In This Compliance Corner Issue:
CMS INTRODUCES PROCESS TO CONCLUDE ANNUAL LIMIT WAIVER APPLICATIONS AND PROVIDES WAIVER EXTENSION GUIDANCE
On June 17, 2011, the Centers for Medicare & Medicaid Services (CMS) introduced supplemental regulatory guidance regarding the annual limit waiver application process. Specifically, the guidance sets forth the waiver extension process for existing waiver recipients; describes the conclusion of the waiver program for new applicants; and revises the compliance requirements for applicants granted a waiver approval or electing a waiver extension. Importantly, the guidance states that elections for waiver extensions and applications for new waivers must be received by Sept. 22, 2011. Elections for waiver extensions and applications for new waivers received after that date will not be accepted. Plans or issuers that neither elect waiver extensions nor receive a waiver approval by this date must comply with the restricted annual limit requirements.
As background, health care reform generally prohibits group health plans and issuers from offering coverage from imposing lifetime or annual limits on the dollar value of “essential health benefits” but allows restricted annual limits with respect to essential health benefits for plan years beginning before Jan. 1, 2014. The waiver program is an application process permitted under health care reform whereby the secretary of Health and Human Services (HHS) is permitted to temporarily waive the restricted annual limits for limited benefit or mini-med plans if compliance would result in a significant decrease in access to benefits or a significant increase in premiums. For plan years beginning on or after Jan. 1, 2014, all group health plans may not impose annual dollar limits on essential health benefits.
The new guidance extends the duration of waivers that have been granted until Jan. 1, 2014, provided applicants comply with specific requirements. For instance, applicants must submit annual information about their plan, comply with specific recordkeeping requirements and ensure that their participants understand the limits of their coverage through certain disclosure requirements. HHS requires each waiver recipient to distribute an updated annual notice and has provided model language for this required disclosure in the new guidance. Significantly, to use different notice language from that provided in the model, waiver recipients must obtain written permission from the Center for Consumer Information and Insurance Oversight. Among other information, the model notice includes language informing participants that their coverage is subject to an annual dollar limit lower than what is allowed under the law, describes the dollar amount of the annual limit and plan benefits to which the limit applies, and discusses how the annual limit will affect participants who are hospitalized. Plans should be aware that HHS retains audit authority over waiver applicants, as well as applicants for waiver extensions, as a condition for obtaining a waiver.
Finally, as a supplement to the June 17, 2011, guidance, CMS also released technical instructions for the waiver extension and waiver application process designed to explain the process of applying for a waiver or waiver extension in detail, to anticipate and answer common questions, and to provide as much assistance as possible to health insurance issuers, employers and other potential applicants.
Sixth Circuit Holds That ERISA Plan Language Controls Life Insurance Beneficiary Determination
In Union Sec. Ins. Co. v. Blakely, 636 F.3d 275, (6th Cir. 2011), a decision involving the proper beneficiary of an ERISA self-insured life insurance policy, the Sixth Circuit held that since ERISA requires that the plan document take precedence, if the beneficiary can be identified through the plan document a court “need look no further.” In so ruling, the court reversed a lower court ruling.
In this case, there was not a designated beneficiary, and the decedent’s three children and the cohabitant – the purported fiancée of the decedent – all claimed to be the proper beneficiaries. The parties disagreed over whether the purported fiancée qualified as a domestic partner. In the absence of a named beneficiary, the policy distributed benefits in the following order: spouse, domestic partner, children, living parents and the decedent’s estate. After determining that the policy was an ERISA plan and finding no definition of “domestic partner” in the general definition section of the policy, the lower court looked to federal common law and then Ohio state law, finding that the purported fiancée was a domestic partner and the proper beneficiary under the policy.
