Friday, December 21, 2018

Healthcare Reform & Benefit News, Week of Dec. 21, 2018

Healthcare Reform News

The ACA Remains in Place After Being Struck Down by Federal Court
December 20, 2018 – McGriff Insurance Services
Excerpt: “This lawsuit was filed by 20 states as a result of the 2017 tax reform law that eliminates the individual mandate penalty. In 2012, the U.S. Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. With the penalty’s elimination, the court in this case ruled that the ACA is no longer valid under the U.S. Constitution.”

Obamacare Battle Now Before a Baltimore Judge Picked by Obama
December 19, 2018 – Bloomberg
Excerpt: “Hollander was nominated to the federal bench by Obama in April 2010, less than a month after the ACA was signed into law and the first suits were filed to dislodge it. She may issue a ruling as soon as arguments are completed, but more likely will compose a written ruling in coming days or weeks.”

House Rules to Repackage Tax-Retirement Bill Today
December 19, 2018 – ThinkAdvisor
Excerpt: “Members of the House Rules Committee are preparing to look at the big Republican retirement bill starting at 5 p.m. today, in the U.S. Capitol…The latest would version would also extend the current moratorium on the Affordable Care Act (ACA) medical device tax; put off implementation of the ACA “Cadillac plan tax,” or tax on high-cost health benefits packages; extend the current suspension of the ACA annual fee on health insurers, or “health insurer tax”; and repeal the excise tax on indoor tanning services.”

ACA Ruled Unconstitutional, But It’s Status Quo For Employers—For Now
December 17, 2018 – Fisher & Phillips LLP
Excerpt: “A Texas federal judge dealt a serious blow to the Affordable Care Act (ACA) late Friday afternoon, ruling that the tax reform law passed by Congress in late 2017 rendered the healthcare law unconstitutional. While U.S. District Court Judge Reed O’Connor’s 55-page opinion overturns the entirety of the law on a national basis, his ruling does not include any sort of injunction that would immediately cause employers to alter their practices with respect to benefit administration.”

ACA? Unconstitutional, So Declares a Federal Judge
December 15, 2018 – FisherBroyles LLP
Excerpt: “To keep track of the whipsaw that is the ACA, be aware that Democrat defenders of the ACA have confirmed they would appeal. Notably, the federal judge did not issue an injunction to stop enforcement of the law, and even the White House (though applauding) cautioned that the ACA remains in place while appeals proceed. So, now what??!!”

Texas Judge Throws Out Most of ACA
December 14, 2018 – ThinkAdvisor
Excerpt: “U.S. District Judge Reed O’Connor said today that the PPACA provision requiring many individuals to own health coverage is now an unconstitutional requirement for people to buy health coverage, not a tax that complies with the U.S. Constitution. Because PPACA contains no “severability clause,” or provision that lets the rest of PPACA survive if one part of PPACA is nullified, all of PPACA is invalid, O’Connor writes in an opinion explaining his ruling on the case, Texas et al. v. USA (Case Number 4:18-cv-00167-O).”

In Other News:

Removal of Final ADA Wellness Rule Vacated by Court
December 20, 2018 – The Federal Register
Excerpt: “This action responds to a decision of the U.S. District Court for the District Court for the District of Columbia that vacated the incentive section of the ADA) rule effective January 1, 2019.”

The Evolution of America’s Sick Leave Epidemic vs. State Efforts to Find a Cure
December 19, 2018 – Seyfarth Shaw LLP
Excerpt: “This blog presents Seyfarth Shaw LLP’s Infographic tracking the spread of paid sick leave and anti-local sick leave laws around the country. The Infographic is divided into four distinct time periods to highlight the geographic and historic evolution of these laws.”

Ohio small businesses may get more access to employee health data
December 18, 2018 – Dayton Daily News
Excerpt: “A proposed Ohio law could help small businesses shop for affordable health insurance by letting them see details on expensive health insurance claims, though critics say it would violate employee medical privacy. For employees with a claim that’s $30,000 or more, Senate Bill 227 will allow insurers to provide companies the amount paid toward that claim and the health condition being treated.”

3 Options For Providing Wellness Program Incentives In 2019…And Beyond
December 14, 2018 – Fisher & Phillips LLP
Excerpt: “Employers are about to enter into limbo when it comes to maintaining wellness programs, and you will soon need to make a decision about how you will implement any such programs at your workplace. As of January 1, 2019, the federal rules that had been put into place to govern wellness program incentives will be officially invalid…”

Health Plan Fiduciaries Liable for Restitution and Penalties Relating to Tobacco Surcharge
December 13, 2018 – Thomson Reuters
Excerpt: “A federal court has entered a consent order requiring the fiduciaries of a group health plan to repay over $145,000 to participants who, as tobacco users, were required to pay health insurance premium surcharges as part of the plan’s wellness program.”

Monday, November 12, 2018

Wednesday, November 7, 2018

California's Medicaid Program Paid Over $4 Billion in Illegitimate Payments Over 4 Years According to a State Audit

From Kaiser Health News:
California’s Medicaid program made at least $4 billion in questionable payments to health insurers and medical providers over a four-year period because as many as 453,000 people were ineligible for the public benefits, according to a state audit released Tuesday. 
In one case, the state paid a managed-care plan $383,635 to care for a person in Los Angeles County who had been dead for more than four years, according to California State Auditor Elaine Howle.  
She said she found “pervasive discrepancies” in Medicaid enrollment in which state and county records didn’t match up from 2014 to 2017, leading to other errors that persisted for years. The bulk of the questionable payments, or $3 billion, went to health plans that contract with the state to care for 80 percent of enrollees in California’s Medicaid program, known as Medi-Cal. 
The program for low-income residents is the nation’s largest and funded by both the federal and state governments. The state findings echo similar problems cited by federal officials and come at a time when the Trump administration has applied extra scrutiny to California’s spending on Medicaid. 
In the report, the state auditor said it’s critical for the state to have accurate information on eligibility “because it pays managed care plans a monthly premium for an increasing number of Medi-Cal beneficiaries regardless of whether beneficiaries receive services.” 
California’s Medicaid program has 13.2 million enrollees, covering about 1 in 3 residents. It has an annual budget of $107 billion, counting federal and state funds. Nearly 11 million of those enrollees are in managed care plans, in which insurers are paid a monthly fee per enrollee to coordinate care. 
The state’s Medicaid enrollment soared by more than 50 percent since 2013 due to the rollout of the Affordable Care Act and the expansion of Medicaid. 
Enrollment grew from 8.6 million in December 2013 to more than 13 million in December 2017, according to the audit report. 
In the case of the dead patient, a family member had notified the county of the enrollee’s death in April 2014. However, the person’s name remained active in the state system, and California officials assigned the patient to a managed-care plan in November of that year. 
From then on, the state kept making monthly payments of about $8,300 to the health plan until August 2018, shortly after the auditor alerted officials of the error. Auditors didn’t identify the health plan. 
There also were costly mistakes in cases in which Medi-Cal pays doctors and hospitals directly for patient care – a program known as “fee for service.” 
For instance, the state auditor found that Medi-Cal paid roughly $1 million in claims for a female patient in Los Angeles County from June 2016 to December 2017 even though the county office had determined in 2016 that she was ineligible. 
In a written response to the auditor, the California Department of Health Care Services said it agreed with the findings and vowed to implement the auditor’s recommendations. However, the agency warned it may not meet the auditor’s timeline, which called for the main problems to be addressed by June 2019. 
In a statement to California Healthline, the agency said it is implementing a quality control process and “where appropriate, DHCS will recover erroneous payments.” 
Early on in 2014, as the ACA rolled out, the state struggled to clear a massive backlog of Medi-Cal applications, which reached about 900,000 at one point. There were widespread computer glitches and consumer complaints amid the increased workload at the county and state level. 
In addition to questionable payments for care of ineligible enrollees, Howle and her audit team also discovered some patients who may have been denied benefits improperly. The state auditor identified more than 54,000 people who were deemed eligible by county officials but were not enrolled at the state level. As a result, those people may have had trouble getting medical care. 
In February, a federal watchdog estimated that California had signed up 450,000 people under Medicaid expansion who may not have been eligible for coverage.
The inspector general at the U.S. Department of Health and Human Services said California made $1.15 billion in questionable payments during the six-month period it reviewed, from Oct. 1, 2014, to March 31, 2015. 
In August, Seema Verma, administrator of the U.S. Centers for Medicare and Medicaid Services, told a U.S. Senate committee that she was closely tracking California to ensure the state “returns a significant amount of funding owed to the federal government related to the state’s Medicaid expansion.” 
Verma expressed concern that states had overpaid managed-care plans during the initial years of Medicaid expansion, resulting in “significant profits for insurance companies.” By year’s end, she said she expects the federal government to recoup about $9.5 billion from California’s Medicaid program, covering overpayments from 2014 to 2016. 
Tony Cava, a spokesman for Medi-Cal, said the state has already returned about $6.9 billion to the federal government and expects more than $2 billion more to be sent back by December.
Full story here

