after the ruling, the number of employers offering health care benefits to unmarried same-sex couples has dropped. Employers report that:
  • 31 percent are providing benefits to same-sex partners in civil unions (down 20 percent from 2014)
  • 48 percent are providing benefits to same-sex domestic partners (down 11 percent from 2014).

AT&T Health Plan Must Cover Girl’s Horse-Based Therapy

From Bloomberg BNA
An AT&T Inc. health plan must pay for an employee’s daughter’s mental health treatment at a residential center that combines psychotherapy with riding horses ( Lynn R. v. ValueOptions , 2017 BL 293893, D. Utah, No. 2:15-cv-00362-RJS-PMW, 8/22/17 ). 
The health plan was wrong to deny more than $117,000 in medical claims for treatment the girl received at Utah-based Equine Journeys, a federal judge ruled Aug. 22. The plan said it denied coverage because the facility wasn’t nationally accredited, but the judge rejected this rationale. “Nowhere does the Plan state a provider must be nationally accredited for the treatment to be medically necessary,” the judge said.

Draft Forms and Instructions For 2017 ACA Reporting Released

The Internal Revenue Service (IRS) recently released the draft instructions for  2017 Forms 1094-C and 1095-C used by applicable large employers (ALEs) to report under Internal Revenue Code (Code) Sections 6055 and 6056. The newly released instructions  incorporate  minor changes that were reflected in the 2017 draft forms, released on July 27, 2017.   
2017 forms are due to employees/covered individuals by Jan. 31, 2018, and must be filed with the IRS by Feb. 28, 2018 (or April 2, 2018, if filing electronically since March 31 is a Saturday). As a reminder, it appears ALEs will not have the extension to file they had for their 2016 forms.
Draft instructions provide employers with a few clarifications, including the following:
  • Transition Relief: Certain limited transition relief was available to ALEs for 2015 & 2016. Since no transition relief is available in calendar year 2017,  any reference to that relief has been removed.  Both boxes "B" and "C" on line 22  of form 1094 C are now labeled "Reserved". These boxes will never apply in 2017 as the transition relief for boxes "B" and "C"are no longer applicable. The second change is column (e) in Part III of the Form 1094-C is also labeled "Reserved". Column (e) in Part III of the Form 1094-C was tied to box "C".
  • Plan Start Month: Optional again in 2017 on form 1095C, Part II.
  • Penalty Information: The penalty remains at $260 per violation, but maximum was indexed to an annual maximum of $3,218,500 (up from a maximum of $3,193,000, for 2016).
  • Formatting Returns: Clarifies formatting must be in landscape.
  • Line 15: The instructions  added  for Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. ( see page 6)
  • Line 16: A note has been added in the instructions for Code 2 series " There is no specific code to enter on line 16 to indicate that a full-time employee offered coverage either did not enroll in the coverage or waived the coverage."   This question has been raised often and  employers can either enter appropriate affordability codes of 2F,2H or2G or leave blank to indicate unaffordable.
  • IRS HotlineInformation on an IRS website and IRS hotline phone number  (1-800-919-0452)  have been added to the recipient form back page instructions
For a more detailed discussion of both the finalized forms and their accompanying instructions, please see our legislative alert below.

Federal Court Strikes Down 2016 Overtime Rule

  • A federal court struck down the 2016 overtime rule that was supposed take effect on Dec. 1, 2016.
  • The salary level limit for EAP employees remains at $455 per week or $23,660 per year.
  • The salary level limit for HCEs remains at $100,000 per year.
Important Dates:
  • November 22, 2016 - A federal judge issued a preliminary injunction blocking enforcement of the overtime rule.
  • August 31, 2017 - The final rule was struck down.

On Aug. 31, 2017, a federal judge in Texas struck down the Department of Labor’s (DOL) 2016 overtime rule, stating that the DOL had exceeded its authority by issuing a new salary level requirement for white collar exempt employees. 

The DOL is unlikely to appeal this court decision because the ruling does not put into question the DOL’s general authority to set any type of salary limit. 

However, the DOL has also signaled its intention to propose a new overtime rule. The DOL has published a request for information (RFI) to invite the public to comment on the issues the DOL should consider before proposing a new overtime rule. 

Action Steps 
Employers are not required to comply with the 2016 overtime final rule. This ruling ensures that the rule will not take effect. Employers should monitor developments on a new overtime rule proposal. 

DOL Rule on White Collar Exemptions 
The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, the FLSA exempts certain workers, such as white collar employees, from these protections. The white collar exemptions apply to certain executive, administrative, professional, outside sales, computer and highly compensated employees. 