The Sixth Circuit reversed the lower court ruling, based on language contained elsewhere in the plan discussing domestic partners, stating that “[w]hile courts do sometimes resort to federal common law to identify beneficiaries under ERISA plans, the text of the plan is the much preferred source.” Importantly, although the general definition section of the insurance policy did not define the term “domestic partner,” the court found that the policy, when “read as a whole,” did provide a definition. For example, to constitute a domestic partner, the plan required that there be a committed, mutually exclusive relationship of at least six months, that each partner be over age 18, and that the partners be financially interdependent and each have power of attorney for the other. Because the lower court had not applied this plan language, the case was remanded for further proceedings to determine whether the purported fiancée qualified as a domestic partner under the policy.
Plan administrators should keep in mind that for fully insured plans, specific state insurance law provisions may dictate the definition of “domestic partner,” or the insurer may otherwise place conditions on the coverage. On the other hand, generally ERISA self-insured plan sponsors should have flexibility regarding the definition of “domestic partner.”
EEOC PROPOSES TO EXTEND TITLE VII AND ADA RECORDKEEPING REQUIREMENTS TO GINA-COVERED EMPLOYERS
On June 2, 2011, the Equal Employment Opportunity Commission (EEOC) published a proposed rule that is designed to extend the recordkeeping requirements under Title VII of the Civil Rights Act and the Americans with Disabilities Act (ADA) to employers covered by Title II of the Genetic Information Nondiscrimination Act (GINA). Specifically, Title II of GINA, which generally covers employers with 15 or more employees, prohibits the use of genetic information in making employment decisions, restricts acquisition of genetic information by employers and other entities covered by Title II, strictly limits the disclosure of genetic information and prohibits retaliation against employees who complain about genetic discrimination.
The EEOC’s proposed rulemaking would not require employers to create any new documents, and does not impose any reporting requirements under GINA, although it does reserve the right to issue reporting regulations as necessary to accomplish the purposes of GINA. The proposed regulations, however, would extend the same record-retention requirements currently in place under Title VII and the ADA to GINA. As such, the EEOC’s proposal would require employers to expand their existing Title VII and ADA record-retention systems, policies and procedures to include records made relevant under GINA.
Currently, an employer subject to the existing Title VII and ADA recordkeeping requirements must retain, subject to any state laws imposing a longer retention period, all personnel or employment records made or kept by that employer for one year, and any records relevant to charges filed under Title VII or the ADA until final disposition of those matters. The proposed rule would require employers to also retain documents relevant to charges filed under GINA until final disposition of those charges.
The EEOC requested that comments be submitted on or before Aug. 1, 2011.
IRS ISSUES SPECIFICATIONS FOR FILING FORM 8955-SSA ELECTRONICALLY
Consistent with the announcement by the Internal Revenue Service (IRS) to start requiring filings of Form 8955-SSA, which is the Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, the IRS has now provided the specifications for filing the form electronically through the Filing Information Returns Electronically (FIRE) System. For plan years beginning on or after Jan. 1, 2009, the IRS had previously designated Form 8955-SSA as the proper form to use to satisfy this annual registration requirement, with Aug. 1, 2011, as the earliest filing due date for the 2009 and 2010 plan years. Prior to the release of the new electronic filing specifications, the IRS had announced the development of a voluntary electronic filing system for the 2009 and later plan years. The new electronic specifications are now contained in Rev Proc 2011-31, and must be used to prepare current and prior year forms filed beginning Jan. 1, 2011, and received by FIRE by Dec. 31, 2011.
A final version of Form 8955-SSA has not yet been published, although a draft version of the 2009 plan year form is available.
HHS Issues Proposed Rule to Modify HIPAA Privacy Rule
The U.S. Department of Health and Human Services (HHS) has proposed changes to the existing HIPAA Privacy Rule. The proposed rule, which is available for public comment until Aug. 1, 2011, adds a new right, which allows individuals to access a report detailing who has electronically accessed their protected health information (PHI) and makes revisions to the existing right to an accounting of disclosures.