Healthcare Measure Routed in Palo Alto

Voters strike down Measure F, which would have required City Hall to regulate hospital bills. Similar measure defeated in Livermore.

From Palo Alto Online:
A proposal by a union of health care workers to impose caps on how much Palo Alto's medical providers can charge patients and insurance companies was emphatically rejected by local voters on Election Day on Tuesday. 
The proposal, known as Measure F, would have placed City Hall in charge of regulating the health care costs of most local medical providers to ensure that none are charging their patients more than 115 percent of the cost of "direct patient care," which excludes administrative salaries. The Service Employees International Union-United Health Workers (SEIU-UHW) had argued that the measure is necessary to curb Stanford's exorbitant costs and ensure that Stanford devotes more resources to reducing its high rate of hospital-contracted diseases. 
With 93 percent of the results counted, the measure was trailing by a huge margin, with 77.03 percent of the voters opposing it and 22.97 percent supporting it. Of all the votes cast, 10,702 went against Measure F while 3,192 went for it. ... 

Saturday, November 3, 2018

Palo Alto & Livermore, Calif. Attempt Price Controls on Hospitals in Upcoming Election - Unprecedented at Local Level

In Brief
  • The the best of our knowledge, local governments have never attempted to regulate hospital prices.   
  • Measures would cap prices charged by hospitals and other health care providers at 115 percent of “the reasonable cost of direct patient care.” 
  • What costs are acceptable and how will we stop providers from increasing costs as much as possible” to compensate for the cap are not clear. 
  • Stanford estimates this would cut its total revenue by 25%.   
  • Industry competition is much healthier in Southern California than in the North - where hospital charges are typically 55% to 70% higher.   
  • Health plans purchased on the state insurance exchange were 35 percent higher in Northern California than in Southern California.  
From Kaiser Health News:  
At a time of mounting national anger about rising health care prices, the country’s largest union of health workers has sponsored ballot measures in two San Francisco Bay Area cities that would limit how much hospitals and doctors can charge for patient care.

The twin measures in Palo Alto and Livermore, sponsored by the Service Employees International Union-United Healthcare Workers West, take aim primarily at Stanford Health Care, which operates Stanford Hospital and Clinics, the facility with the third-highest profits in the country from patient care services, according to a 2016 study.

The union also is sponsoring Proposition 8, a statewide measure that would impose a cap on profits for dialysis clinics. Together, the state and local measures seek to draw on public outrage over sky-high medical prices. And, for municipalities, they amount to a novel and untested effort to rein in those prices through the ballot box.

“I’ve been in this field almost 50 years, and I’ve never seen a local government regulating hospital prices,” said Paul Ginsburg, director of public policy at the Schaeffer Center for Health Policy & Economics at the University of Southern California. A number of states set hospital rates in the 1970s, and two states, Maryland and West Virginia, do so today, he said. ... 
The Palo Alto and Livermore initiatives, which also affect other medical systems in the cities, would cap prices charged by hospitals and other health care providers at 115 percent of “the reasonable cost of direct patient care.”

And there, some experts say, lies the rub.

“What is a seemingly simple idea — limiting prices to 115 percent of ‘costs’ — is neither simple in execution, nor concept,” said Benedic Ippolito, a research fellow at the American Enterprise Institute who studies health care financing. “What costs are acceptable? How will we stop providers from increasing costs as much as possible” to compensate for the cap? ...

Under the initiatives, hospitals and other medical providers would be obliged to pay back any charges above the cap each year to private commercial — but not government — insurers, and to patients who pay for their own care. They would also owe the cities a fine equal to 5 percent of the excess charges. Fines collected by the cities could be used to pay for enforcing the laws.

Stanford estimates that Proposition F, the Palo Alto measure, would reduce the health system’s budget by 25 percent, forcing it to make cutbacks and possibly end essential services, said David Entwistle, the health system’s president and chief executive officer.

Livermore would need to spend $1.9 million a year on the staff required to implement Measure U — its version of the proposal — and would likely incur another $750,000 to $1 million in legal and startup costs, according to an analysis conducted for the city by Henry Zaretsky, a health economist who has worked for the state and the California Hospital Association. ...

Industry consolidation is far more pronounced in Northern California than in Southern California, according to a recent study from the University of California-Berkeley. As a result, inpatient hospital prices in the north were 70 percent higher and outpatient costs as much as 55 percent higher than in the south. The price disparities, even within the Northern California region, can be dramatic.

For instance, independent doctors in the Bay Area are reimbursed, on average, a median $2,408.45 for a routine vaginal delivery, which includes prenatal and postnatal visits, according to a 2017 Kaiser Health News analysis of claims data from Amino, a health cost transparency company. That compares with $5,238.13 for the same bundle of services for Stanford physicians (and $8,049.84 for doctors employed by the University of California-San Francisco).

The higher cost of medical care also pushes up insurance premiums for patients. Health plans purchased on the state insurance exchange were 35 percent higher in Northern California than in Southern California, the 2018 UC Berkeley study showed.
Read full article here.

Don't Expect a PPACA Ruling Before Election Day on the Repeal Effort in Federal Court

From HealthLeaders Media
An injunction against the Affordable Care Act would create chaos for the statute's Marketplace plans, which begin enrollment on November 1. If such a ruling were handed down before the midterms, it would be a welcome gift for Democrats.