To qualify for the executive, administrative or professional (EAP) exemption, an employee must meet a salary basis test, a salary level test and a duties test. The DOL’s 2016 overtime rule would have increased the required salary level from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Highly compensated employees (HCEs) must also satisfy the salary basis and duties tests to be considered exempt, but a different salary level applies to them. The DOL rule would have increased the required salary level for highly compensated employees from $100,000 per year to $134,004 per year

Challenges to the 2016 Overtime Rule
In September 2016, a coalition of 21 states and a number of business groups filed two separate lawsuits challenging the new rule. These two lawsuits were combined in October. On Nov. 16, 2016, the court held a hearing on whether to grant an emergency injunction blocking the implementation of the rule. The judge presiding over the case issued his written ruling granting the injunction on Nov. 22, 2016.

On Aug. 31, 2017, the same federal court struck down the 2016 overtime rule stating that the DOL exceeded its authority when imposing the $913 per week ($47,476 per year) and $134,004 per year salary level limits.

The Future of FLSA Overtime Regulations
On July 26, 2017, the DOL published an RFI regarding the overtime exemptions for executive, administrative, professional, outside sales and computer employees. The purpose of the RFI is to gather information from the public before formulating a proposal to amend the FLSA or its regulations.

The RFI does not place any responsibilities on employers. However, any individual or organization interested in responding to the RFI must submit their comments to the DOL by Sept. 25, 2017. The DOL is encouraging individuals and organizations to submit their comments electronically, using the instructions in the Federal eRulemaking Portal.

When submitting a comment, employers should remember that, once submitted, comments are considered public records and will be published without editing. This includes any personal information provided.

Monday, August 14, 2017

Yes, You Must Add Employee Benefit Opt-Out Payments Into Total Compensation for Overtime Calcs

If you are an employer within the jurisdiction of the Ninth Circuit Court of Appeals and offer cash payments to employees who opt out of group health coverage (“opt-out payments”), what you don’t know about the court’s 2016 opinion in Flores v. City of San Gabriel may hurt you.0 
Specifically, the Ninth Circuit court held that opt-out payments had to be included in the regular rate of pay used to calculate overtime payments under the federal Fair Labor Standards Act (FLSA). In May 2017 the U.S. Supreme Court declined to review the opinion, making it controlling law within the Ninth Circuit, and hence in the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington. 
The Flores case arose when a group of active and former police officers in the City of San Gabriel sought overtime compensation based on opt-out payments they received between 2009 and 2012 under a flexible benefits plan maintained by the City. The plan required eligible employees to purchase dental and vision benefits with pre-tax dollars; they could also use the plan to purchase group health insurance. Employees could elect to forgo medical benefits upon proof of alternative coverage; in exchange they received the unused portion of their benefits allotment as a cash payment added to their regular paycheck. The opt-out payments were not insubstantial, ranging from $12,441 annually in 2009 to $15,659.40 in 2012. The City’s total expenditure on opt-out payments exceeded $1.1 million dollars in 2009 and averaged about 45% of total contributions to the flexible benefits plan over the three years at issue. ...
Full column.

COBRA and Severance Agreements – Think Twice Before Wading Into This Mess

From Hill, Chesson & Woody:
Employers sometimes allow former employees to remain on their health insurance plan for some period of time after termination of employment at no cost or reduced cost to the terminated employee. While this may seem like a generous offer to include in a severance agreement, there can be unintended consequences for both the employer and the former employee if not handled correctly. Questions often arise regarding the interaction of severance agreements and health benefits. 
3 tips for employers contributing to or continuing a terminated employee’s health insurance:
  1. Educate the terminating employee about their coverage options. Make sure that the individual understands that if they accept your offer of COBRA coverage, they may not be able to purchase individual coverage through the Marketplace until the next Marketplace annual enrollment. Individuals who lose job-based coverage generally have 60 days to purchase coverage through the Marketplace. If they stay on COBRA beyond the Special Enrollment Period, they could lose that option. Maintaining COBRA coverage (at a higher cost than Marketplace coverage) until other employer-sponsored coverage becomes available or the next Marketplace annual enrollment could be the individual’s only option for avoiding a gap in coverage and tax penalties. 
  2. Offer the terminating employee COBRA. If the individual is left enrolled as an active employee, fully-insured employers may risk violating the medical plan eligibility requirements in their insurance contract. Similarly, self-funded employers may violate the coverage provisions of their stop-loss agreement. Consequently, failure to offer COBRA can expose an employer to significant financial liability for claims not paid by an insurance carrier or stop-loss insurer. Also, it ensures that coverage obtained through a new employer will pay primary to COBRA coverage. If you want to pay all or a portion of the individual’s coverage, work with legal counsel to draft a severance agreement that includes an employer contribution to offset the cost of COBRA coverage.
  3. Pay the COBRA premium directly. If the severance agreement includes an employer contribution toward the cost of COBRA coverage, minimize tax consequences by paying the COBRA premium directly to the plan instead of reimbursing the former employee. COBRA premium payments are not treated as taxable wages if made by the employer directly, or if the employer requires verification of or retains control over the purchase of COBRA coverage (such as requiring substantiation of the month’s premium payment prior to providing reimbursement). If you offer a terminated employee cash to purchase their own individual health insurance as part of a severance agreement, use caution. Although this might seem to provide the terminated employee with greater flexibility to choose the type of health insurance coverage that best fits their needs, it may result in the creation of a new ERISA group health plan and additional excise tax liability, among other compliance obligations. ...
Full story

