LEGAL DEVELOPMENTS IMPACTING HEALTH AND WELFARE PLANS 2018 YEAR-END UPDATE

1. The 2017 tax reform legislation eliminated the individual mandate penalty under the Affordable Care Act (ACA) for when an individual does not maintain health coverage.  Thereafter, several states sued the federal government, alleging that this change made the ACA unconstitutional, and the federal district court for the Northern District of Texas agreed in a December 2018 ruling.¹ The court relied on the Supreme Court’s 2012 decision on the ACA to conclude that without a penalty, the individual mandate is unconstitutional, which, because the ACA cannot exist without the individual mandate, made the ACA invalid.  The states defending the ACA have appealed the case to the Fifth Circuit Court of Appeals, and the district court’s ruling is stayed during the appeal, meaning the ACA remains in place for now. 

2. In October 2018, the IRS, DOL and HHS (the Departments) issued proposed regulations that would expand the usability of Health Reimbursement Arrangements (HRAs) by permitting HRAs to be integrated with individual health insurance coverage.  These would permit certain employers to fund employees’ purchases of Exchange health insurance.  However, the IRS also identified remaining issues to be addressed: the interactions this potential change would have with the play-or-pay rules and premium tax credit, and the possible need to modify nondiscrimination testing rules.

3. The ACA mandates contraception coverage, but certain religious entities are exempt and others are eligible for religious “accommodation” that shifts responsibility to insurers and third-party administrators.  On November 15, 2018, the Departments published two final rules expanding these exceptions to make contraception coverage optional for most entities claiming a religious objection and for most entities (except for publicly-traded companies) claiming an incompatible moral conviction.  These expansions were to become effective January 14, 2019, but a federal district court has temporarily blocked them.²

4. The DOL issued regulations making it easier for small employers to join together and offer association health plans.  The practical effect of these new rules is unknown, as states may still regulate these arrangements if consistent with ERISA.  In addition, several states are suing the DOL over the new regulations, claiming they are unlawful and exceed the DOL’s authority.  

5. In 2015, Anthem revealed that the personal information of nearly 80 million individuals was stolen in a cyberattack.  Affected individuals brought a class-action lawsuit against Anthem.  Because they had no private right of action under HIPAA, they sued on a variety of other claims, such as breach of contract and violation of state privacy and consumer protection laws. Anthem settled the lawsuit for $115 million and agreed to increase its cybersecurity spending and adopt protections recommended by the plaintiffs’ cybersecurity experts. According to the parties in that case, this is the largest settlement to result from a U.S. class action over a privacy breach.³

6. The Departments released proposed guidance identifying plan features (such as medical necessity or experimental exclusions) that, if used in a way that favors medical or surgical benefits over substance abuse or mental health benefits, could violate the non-quantitative treatment limitation (NQTL) rules of the Mental Health Parity and Addictions Equity Act (Parity Act).  Parity Act litigation has focused on NQTLs, such as exclusions for residential treatment centers, exclusions for wilderness treatment programs and limitations on counseling for eating disorders, and courts so far have generally favored participants’ arguments on these issues.⁴

7. Overturning its prior position, the Fifth Circuit Court of Appeals held that a plan administrator’s factual determinations are not entitled to a deferential standard of review unless plan terms give the administrator discretion to determine eligibility for benefits and interpret the plan. The Fifth Circuit is now aligned with every other circuit court to address the issue.⁵

8. Many health plans do not pay non-network provider fees that the plan classifies as above the reasonable and customary amount, which can expose patients to providers who balance bill for the difference.  Some states require non-network health providers and insurers to arbitrate the difference so as to avoid balance billing the patient.  A recent New Jersey law permits uninsured plans to opt into that arbitration system.  Other states are considering similar laws, and a bipartisan bill with the goal of eliminating balance billing was circulated in the Senate.

9. The high cost of air ambulance services received more press in 2018, primarily because of the balance billing practices of non-network air ambulance services.  Federal law (the 1978 Airline Deregulation Act) limits states’ ability to regulate air fares, so even for fully insured health plans, only federal law can modify air ambulance charges.

10. A federal district court rejected an employee’s state law claims against his employer’s Long Term Disability (LTD) insurance policy, holding the policy was governed by ERISA.  An insurance policy is subject to state law (and not ERISA) only if certain safe-harbor criteria are satisfied, including that the employer not endorse the policy. In that case, the Summary Plan Description (SPD) was prepared by the insurance company at the employer’s request and listed the employer as the plan sponsor, administrator, and agent for service of process.  The court held this showed the employer endorsed the policy and so did not satisfy the safe harbor.⁶

11. The Supreme Court expanded its 2015 decision that inferences alone cannot create lifetime vested health benefits under a collective bargaining agreement (CBA), or any other contract.⁷  This year, the Supreme Court repeated that unless the CBA promises continued coverage in the CBA, health coverage ends when the agreement expires, and that it is generally improper to look outside the agreement for indications of a promise to provide such lifetime, vested benefits absent some language to that effect in the CBA.  Soon after, the Sixth Circuit concluded a retiree lawsuit was unlikely to succeed in proving that health benefit rights continued after their CBA expired.⁸

12. Healthcare providers frequently obtain written assignments from patients assigning providers the right to pursue claims for benefits against (including filing suit against) the patient’s health plan.  The Third Circuit Court of Appeals has joined several other circuits in holding that such assignments are ineffective as to ERISA plans that contain anti-assignment language.⁹  With such anti-assignment language, only patients and their representatives may sue the plan for benefits.

13. The Patient Centered Outcomes Research Institute (PCORI) fee increased to $2.45 per covered life for plan years ending after September 2018 and before October 2019. The next PCORI fee must be paid by July 31, 2019.

14. For 2019, the annual dollar limit on employee contributions to a health FSA will increase from $2,650 to $2,700. The limit on HSA contributions for self-only coverage will increase from $3,450 to $3,500 and the limit for family coverage will increase from $6,900 to $7,000. The age 55+ catch-up contribution limit remains at $1,00.

From all of us here at MMPL, your employee benefits law firm.

Not intended as legal advice.