Key Takeaways

  • Republican attorneys general from 20 states want a federal judge to impose an injunction on the ACA.
  • A ruling is unlikely before next week's mid-terms.
  • The severability of the ACA's so-called individual mandate is a key issue in the suit.
  • The Court is ultimately expected to hold that the individual mandate is unconstitutional and throw out the guaranteed issued community rating and the pre-existing condition ban.  
It's been nearly two months since a U.S. District Judge in Fort Worth, Texas, heard oral arguments in Texas v. Azar challenging the constitutionality of the Affordable Care Act.

But court watchers hoping for a ruling soon probably shouldn’t expect anything from Judge Reed O'Connor until after the midterm elections next week, says Timothy S. Jost, professor emeritus at Washington and Lee University School of Law, and coauthor of the casebook Health Law.

"I'm sure Judge O'Connor is going to wait until after the election to rule," Jost says. "He's keeping his ear to the political news." ...

Jost says a ruling in favor of Texas Attorney General Ken Paxton and Republican officials from 19 other states who want to slap an injunction on the ACA would provide a pre-election gift to Democrats, as well as create upheaval for Marketplace plans, which begin open enrollment on November 1.

That was not lost on Department of Justice attorneys, who during oral arguments last month urged O'Connor to delay any injunction until 2019 to avoid "chaos."

The Republican attorneys general argued that the ACA became unconstitutional when Congress zeroed-out the tax penalty for the individual mandate, thus invalidating the sweeping legislation in its entirety.

A secondary argument by the plaintiffs focuses on the language in the 2010 statute, which says that the individual mandate is essential to creating a market in which guaranteed issued and preexisting condition exclusion bans are possible.

"The real question is what did the 2017 Congress intend to do when they zeroed out the tax?" Jost says. "Did they intend to get rid of the preexisting condition exclusions or not? You ask anyone in the Senate right now whether they think preexisting conditions should be excluded or not, they'll say, 'Oh no that's not what we did!'"

"So, the important question is when Congress repealed the tax in 2017 did they mean to get rid of the rest of the ACA?" Jost says. "Obviously they didn’t. They tried to amend parts of it in 2017 and they failed. To argue otherwise is just ridiculous."

Plaintiffs win likely 
"When O'Connor does rule," Jost says, "he will probably hold that the individual mandate is unconstitutional and throw out the guaranteed issued community rating and the pre-existing condition ban."

"He might also throw out all of Title I, the exchanges, premium tax credits, and the premium stabilization programs, maybe even insurance reforms such as the age rating," Jost says.

"It's very unlikely he is going to throw out the Medicare donut hole closing, and the generic biologics provisions and the reforms to the Indian Health Service and all the other things that are inconceivably, not related to the individual mandate," Jost says. ...
Full story here.

Monday, October 29, 2018

California’s Senior Population is Growing Faster Than Any Other Age Group. How the Next Governor Responds is Crucial

From the LA Times:
... The next governor will be confronted with a demographic shift of epic proportions: Seniors will be California’s fastest-growing population. Between now and 2026, the number of Californians 65 and older is expected to climb by 2.1 million, according to projections by the state Department of Finance. By contrast, the number of 25- to 64-year-olds is projected to grow by just more than half a million; the number of Californians younger than 25 will grow by a mere 2,500. 
That radical transformation has been largely absent from discussion as politicians grapple with education, healthcare and environmental policies. 
But the graying of California will seep into nearly every nook of the state budget and policy planning under the next governor. It will determine what services will be in demand and how money must be spent. Most significant, it will place enormous strain on the state’s already fragile network of long-term services and supports, including in-home aides and skilled nursing facilities. 
“We are exquisitely unprepared for that [oldest] age demographic pushing through,” said Dr. Bruce Chernof, president of the SCAN Foundation, an aging advocacy group. 
What does it mean to govern an aging state? It means dealing with higher healthcare costs, particularly for low-income seniors who are eligible for Medi-Cal coverage, the state-subsidized healthcare system for the poor. There are currently close to 1.2 million Californians 65 or older enrolled in the program. 
It means grappling with poverty in a different way. California politicians often focus on the state’s child poverty rate, which averaged nearly 23% from 2014 to 2016. But fewer talk about the poverty rate among seniors, which was 20% during the same time period, according to the U.S. Census Bureau’s Supplemental Poverty Measure. The fastest-growing population of homeless people is among older adults; in Los Angeles County, the number of homeless people 62 or older surged by 22% this year, even as the overall homeless population slightly dropped. ...
 Full story here.

Interactive Map Offers Easy Access to Data Breach Laws by State

Click here for the map brought to you by Baker Hostetler.  


Coverage for Ex-Spouses under Divorce Court Orders

Question Presented: An employee has brought us a court order that requires the employee to maintain coverage for her ex-spouse under our plan. Do we have to comply?

Short Answer: Generally the answer is no. Neither the employer, nor the group health plan, nor the insurer is typically a party in the underlying divorce proceedings. A court normally has no power to compel a non-party to take action unless there is some other law requiring that party to recognize the order.

For example a health plan would have to recognize a “qualified medical child support order” (QMCSO) even if it was not a party to the underlying divorce because the Employee Retirement Income Security Act (ERISA) requires health plans to follow valid medical child support orders. A QMCSO, however, cannot order coverage of an ex-spouse.

Of course if the employer has more than twenty employees then it would be obligated to offer the ex-spouse COBRA if notified of the divorce in a timely fashion. And, the order could compel the employee to pay the COBRA premiums but the plan would have no obligation to provide coverage if the employee failed to pay the premiums.

State law could also be applicable. A number of states have what are termed “mini-COBRA” laws that vary widely from state to state. Some only cover small employers who are not covered by federal COBRA.

There are other state laws that mandate coverage for ex-spouses even outside of the mini-COBRA laws. A survey of several of those states is contained in the detail to this Q&A.

Many of these state laws are specifically not applicable to self-insured plans. Even if they were applicable on their face, ERISA would likely preempt (supersede) those state laws and they would be inapplicable to ERISA governed self-insured health plans. A more detailed discussion of preemption is also in the detail to this Q&A.

Analysis: When an employer receives a court order directing it to enroll an ineligible person into its health plan, the employer is usually uncertain as to whether it must follow the court order or not. This sometimes happens when an employee gets a divorce and the court in which the divorce is pending enters an order that the employee’s ex-spouse must continue to be covered under the employer’s health plan – regardless of whether the plan’s terms permit an ex-spouse to remain on the plan. Most health plans do not (other than providing COBRA continuation coverage under federal or state law, as applicable, to the health plan).

While disconcerting to receive, such an order is usually unenforceable. Divorce proceedings are between the two married persons seeking to end their marriage. The employers of the two persons are not parties to the lawsuit. Thus, absent an unusual circumstance, a divorce court has no authority to order an employer’s health plan to provide coverage to any particular person, including an ex-spouse.

     A. QMCSOs.

One example of an unusual circumstance is a QMCSO. ERISA Section 609 specifically provides that QMCSOs (qualified medical child support orders) apply to group health plans governed by ERISA. A QMCSO is an order issued by a court of competent jurisdiction that requires a group health plan to provide coverage to a child of a participant in the group health plan. Section 609 provides that the order cannot require the plan to provide any type of benefit, or any option, that is not otherwise provided under the plan. Because ERISA specifically recognizes QMCSOs, group health plans must provide the coverage ordered under the QMCSO.