The rule separates the existing HIPAA privacy standard into two parts: the right to an accounting and the new right to an “access report.” The right to an access report would provide information on who has accessed electronic PHI in a designated record set (including access for purposes of treatment, payment and health care operations). The intent of the access report is to allow individuals to learn if specific persons have accessed their electronic designated record set.
On the other hand, the proposed changes to the right to an accounting would, among other modifications,
The proposed rule notes that the modifications to the accounting right would become effective 240 days after publication of final regulations, while the access report requirement would become effective Jan. 1, 2013, for electronic designated record set systems acquired after Jan. 1, 2009, and Jan. 1, 2014, for systems acquired before 2009.
On June 9, 2011, Alabama joined the growing number of states making it mandatory for employers to use E-Verify, the federal government’s Internet-based system for checking the work authorization status of employees. The legislation, HB 56, is known as the Beason-Hammon Alabama Taxpayer and Citizen Protection Act. The language found in the act is similar to certain provisions found in the Arizona statute that the U.S. Supreme Court upheld May 26 in Chamber of Commerce v. Whiting, featured in the June 7, 2011, Compliance Corner. However, the Alabama law goes even further by requiring public schools to verify the immigration status of students and parents, preventing illegal immigrants from attending the state’s colleges and universities, and prohibiting the rental of housing to illegal immigrants. Due to the attention this topic has received at both the federal and state levels, employers need to be aware of the laws in their state when hiring new personnel. This provision will become effective on Jan. 1, 2012, and by April 1, 2012, every Alabama business entity or employer must enroll in E-Verify and confirm the employment eligibility of their employees using the E-Verify criteria.
On May 20, 2011, the Arizona Department of Insurance issued Regulatory Bulletin 2011-03, which is directed to all Arizona-licensed insurance producers and relates to license renewal fees. The purpose of the bulletin is to remind all Arizona-licensed insurance producers that they can renew their licenses up to 90 days prior to expiration and that licenses must be renewed by or before midnight of the expiration date. For an individual, a license expires on the last day of the licensee’s birth month in the fourth year of the license. For a business entity, the license expires every four years on the last day of the month in which the license was issued. The bulletin emphasizes that there are no extensions or grace periods for licenses that expire on a Saturday, Sunday or holiday. The bulletin also provides information on how to renew producer licenses.
On June 1, 2011, Governor Hickenlooper signed into law SB 200, also known as the Colorado Health Benefits Exchange Act. The new law creates the Colorado Health Benefits Exchange, as well as a board responsible for designing, developing, governing and operating the exchange. As background, PPACA requires states to establish or join a state or regional insurance exchange by 2014. If a state fails to do so, the federal government will set up the exchange(s) in the state. According to PPACA, a state exchange is meant to create a marketplace for buyers of health insurance, thus giving individuals a choice for health coverage. The initial target population for an exchange will be people who purchase individual plans, as well as small businesses with up to 100 employees. In the future, exchanges may be expanded to larger employers. While states are at different stages of establishing exchanges, many states have begun to enact legislation to either study and evaluate and/or establish such exchanges. The passage of SB 200 signals Colorado’s intent to implement its own state exchange.
On June 4, 2011, Connecticut became the first state to mandate that employers provide paid sick leave to employees. Public Act 11-52 requires certain employers to provide five paid sick days per year to service workers. The legislation also includes an anti-retaliation provision, which makes it unlawful for any covered employer to discriminate or otherwise take any retaliatory action against an employee for requesting or using paid sick leave. This provision applies whether the employee is attempting to use sick leave provided by the act or provided within an employer policy, and if the employee makes a complaint to the labor commissioner alleging a violation of PA 11-52. The act is effective Jan. 1, 2012.