What Changing Medical Carriers Does to Your Short-term Utilization

From the National Institute for Health Care Management:
  • Visits to new primary care physicians (PCPs) increased significantly for patients changing insurers relative to patients staying with the same insurer.
  • For patients initially covered by Medicaid, the monthly rate of visits to new PCPs increased by an average of more than 200 percent after changing insurers, and their rate of visits to new specialists rose by almost 50 percent.
  • For patients initially covered by private insurance, changing carriers was associated with a nearly 50 percent increase in new PCP visits while visits to new specialists fell slightly. The overall decline in new specialist visits was caused by lower use among patients who faced higher deductibles after changing plans.
  • These average utilization changes reflected larger changes in use shortly after the insurance switch that diminished over the subsequent year.
  • The rate of ED visits increased significantly for Medicaid patients in the month of their insurance transition, relative to levels seen in the four to twelve months before the transition, but quickly returned to baseline levels.

Friday, August 4, 2017

Another ACA Lie - Preventative Care Actually Does Not Save Money

...the commonly held, but mostly false, belief that more preventive care will reduce overall health care costs.
As counterintuitive as it seems, preventive measures generally increase rather than decrease costs. This in no way suggests that we shouldn’t pursue preventive measures. It simply means that we shouldn’t spend time dreaming up ways to spend the savings that will result. 
How can reality stray so far from what seems to be obvious logic? Let’s illustrate the conundrum by way of a thought experiment — the hypothetical costs involved in a hypothetical Disease X: 
COMMON SENSE: Suppose one out of 10,000 people will contract a potentially fatal Disease X, which — if not caught early — costs $100,000 to treat. Catching the illness early requires a $5 test, and the early treatment costs $20,000. So, if we test and treat the one sick patient, we enjoy $100,000 minus $5 minus $20,000 (equals) $79,995 in savings. So, common sense might suggest that prevention saves money. 
WIDESPREAD TESTING: But the first problem is that we don’t know in advance who needs an early screening. So, practically speaking, we have to conduct widespread testing. Testing all 10,000 people means $50,000 in tests to find the one unfortunate who has Disease X. Now, early detection saves $100,000, but we spend $50,000 for tests and $20,000 for treating the one sick person. Net savings are now $30,000, rather than $79,995. Still, some savings are better than none. 
FALSE POSITIVES: But, wait — as the TV ad says — there’s more. The test isn’t perfect and incorrectly flags two healthy people as having Disease X. We treat them, too, at a cost of $40,000, but there are no gross savings from those treatments, since neither would ever have become ill with Disease X. Now, we save $100,000 by detecting the one case early on. But we spend $50,000 in tests and $60,000 in early treatments. On net, our prevention program now amounts to a $10,000 loss — rather than savings. 
IATROGENESIS: Here things get worse. One of the two false-positive patients suffers adverse consequences from the early treatment. (The technical term is “iatrogenesis.”) We spend $30,000 to reverse the damage caused by the original treatment, which we omniscient readers know was unnecessary in the first place. The prevention program now cuts out $100,000 in costs by averting one case of Disease X, but requires us to spend $50,000 for tests, $60,000 for treatments, and $30,000 for undoing the side effects of one patient’s Disease X treatment. The net loss is now $40,000. 
We can add yet another complication. Preventive care often has the effect of extending life. While that is admirable and desirable, a longer life often means surviving long enough to contract even more expensive maladies (think of cancer or Alzheimer’s) that would never have occurred over a shorter lifespan. 
And so it goes with most preventive care. Again, that doesn’t mean we shouldn’t engage in preventive care. It only means we ought to expect our collective health care expenditures to rise, not drop, as we increase our preventive efforts. ...
This is not a new concept.  We've known it for years - but hey - that never stops politicians from repeating a good talking point, right?  See also:


Tuesday, August 1, 2017

Covered California Plans to Increase 12.5% to 25% in 2018

Covered California on Tuesday announced that health insurance rates on the state’s health insurance exchange created under the Affordable Care Act will increase by an average rate of 12.5 percent for 2018 plans. 
Peter Lee, CEO of the exchange, said the increase normally would have been just under 10 percent, but for a 2.8 percent tax on health insurers that resumes next year. 
But a bigger threat — the possibility that the Trump administration kills certain Obamacare subsidies — would increase rates by another 12.4 percent, he said, though Covered California has a work-around plan to avoid that scenario. ...  
Anthem Blue Cross of California will leave markets that comprise about half of its enrollment — except for Santa Clara County, the Central Valley and certain Northern California counties. 
That means 153,00 of those enrolled in Anthem plans through the exchange today will need to select a new plan for 2018. ... 
Anyone who earns between 139 percent and 250 percent of the poverty threshold — between $34,200 and $61,500 for a family of four — [has also been] eligible for additional reductions, which lower out-of-pocket costs such as co-pays and deductibles.
About 7 million Americans, including roughly 650,000 Californians, receive those extra subsidies. And the federal government reimburses insurers on the exchanges about $7 billion to reduce the cost of the co-pays and deductibles for those low-income people.
[The end of those] subsidies would send many premiums soaring because health insurers would have to pick up those costs themselves, and many companies would also likely flee the markets, experts say.
Covered California continues to seek clarification from the Trump administration about its intentions regarding the cost-sharing payments. But Lee said if the exchange doesn’t receive confirmation by the end of the month that the payments will continue, an additional average 12.4 percent surcharge will be attached to plans when enrollment opens Nov. 1.
The above article from the Mercury News did an adequate job in summarizing the rate increases and exit of Anthem, however, it did not explain the illegal cost reduction subsidies that have been forbidden in federal court.  In an attempt to not rock the boat too much (believe it or not), the Trump administration has been continuing these payments but that practice is not likely to continue.  Michael Cannon at the CATO Institute explains:
Another [issue] is the illegal “cost-sharing” subsidies President Obama began issuing – and that President Trump is still issuing – to insurers participating in ObamaCare’s Exchanges. In a case where the House of Representatives challenged the payments, a federal judge ruled that issuing those payments “violates the Constitution” and ordered them to stop, pending appeal. The Obama administration was pursuing an appeal, but the Trump administration has not indicated whether it would continue to appeal that ruling or enforce the judge’s order. Trump must do one or the other.
Two of President Trump’s cabinet picks have practically forced his hand on this issue.
When the federal district-court judge issued her ruling striking down the cost-sharing subsidy payments, Health and Human Services Secretary Tom Price was a Republican member of Congress. He issued a statement endorsing the ruling:
Today, Congressman Tom Price, M.D. issued the following statement after a federal judge ruled in favor of House Republicans’ lawsuit against Obamacare, saying that the Administration does not have the power to spend money on “cost sharing reduction payments” to insurers without an appropriation from Congress: 
“The ruling proves a momentous victory for the rule of law and against the Obama Administration’s overreach of Constitutional authority,” said Congressman Tom Price, M.D. “This historic decision defies the Obama’s Administration’s ask that the courts disregard the letter of the law and reasserts Congress’s power of the purse as defined by our nation’s founders in Article One of the Constitution.” 
“In recent weeks, we’ve seen insurers announce that they will exit the exchange markets in 2017, further deteriorating patients’ access and choice to health care plans that they want. This is yet again proof that Obamacare is on an unsustainable path, and House Republicans must remain committed to repealing and replacing this law. As a member of the Health Care Task Force, I’m honored to be working with my colleagues to advance positive, patient-centered solutions to the challenges in our health care system."
Price has made clear his view that Congress did not appropriate funding for these payments, and that continuing to make them would constitute executive overreach and violate the rule of law. If President Trump chooses to appeal the lower-court ruling, he would put Price in a situation where he would have to help implement a policy that he considers unconstitutional. Price arguably would have to resign.
Yesterday, Trump’s attorney general Jeff Sessions expressed his view that the payments are unconstitutional and that the lawsuit challenging those payments “has validity to it.” If Trump chooses to appeal the lower-court ruling, Sessions would be the guy who carries out that appeal. It would be…awkward for him to defend a policy he believes to be unconstitutional.