     B. Ex-Spouse Orders.

Noticeably absent from Section 609 of ERISA is any requirement that ex-spouses be provided coverage if an order so requires. Nor is there any other section of ERISA or any other federal law that requires a group health plan to provide coverage to ex-spouses (other than COBRA).

     C. COBRA.

If an employer has more than 20 employees, its health plan is subject to federal COBRA, and divorce is a qualifying event that triggers the right to COBRA coverage if the ex-spouse was covered under the plan at the time of divorce. Under federal COBRA, if the employee or ex-spouse notifies the group health plan within 60 days of the date of divorce, the ex-spouse must be offered COBRA continuation coverage for up to 36 months.

     D. State “Mini-COBRA” Laws.

Many states have some version of state required COBRA like coverage intended to fill in the gaps where federal COBRA does not apply, so in the case of employers who have 2-19 employees. These laws vary greatly in the amount of time they allow coverage to continue as well as eligibility for the coverage. For example, Arkansas provides continuation coverage for only 120 days after a qualifying event and requires an employee to be covered under a policy for a three month period prior to termination of employment or a divorce. Arkansas Code §§ 23-86-114 – 23-86-116. Colorado and North Carolina permit continuation coverage for 18 months. Colo. Rev. Stat. 10-16-108; N.C. Gen. Stat. §58-53-1 et seq. And California allows coverage to be extended for up to 36 months following a divorce. California Insurance Code § 10128.59.

The state mini-COBRA laws are typically part of each state’s insurance laws and are applicable only to fully insured plans. These laws vary as to their applicability. Some, on their face, apply to all insured plans while some apply to only those insured plans that aren’t covered by federal COBRA. If the mini-COBRA law did purport to govern a self-insured plan it would likely be preempted by ERISA as discussed below. But remember, self-insured plans of entities that do not fall under ERISA, like local governments and churches, may have to pay attention to these mini-COBRA laws if they purport to cover self-insured plans.

     E. State Mini-COBRA and Other State Laws Extending Coverage for Ex-Spouses.

As part of, or in addition to, mini-COBRA laws, some states have laws that specifically mandate continued health coverage for ex-spouses for an extended period of time as discussed below. This list should not be considered exhaustive and is just for illustration on the importance of consulting these state laws for fully insured plans.

1. Georgia. Group policies must provide continuation coverage for an ex-spouse who was covered by the plan for 36 months. Group policies that cover 20 or more employees must provide coverage to ex-spouses who are 60 years or older at the time of divorce for themselves and any covered dependent children to the earliest of (1) failure to pay premiums when due; (2) plan is terminated for all group members; (3) ex-spouse becomes insured under any other group health plan; or (4) ex-spouse becomes eligible for Medicare. O.C.G.A. §§33-24-21.1 and 33-24-21.2. 
2. Illinois. All fully insured plans regardless of size are required to provide continuation coverage for an ex-spouse who was covered by the health plan prior to the divorce (and dependent children) for up to 2 years if the ex-
spouse is under 55 years old or until the ex-spouse is eligible for Medicare if the ex-spouse is 55 years old or older. 215 ILCS 5/367.2. The statute states that it is inapplicable to self-insured plans. 
3. Maryland. Group policies must provide continuation coverage for an ex-spouse until the earlier of when the ex-spouse (1) becomes entitled to coverage or obtains coverage under another group health plan; (2) becomes entitled to Medicare; (3) remarries; or (4) elects to terminate coverage. Maryland Code §15-408. 
4. Massachusetts. Coverage must be continued for ex-spouses until the ex-spouse remarries or until the date for termination of coverage set forth in the court’s decree, if sooner. If the employee member remarries, the ex-spouse must be covered by a rider to the employee’s participation in the plan if the divorce decree so requires. The cost of coverage cannot be more than it would have been if the insured and ex-spouse had not divorced until at least the time the employee member remarries. Mass. Gen. Laws, Part I, Title XXII, Chapter 175, §110I. 
5. Minnesota. Group health plans must continue ex-spouse coverage until the ex-spouse is covered by another group plan or when the coverage would otherwise terminate, if sooner. Minnesota Statutes §62A.21. 
6. Missouri. Ex-spouse is entitled to continuation coverage similar to federal COBRA but if over age 55, coverage can continue for up to 10 years but can terminate sooner if the ex-spouse obtains coverage under another group health plan. Missouri Revised Statutes §376.428, §§376.892-894. 
7. New Hampshire. Ex-spouses entitled to continuation coverage until the earliest of (1) 3 year anniversary of final decree of divorce or legal separation; (2) remarriage of ex-spouse; (3) remarriage of employee member; (4) death of member; or (5) such earlier time as set forth in the divorce decree. RSA 415:18, VII-b. If the ex-spouse is age 55 and loses coverage due to divorce, the ex-spouse is entitled to continuation coverage until eligible for participation in another employer group health plan or eligible for Medicare. RSA 415:18, XVI(c)(5). 
8. Oregon. Group health plans must provide continuation coverage for ex-spouses for up to 9 months unless the ex-spouse is age 55 or older, and for them coverage continues until the ex-spouse is eligible for Medicare, or if sooner, the date the ex-spouse remarries or becomes insured under any other group health plan. ORS §§743B.343-743B.347. 
9. Rhode Island. Ex-spouses entitled to continuation coverage until the remarriage of either party, or until such time as provided in the judgment of divorce, or if the ex-spouse becomes eligible for coverage through own employment. Rhode Island General Law §27-20.4-1.
Some of the above state laws specifically recognize that they do not apply to self-insured plans which are governed by ERISA. But even those state statutes that do not explicitly recognize this fact cannot escape the application of federal preemption under ERISA.

    F. ERISA Preemption.

By its terms ERISA specifically preempts state laws that relate to ERISA plans. ERISA §514(a). Court orders and state laws that purport to require a health plan governed by ERISA to provide continuation coverage to ex-spouses “relate to” the ERISA plan. But ERISA exempts state insurance law from preemption. This is sometimes referred to as the “savings clause” because those state insurance laws are “saved” from preemption, and the savings clause is found in ERISA §514(b)(2)(A). Therefore any state laws described above would not be preempted for fully insured plans while they likely would be preempted for self-insured plans. The result for self-insured plans is made explicit in ERISA Section 514(b)(2)(B) which states that any self-insured plan will not be “deemed” to be insurance. This clause is sometimes known as the “deemer” clause.

     G. Alternatives for Ex-Spouses.

While ERISA preemption prevents the application of certain state laws to self-insured health plans, ex-spouses do have some alternatives. First, while a court order cannot force a plan to provide continuation coverage outside of COBRA, a court order can direct a person to pay for the coverage obtained by the ex-spouse, regardless of where that coverage is obtained. Then, the ex-spouse could elect COBRA for some period of time and/or obtain an individual insurance policy in the private market or on the exchange. Counsel for the divorcing ex-spouse should discuss these options with the client and insure that the parties’ expectations are documented in a court order that can be enforced instead of trying to force a group health plan to operate outside of its usual terms.