On June 9, 2011, Governor Abercrombie signed into law HB 1089, which brings Hawaii state taxation laws into conformance with the federal Internal Revenue Code (IRC) as of Dec. 31, 2010. As background, Hawaii, unlike some states, does not automatically adopt the current version of the federal IRC. The Hawaii legislature periodically updates the Hawaiian statutory definition of the federal IRC to include any federal provisions that may have become effective in prior years. Specifically of interest to employers sponsoring group health plans is the PPACA requirement to provide coverage for adult children up to age 26 and the potential tax implications relating thereto when the state tax law does not mirror the federal IRC. As a result of HB 1089, Hawaii state law now provides that such adult dependent coverage is excludable for Hawaii state income tax purposes.
On June 3, 2011, the Massachusetts Division of Insurance issued Bulletin 2011–12. The bulletin is issued to all licensed insurance producers in Massachusetts, and notifies resident insurance producers of the division’s review of their compliance with the state’s continuing education (CE) requirements and the division’s implementation of a compliance program for those producers who are deficient in CE credits. As background, Massachusetts law requires licensed resident insurance producers to complete a minimum of 60 hours of instruction during the first 36-month period following the date of their original licensure, and 45 hours of instruction for each 36-month period thereafter. The bulletin outlines the division’s CE compliance program, including penalties for noncompliance. According to the bulletin, insurance producers have until Dec. 31, 2011, to come into compliance with any outstanding CE requirements.
On June 9, 2011, Governor Lynch signed into law HB 647. The new law provides that if an employee has given an employer written authorization, the employer may deduct amounts from wages for any purposes to which they have mutually agreed. The law specifically provides that the deductions may not grant the employer a financial advantage or offset the cost of general business items incurred by the employee during the ordinary course of business operations. HB 647 is effective Aug. 6, 2011.
On May 19, 2011, the governor signed into law HB 2828. The new law prohibits employers from ceasing to provide health, disability, life or other insurance during the period an employee is serving or is scheduled to serve as a juror, if the employee previously notified the employer of an election to have such insurance coverage continue. The law also describes the employer’s rights and responsibilities with respect to the cost of providing such coverage while the employee is serving as a juror. In addition, according to the new law, an employer commits an unlawful employment practice if the employer discharges, threatens to discharge, intimidates or coerces an employee in connection with the employee’s service or scheduled service as a juror. HB 2828 applies to employers who employ 10 or more persons, and is effective Jan. 1, 2012.
What is an employee assistance program, and is it subject to ERISA or COBRA?
An employee assistance program (EAP) is an employer-sponsored program typically offered in conjunction with the employer’s group health insurance plan. EAPs are usually intended to assist employees in dealing with personal problems that may adversely impact their work performance, well-being and health. EAPs generally include some sort of assessment, short-term counseling and referral services for employees and their dependents. The personal issues for which EAPs provide support vary greatly, depending on the design of the employer. Examples of personal issues include substance abuse, emotional distress, major life events (including births, accidents and deaths), health care concerns, safe working environment anxieties, financial and legal troubles, work relationship worries and family or personal relationship problems. Also, the structure of an EAP may vary, but typically the EAP is either staffed by the employer internally or through a third-party vendor. EAPs are meant to lower medical costs, reduce employee turnover and absenteeism, and raise employee productivity.
Whether an EAP is subject to ERISA and COBRA depends on the structure of the EAP and the type of benefits provided through it. To the extent that the EAP offers one or more ERISA benefits, the EAP will be subject to ERISA. In addition, an EAP that provides medical benefits will also be subject to ERISA. There are several U.S. Department of Labor (DOL) advisory letters addressing the issue, but the general guidance concludes that if an employer-sponsored EAP is staffed (internally or through an EAP service provider) by trained professionals who provide any form of counseling, the EAP is most likely subject to ERISA as an arrangement providing medical benefits. See DOL Advisory Opinions 88-04A and 83-35A. The only exception provided by the DOL appears to be for a narrow class of EAPs providing general information about referrals and not staffed by trained counselors. In that case, the EAP may not be subject to ERISA. Lastly, if an EAP provides medical care, then it is likely a group health plan subject to COBRA.
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