Source: BB&T of California, McGriff Insurance Services and its representatives. BB&T of CA and McGriff do not offer tax or legal advice. Please consult your tax or legal professional regarding your individual circumstances.

CVS Health and Aetna $69 Billion Merger Is Approved With Conditions

From the NYT:  
The Justice Department’s approval of the $69 billion merger between CVS Health and Aetna on Wednesday caps a wave of consolidation among giant health care players that could leave American consumers with less control over their medical care and prescription drugs.

The approval marks the close of an era, during which powerful pharmacy benefit managers brokered drug prices among pharmaceutical companies, insurers and employers.
But a combined CVS-Aetna may be even more formidable. As the last major free-standing pharmacy manager, CVS Health had revenues of about $185 billion last year, and provided prescription plans to roughly 94 million customers. Aetna, one of the nation’s largest insurers with about $60 billion in revenue last year, covers 22 million people in its health plans. 
The two companies say that they will be better able to coordinate care for consumers as the mergers help tighten cost controls. Larry J. Merlo, the chief executive of CVS Health, said in a statement that the approval “is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer health care experience.” 
But critics worry that consumers could end up with far fewer options and higher expenses. 
Just last month, the Justice Department also approved the takeover of Express Scripts, a major CVS rival, by the big insurer Cigna. ...

The preliminary approval was based on Aetna’s decision to sell its plans to WellCare Health Plans to address the government’s concerns that the combined companies would control too much of the market. But state regulators and consumer groups have also raised other concerns about the impact of the merger, saying that the lack of large pharmacy managers that aren’t affiliated with insurers could make it difficult for smaller competitors in either sector.
Previous mergers in the industry have left consumers with fewer choices and higher drug bills, said David A. Balto, an antitrust lawyer who is a critic of the pharmacy managers. 
“This is a marketplace that hasn’t done well because of lack of transparency, and transparency may be even weaker,” said Mr. Balto, who had worked at the Federal Trade Commission and the Justice Department. Affiliations with large insurers could change that dynamic, he added. “It might correct some of the more pernicious practices.” 
Mr. Balto warned that while state officials have not traditionally overseen pharmacy managers, the combined mammoths “could bring them into the cross hairs of regulation.” ...

Administration Plans to Require Drug Companies to Include Prices in Ads

From The Hill
Drug companies would be required to list prices in advertisements under a Trump administration proposal released Monday. 
Under the new proposal, which was announced by Health and Human Services Secretary Alex Azar, drug manufacturers would need to state the list price of a 30-day supply of any drug that is covered through Medicare and Medicaid and costs at least $35 a month.

The plan is the boldest step the administration has taken to date as part of its efforts to bring down drug prices, and puts the administration squarely at odds with the powerful prescription drug lobby. 
"Patients deserve to know what a given drug will cost when they're being told about the benefits and risks it may have," Azar said during a speech Monday in Washington, D.C. 
"And they deserve to know when a drug company has pushed its prices to abusive levels, and they deserve to know this every time they see a drug advertised to them on TV."  
The proposal will be officially published Wednesday, and will be open for public comment for 60 days.  
According to HHS, the 10 most commonly advertised drugs have list prices ranging from $535 to $11,000 per month for a usual course of therapy. Under the proposal, companies would be required to post that information in clear, legible text onscreen at the end of the ad. 
HHS officials said the agency will publish a list of companies that don’t comply with the policy. Those companies would also be subject to potential litigation, officials said during a press call.  ... 
Full story here

ACA Regulations Watch: What to Expect This Fall

From Health Affairs:
The past few months have been relatively quiet for regulatory changes under the Affordable Care Act (ACA). Indeed, much of the attention has been focused on the courts as attorneys general, patient advocates, and others file lawsuits challenging, or defending, the ACA, and on Congress as members continue to debate protections for people with preexisting conditions ahead of the midterm elections. 
That could, however, change soon given the many ACA regulations currently pending at the Office of Information and Regulatory Affairs within the Office of Management and Budget (OMB) at the White House. This post highlights the regulations that are currently pending at OMB as well as those outlined in the recently released fall 2018 regulatory agenda. Although timing is never certain, the number of pending regulations sets up what is likely to be a very busy regulatory fall that coincides with the 45-day 2019 open enrollment period.

Is Your Severance Arrangement Subject to ERISA?

From: The Emplawyerologist:
Suppose your company, Wonderful World of Widgets, Inc., finds itself needing to lay off some employees. You are tasked with effectuating the terminations, making sure they go smoothly, including offering severance benefits. You read The EmpLAWyerologist’s previous posts on severance agreements (click here, here, here and here for review). You have taken those points to heart and even gone beyond that, offering a package that you believe will take care of your terminated employees. But wait. There may be more. Could the benefits you have offered be subject to ERISA? Let’s take a look — after the jump…

Before we get into the nitty-gritty, we need some definitions. First, what is ERISA? The acronym stands for the Employee Income Retirement Security Act. ERISA is a federal law, enacted on September 2, 1974 that establishes minimum standards for pension plans and sets forth extensive federal income tax rules for transactions associated with employee benefit plans. Its mission is to protect employee beneficiaries of pension and benefit plans. It includes disclosure and reporting requirements, standards of conduct for plan administrators (also known as fiduciaries) and to provide for appropriate remedies and access to federal courts.  Unlike many other federal laws, ERISA applies to all employers whether they have 1 employee or billions of employees.  
Now let’s discuss some terms that look and sound alike, but carry some significant differences. You already know that a severance agreement is the actual contract between the employer and the terminated employee that a) governs the post-termination relationship; and b) discusses the severance benefits that the employer has agreed to provide the former employee. A severance package is the entire set of benefits provided to the terminated employee(s). Severance  packages may include without limitation pay, stock options and medical/dental benefits to name a few things.
Full post here.

Thursday, October 25, 2018

Summary of the 2018 Employer Health Benefits Annual Survey

Each year, the Kaiser Family Foundation and the Health Research & Educational Trust conduct a survey to examine employer-sponsored health benefit trends. This document summarizes the main points of the 2018 survey and suggests how they could affect employers. 

Health Insurance Premiums

In 2018, the average premium rose 3 percent for single coverage and 5 percent for family coverage. The average premiums were $6,896 and $19,616, respectively.

However, premiums for high deductible health plans with a savings option (HDHP/SOs) were noticeably lower than the average premiums. HDHP/SOs annual premiums for single and family coverage were $6,495 and $18,602, respectively.

The premium for family coverage was, on average, lower at small employers (three to 199 employees) than at large employers—$18,739 compared to $19,972. Yet, premium costs varied widely across industry and regions in 2018. 
Worker Contributions

The average worker contribution toward the premium was 18 percent for single coverage and 29 percent for family coverage. Although, employees at organizations with a high percentage of lower-wage workers (where 35 percent make $25,000 or less annually) made above average contributions—24 percent and 42 percent of the premium for single coverage and family coverage, respectively.

In terms of dollar amounts, workers contributed $1,186 and $5,711 toward their premiums for single coverage and family coverage, respectively. Workers enrolled in HDHP/SOs contributed less on average, paying $1,074 for single coverage and $4,631 for family coverage. 

Plan Enrollment

The following were the most common plan types in 2018:
  • Preferred provider organizations (PPOs)—49 percent of workers covered 
  • HDHP/SOs—29 percent of workers covered 
  • Health maintenance organizations (HMOs)—16 percent of workers covered 
  • Point-of-service (POS) plans—6 percent of workers covered 
  • Indemnity plans—under 1 percent 
PPO enrollment has decreased by 8 percent over the last five years, and enrollment in HDHP/SOs has risen by 9 percent over the same period.
Employee Cost Sharing

Most workers must pay a share of their health care costs, and 85 percent had a general annual deductible for single coverage in 2018. Fifty-eight percent of workers had a deductible of $1,000 or more for single coverage. The average deductible for all workers was $1,350. The prevalence of HDHP/SOs has contributed to the increase of deductible amounts.

Even without a deductible, the vast majority of workers cover some portion of the costs from their in-network physician visits. For instance, 66 percent have a copayment for primary doctor visits and 24 percent have coinsurance.
Nearly all workers are covered by a plan with an out-of-pocket maximum (OOPM), but the costs vary considerably. Fourteen percent of workers with single coverage have an OOPM of less than $2,000, and 20 percent have an OOPM of $6,000 or more.

Availability of Employer-sponsored Coverage

Similar to the last few years, employers offer health benefits to at least some workers. Only 47 percent of very small employers (three to nine employees) offer benefits, while virtually every large employer (1,000 or more employees) offers coverage.

Health and Wellness Promotion Programs

Wellness programs help employees improve their lifestyles and avoid unhealthy habits. Small and large employers both offer wellness programs, with 53 percent of small employers and 82 percent of large employers offering at least one. Of these large employers, 35 percent offer participation incentives like gift cards or merchandise. Programs vary in topic and include subjects like smoking cessation, weight management and lifestyle coaching.


Over half of large employers have embraced telemedicine, with 74 percent offering health care services through this method. Of these employers, 39 percent offer financial incentives to receive health care services this way, opposed to an in-person physician visit.


Similar to the previous year, 13 percent of workers with small employers are elected in plans either partially or entirely self-funded, compared to 81 percent of workers with large employers. Despite conversations about insurers offering more self-funded plans to small employers, there has not been a noticeable increase in their enrollment.

In the past few years, level-funded plans have become more popular. Level-funded plans are health plans provided by insurers that include a nominally self-funded option for small or mid-sized employers that incorporates stop-loss insurance with relatively low attachment points. Of the employers with fewer than 200 workers, 6 percent reported that they had a level-funded plan, or nearly one-third of the respondents who said they had a self-funded plan. 


This year continues a period of a stable market, characterized by relatively low-cost growth for employer-sponsored coverage. While premium growth continues to exceed earnings and inflation increases, the differences are moderately small. Additionally, while there have been some changes in terms of employer-sponsored health benefits, no trends have gained significant traction. 

The recent trend of raising deductibles to offset premium increases is popular, but its growth has slowed. A reason for the slowed growth is that health benefits are a highly effective attraction and retention tool, especially in a strong economy and tight labor market, and employers want to recruit and retain top talent. 

Looking forward, employers should begin to identify tools and resources they can use to offset higher premium growth. As costs continue to rise, the individual mandate repeal takes effect and possible political changes ensue, employers and employees may begin to see increased market movement. 

Proposed Rule Would Expand Options for HRAs

IRS Issues Guidance on Tax Credit for Paid Family and Medical Leave

California Expands Sexual Harassment Training Law Again for 2019


On Sept. 30, 2018, California enacted a series of laws that strengthen the state’s protections against workplace harassment. Effective Jan. 1, 2019, these new laws:
  • Require employers with five or more employees in the state to provide sexual harassment prevention training to all employees; 
  • Expand and clarify employer liability for workplace harassment; and 
  • Prohibit employers from entering certain agreements related to sexual harassment and other unlawful acts in the workplace. 
Action Items:

All California employers should become familiar with the new laws. Those with five or more employees should review the new training requirements and monitor the California Department of Fair Employment and Housing’s (DFEH) website for training courses and additional guidance.


The California Fair Employment and Housing Act (FEHA) broadly prohibits workplace harassment. All employers in the state are prohibited from harassing individuals or allowing harassment based on any of the protected traits listed below. Employees, applicants, unpaid interns, unpaid volunteers and anyone providing services under a contract in the workplace are all protected under the law.

FEHA Protected Traits
Disability/medical condition
Genetic information
Marital status
Gender identity
National origin
Age (40 and older)
Gender expression
Military/veteran status
Sexual orientation

Under the FEHA, any employer, regardless of size, may be held liable for sexual harassment committed in its workplace, even if the harasser is not an employee. The FEHA also requires employers with 50 or more employees in the state to provide sexual harassment prevention training to all supervisory employees every two years.

Overview of Changes Effective Jan. 1, 2019

Effective Jan. 1, 2019, the FEHA is expanded as follows:
  • The current requirements for supervisor training on sexual harassment are expanded to employers with five or more employees. These employers must also provide one hour of sexual harassment training to all nonsupervisory employees. 
  • Employers may be held liable for workplace harassment that is based on any protected trait (not just sexual harassment) committed by nonemployees in the workplace. The rules on what an employee must prove in a harassment claim have also been clarified. 
  • Employers may not require an employee to sign any agreement that waives a claim or right for workplace discrimination or harassment, or that prevents disclosure of any information about unlawful acts in the workplace. 
California law has also been changed to prohibit confidentiality requirements in sexual harassment claim settlements and sex discrimination claim settlements.

New Training Requirements

Effective Jan. 1, 2019, every California employer with five or more employees must provide:
  • Each supervisory employee with at least two hours of sexual harassment training; and 
  • Each nonsupervisory employee with at least one hour of sexual harassment training. 
The appropriate training must be completed by each employee within six months of assuming his or her job. Each employee must receive the appropriate training once every two years. The deadline for initial compliance with these requirements is Jan. 1, 2020. Employers must provide the initial training after Jan. 1, 2019, in order to meet this deadline.   

As of Jan. 1, 2020, special requirements will apply for seasonal employees, temporary employees and any employees who are hired to work for less than six months. For these employees, employers must provide the required training within 30 calendar days after the employees’ hire dates or before the employees have worked 100 hours, whichever comes first.

The DFEH plans to develop two online training courses that employers may use to satisfy the training requirements. Employers should monitor the DFEH website for these courses and additional guidance.

Expanded Employer Liability for Workplace Harassment

The FEHA allows an employer to be held liable for acts of workplace sexual harassment committed by nonemployees under certain circumstances. Effective Jan. 1, 2019, employers may also be held liable for nonemployees’ acts of any type of unlawful workplace harassment. An employer may be held liable if:
  • A nonemployee commits harassment against any of the employers’ employees, applicants, unpaid interns, unpaid volunteers or people providing services pursuant to a contract in the workplace; 
  • The harassment is based on any FEHA-protected trait; 
  • The employer (or its agents or supervisors) knows or should have known of the conduct; and 
  • The employer fails to take immediate and appropriate corrective action. 
Prohibited Waivers and Confidentiality Agreements

An employer may not require an employee to sign either of the following in exchange for a raise or bonus, or as a condition of employment or continued employment:
  • A release of a claim or right against the employer for employment practices that violate the FEHA; or 
  • A non-disparagement agreement or other document that prevents the employee from disclosing information about unlawful or potentially unlawful acts in the workplace. 
These rules apply to agreements executed on or after Jan. 1, 2019.

These rules do not apply to agreements to settle claims involving unlawful acts in the workplace that have been filed by an employee either in court, with an administrative agency, in an alternative dispute resolution forum or through an employer’s internal complaint process. However, there are new restrictions on settlement agreements involving claims of:
  • Workplace sexual harassment; 
  • Employment discrimination based on sex; or 
  • Retaliation related to claims of sex discrimination or sexual harassment in the workplace. 
Effective Jan. 1, 2019, these settlement agreements may not include any provision that prevents the disclosure of factual information related to the underlying claim. Settlement agreements executed on or after Jan. 1, 2019, that violate this prohibition are void and unenforceable. The bill also prohibits courts from issuing any order or stipulation that restricts this type of disclosure in sex discrimination or sexual harassment cases.

However, settlements for sex discrimination or sexual harassment may shield the claimant’s identity and all facts that could lead to the discovery of his or her identity (including pleadings filed in court), as long as the claimant is the one who requests it (and as long as no government agencies or public officials are parties to the settlement agreement). In addition, settlement provisions may prevent parties from disclosing the amount paid for a claim settlement.  

Hardship Exemption Rules Gutted for 2018 Individual Mandate

On Sept. 12, 2018, the Centers for Medicare & Medicaid Services (CMS) provided guidance on claiming a hardship exemption from the individual mandate under the Affordable Care Act (ACA) for 2018. Individuals may claim a hardship exemption on their 2018 federal income tax return without:
  • Obtaining a hardship exemption certification from the Exchange; or 
  • Providing any explanation or documentation of the hardship. 
In past years, most individuals had to apply for the exemption and receive a certification from an Exchange to qualify.

This change applies to 2018 only. However, for all eligible years, individuals can still apply for hardship exemptions through the Exchange, and CMS will continue to process those as normal. No exemptions are required after 2018 because the individual mandate has been effectively repealed beginning in 2019. 

The IRS Issues Letter 5699 to Noncompliant Employers - Action Steps

Telemedicine Compliance Issues for Employers

PPACA 2019 Compliance Checklist

Wednesday, August 1, 2018

Beware of Sales Pitches for the New "Association Healthcare Plans" in California

Almost immediately after the new Trump Administration regulation on Association Healthcare Plans (AHPs) was released, a number of brokerages and advisors were out touting the new plans as a way employers can save money.  While this may be true in many states, the Republic of California is a different story.   

This is an excellent summary from Katrina Veldkamp at Boutwell Fay LLP
The DOL acknowledged that AHPs will be MEWAs and that states will retain their existing authority related to MEWA regulation and enforcement. Fully insured MEWAs are subject to state laws that regulate the maintenance of specific contribution and reserve levels. Self-insured MEWAs are subject to state law to the extent not inconsistent with ERISA. Since many states, including California, have substantially limited the establishment of MEWAs – particularly self-insured MEWAs – in order to avoid abuse, it is unclear whether the expanded availability on AHPs under the new regulations will even be feasible in some states. In fact, the California Insurance Commissioner made a statement on the day the AHP regulations were issued that California law prohibits the formation of any new MEWAs and cautioned against AHP fiscal insolvency and fraud. (Note: California prohibits new self-insured MEWAs but does not explicitly prohibit fully insured MEWAs; however, it is unclear whether a fully insured AHP would be able to form under current California law.)
Another hurdle for AHPs will be state mandates and definitions for small and large group insurance. AHPs remain subject to state and federal laws mandating the provision of certain benefits (other than essential health benefits). The DOL declined to rule on whether state laws that differ from the AHP rules regarding group size calculation would be upheld. For example, California’s definition of “small employer” for small group status has different criteria than the AHP regulations and does not reference working owners. Since the DOL specified that the AHP regulations do not modify existing state authority, it is not clear whether state laws would be superseded by the AHP regulations. 
The regulations also result in differing treatment of AHPs under various federal laws. For example, the DOL states in the preamble that size of an employer for purposes of determining applicability of the Mental Health Parity and Addiction Equity Act (“MHPAEA”) should be determined based on the aggregate number of employees of all employer members in an AHP. On the other hand, the number of employees for purposes of determining whether an employer member is an “applicable large employer” under the employer shared responsibility rules of Internal Revenue Code Section 4980H is based on each individual employer member.  This means that employers with 50 or more full time employees may be subject to tax if they are members of an AHP that does not provide minimum value coverage. The DOL declined to provide guidance on how COBRA would apply to an AHP and its employer members because COBRA is within the interpretive jurisdiction of the Treasury and IRS, but it intends to provide further guidance after consulting with the Treasury and IRS. 
AHPs will be subject to all applicable ERISA requirements, including fiduciary duties and reporting and disclosure, such as Form 5500 and M-1. 

Tuesday, July 31, 2018

Big Brother the Insurer - Health Insurers Are Vacuuming Up Alarmingly Private Details About You

Incredibly alarming trend in our industry expounded on by Marshall Allen at Pro Publica / NPR:
Without any public scrutiny, insurers and data brokers are predicting your health costs based on data about things like race, marital status, how much TV you watch, whether you pay your bills on time or even buy plus-size clothing. ... 
With little public scrutiny, the health insurance industry has joined forces with data brokers to vacuum up personal details about hundreds of millions of Americans, including, odds are, many readers of this story. The companies are tracking your race, education level, TV habits, marital status, net worth. They’re collecting what you post on social media, whether you’re behind on your bills, what you order online. Then they feed this information into complicated computer algorithms that spit out predictions about how much your health care could cost them.
Are you a woman who recently changed your name? You could be newly married and have a pricey pregnancy pending. Or maybe you’re stressed and anxious from a recent divorce. That, too, the computer models predict, may run up your medical bills.
Are you a woman who’s purchased plus-size clothing? You’re considered at risk of depression. Mental health care can be expensive.
Low-income and a minority? That means, the data brokers say, you are more likely to live in a dilapidated and dangerous neighborhood, increasing your health risks.  ...
The industry has a history of boosting profits by signing up healthy people and finding ways to avoid sick people — called “cherry-picking” and “lemon-dropping,” experts say. Among the classic examples: A company was accused of putting its enrollment office on the third floor of a building without an elevator, so only healthy patients could make the trek to sign up. Another tried to appeal to spry seniors by holding square dances. ... 
Robert Greenwald, faculty director of Harvard Law School’s Center for Health Law and Policy Innovation, said insurance companies still cherry-pick, but now they’re subtler. The center analyzes health insurance plans to see if they discriminate. He said insurers will do things like failing to include enough information about which drugs a plan covers — which pushes sick people who need specific medications elsewhere. Or they may change the things a plan covers, or how much a patient has to pay for a type of care, after a patient has enrolled. Or, Greenwald added, they might exclude or limit certain types of providers from their networks — like those who have skill caring for patients with HIV or hepatitis C. ...
The full story is absolutely worth your time to read. 

Monday, July 30, 2018

Why Insurers Are Not Fighting to Eliminate PPACA

No, insurers aren't fighting to eliminate PPACA, why would they? Big business loves big government.

House Passes Bill Greatly Expanding HSAs

From EBN
[The proposed legislation would allow for] dollar caps on first-dollar coverage for newly includable health services. [Those caps] would be $250 for an employee with individual coverage, and $500 for an employee with family coverage.

Other liberalizations under the measures include allowing employees to use HSA dollars for certain over-the-counter health-related items, including menstrual care products. Another provision would deem qualified “physical activity, fitness, and exercise” related services, including sports activities, as qualified medical expenses, allowing coverage for up to $500 of qualified sports and fitness expenses ($1,000 for family coverage).

The bill also would increase employee HSA contribution limits substantially — to $6,900 (from today’s $3,450) for individual coverage, and to $13,300 (from $6,900) for families. …  
If the measure ultimately becomes law, employers would have to opt to take advantage of the liberalized provisions; they would not otherwise be available to employees.
Full story here.  

'Medicare for All' Plan Would Cost Federal Government $32 Trillion

Not Even Doubling All Federal Individual and Corporate Incomes Taxes Would Fully Fund the Proposal

From Chad Reese at Mercatus:
A “Medicare for all” proposal would cost the federal government more than $32 trillion over the course of ten years. That’s according to a new study by Charles Blahous, Mercatus Center senior research strategist and former public trustee for Social Security and Medicare. 
Dr. Blahous analyzed the “Medicare for All Act” (M4A), legislation introduced by Senator Bernie Sanders (I-VT) last September, in an effort to determine how much such a proposal would cost the federal government. 
Here are the numbers:
  • M4A total cost over its first ten years: $32.6 trillion
  • Federal spending on healthcare by 2031: 12.7 percent of all economic activity in the United States
Other studies aimed at estimating the cost of providing Medicare-like coverage to all Americans had similar findings. 
  • A 2016 Center for Health and Economy (CHE) study of the same proposal estimated more than $27 trillion more in federal budget deficits
  • Kenneth Thorpe, a professor with Emory University, also estimated that the proposal would require nearly $25 trillion in federal financing
  • If you consider the same time frame and the same set of benefits, the estimates in these studies are similar to Dr. Blahous’s results
Financing such a massive cost increase would be extremely challenging. Even doubling all federal individual and corporate income tax collections would fall short of fully funding the plan. 
You can find the full study here.

Thursday, July 5, 2018

How Socialized Medicine Creates Dependence

From David Henderson:
"A few years ago, an acquaintance who moved here from Canada told me that under Canadian’s single-payer system, his wife was in a years-long queue to get her foot operated on. This was a big deal because one of his and his wife’s regular pleasures was to go walking together after dinner and her foot problem made that difficult. 
Once they arrived here, he got good health insurance from his employer and his wife quickly got the surgery. The surgery worked, and he and his wife started doing their evening walks again. And their out-of-pocket expense for the surgery, which cost a couple of thousand dollars, was a little over $200. 
All good news, right? That’s what I would have thought. Can you see what’s coming? His wife complained bitterly about the $200." 
Full story

Monday, June 25, 2018

DOL Finalizes Rule to Expand Associated Health Plans

On June 19, 2018, the Department of Labor (DOL) released a final rule that provides greater flexibility for small businesses to join together to form Association Health Plans (AHPs). The final rule largely, but not entirely, adopts the provisions of a proposed rule issued in January of this year. DOL received over 900 comments on the proposed rule. A summary of the final rule is below and more detail can be found in our Legislative Alert.

Health coverage through associations and similar groups has actually been in existence for years in the form of Multiple Employer Welfare Associations (MEWAs). Under existing rules, however, DOL and other regulatory agencies treated participating employers in these MEWAs as if each employer sponsored its own plan. Under the Affordable Care Act (ACA) this meant that many employer members of the MEWA would be treated as if they were in the small group market and subject to those rules for rating purposes as well as the requirement that small group market policies provide essential health benefits (EHBs). Under these rules, in order for an association plan to be considered a single large group plan with respect to its employer members, there were a number of requirements including: that self-employed individuals could not participate; a very strict community of interest standard; and operational as well as structural rules for the association sponsoring the plan. Prior DOL guidance referred to these entities sponsoring “plan level” MEWAs as “bona fide” employer groups or associations.

The final rule relaxes many of those requirements for AHPs and provides an additional mechanism for an association sponsored MEWA to be treated as a single large group plan. The community of interest standard was modified so that AHPs can be formed on the basis of either:

Employers being in the same trade/industry/line of business/profession or
Employers having the principal place of business in a single State, part of a State (such as a city or county) or in the same metropolitan area even if the metropolitan area includes more than one State.

Conceivably, under the final rule, a local chamber of commerce could sponsor an AHP for employers in a specific city.

Also AHPs will be open to the self-employed (working owners) if they meet certain hours worked requirements or have a level of income from self-employment that supports the cost of the individual’s coverage. The proposed rule would have allowed an AHP to simply accept the certification of the working owner that he/she met those qualifications. The final rule, however, deleted this provision and in its place offers flexibility while at the same time making it clear that AHP fiduciaries have a duty to reasonably determine and monitor that working owners meet the final rule’s conditions for coverage.

In another change from the proposed rule, the final rule requires that the group or association have at least one substantial business purpose unrelated to offering health coverage even if the primary purpose of the AHP was to provide such coverage. The proposed rule provided that the sole purpose of the AHP could be to provide such coverage. The final rule states that a business purpose includes promoting common business or economic interests of the members of the AHP. DOL also provided a safe harbor that “substantial business purpose is considered to exist if the group or association would be a viable entity in the absence of sponsoring an employee benefit plan.”

While not limited to small employers, the primary benefits of participating in an AHP are the ability to offer benefits under the ACA large group market rules and to avoid the small group market rating rules and EHB requirements. Large employers already have these advantages but could enjoy any increased buying power that an AHP might bring.

How AHPs do (or do not) develop will be determined by a number of factors. First, the final rule has non-discrimination requirements where an AHP cannot discriminate among employers for eligibility, benefits, or premiums based on the health status of the employer’s employees or their claims experience. This could present a challenge for insurers in underwriting AHP coverage. Second, nothing in the final rule affects the ability of States, under existing rules, to regulate AHPs as MEWAs. In the proposed rule DOL solicited public comments on whether to exempt self-insured MEWAs from certain State regulations but ultimately took no action in the final rule on limiting the regulatory power of the States. Significantly, many states have very strict rules on self-funded MEWAs that would severely limit or even prohibit the formation of self-funded AHPs. So, formation of self-insured AHPs may be limited. State regulation of fully-insured AHPs is more restricted (although States can still regulate the terms of the underlying insurance policies).

Our Legislative Alert contains more information on the final rule including: action steps, a summary of the requirements and conditions applicable to AHPs and an explanation of the final rule’s staggered applicability dates based on whether an AHP is a new or existing plan and whether the AHP is fully insured or self-insured.