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  1. Congress and agencies issued various relief and rules in response to the COVID-19 pandemic:
  • The Families First Coronavirus Response Act temporarily requires group health plans to cover COVID-19 testing and related services without cost-sharing.
  • The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requires coverage of COVID-19 vaccines without cost-sharing and temporarily allows high deductible health plans to cover telehealth services without a deductible, while permanently expanding the list of reimbursable items from HSAs, FSAs, Archer MSAs, and HRAs to include menstrual care products and over-the-counter drugs without a prescription.
  • The Consolidated Appropriations Act, 2021 provides additional flexibility for using FSAs in 2021 and 2022. See our article for additional information on this act, which includes provisions in response to surprise billing by out-of-network providers.
  • The IRS and DOL granted relief to plans and participants through sub-regulatory guidance. For example, cafeteria plan sponsors received additional flexibility for mid-year election changes and permitted plans to give participants greater access to unspent funds in health and dependent care FSAs through 2020 (later expanded in the Consolidated Appropriates Act, 2021), and the carryover maximum for health FSAs was increased to $550. Claim and appeal, COBRA, and HIPAA special mid-year enrollment deadlines were extended, as well as deadlines for the provision of certain disclosures required under ERISA. A temporary exemption was also issued, permitting large plans to offer telehealth services to otherwise ineligible employees and their families.
  1. In 2017, Congress eliminated the individual mandate penalty of the Affordable Care Act (ACA), leading a federal district court to find the entire ACA unconstitutional. The Fifth Circuit ruled the case required further analysis by the district court before the case was then appealed to the Supreme Court, which heard oral arguments in November 2020.
  2. Pharmacy Benefit Managers (PBMs) are the intermediaries between health plans and pharmacies who establish the amount pharmacies are reimbursed for drugs dispensed to plan participants, and the amount plans pay for drugs. A majority of states regulate the amounts PBMs pay for drugs. In December 2020, the U.S. Supreme Court upheld an Arkansas law regulating PBM drug pricing, holding it was not preempted by ERISA.1
  3. In its June 2020 opinion, Bostock v. Clayton County,2 the U.S. Supreme Court held that employment discrimination on the basis of an employee’s gender identity or sexuality is sex-based discrimination prohibited by Title VII. Courts have held that benefits plans (including multiemployer health plans3) are subject to Title VII, meaning Bostock could impact plan designs that involve gender identity or sexuality. For example, it may add weight to several lawsuits in recent years which had success challenging health plan exclusions for gender transition services.4
  4. In June 2020, HHS finalized regulations on the ACA § 1557 rule against discrimination in certain health programs. These regulations narrow the original 2016 regulations, for example, by limiting protections against sex discrimination and removing requirements to include multi-lingual taglines on certain documents. After the Supreme Court’s Bostock ruling, federal district courts5 have preliminarily blocked the portions of HHS’s new regulation which remove protections for gender identity and sex stereotyping discrimination. Litigation on these points is ongoing, but other aspects of the rule, such as removing taglines,6 have taken effect.
  5. In a private letter ruling, the IRS ruled an employer can permit employees to choose a contribution to a defined contribution retirement plan or an HRA. The contribution amount was fixed by a collective bargaining agreement, and employees had to make an irrevocable election before the beginning of each year.
  6. HHS, the Department of Treasury, and the DOL (the Departments) proposed and finalized changes to their “Self-Compliance Tool” designed to assist plans in complying with the Mental Health Parity and Addiction Equity Act (MHPAEA). The changes mainly provide more examples of parity violations and of plan designs which may signal violations. The Consolidated Appropriations Act, 2021 (discussed in our separate article) also adds self-evaluation and reporting requirements under the MHPAEA.
  7. Participants continue to file lawsuits challenging coverage restrictions on residential treatment centers and wilderness therapy under the MHPAEA, arguing that plans give less favorable treatment to such facilities than for skilled nursing facilities (which courts tend to view as the analogue for medical services).7 The success of such challenges tends to depend on the circumstances of the case, and so the outcomes are mixed.
  8. The Departments finalized regulations requiring most non-grandfathered health plans and insurers to provide greater transparency surrounding healthcare costs. The regulations require disclosure of pricing information for plan years beginning on or after January 1, 2022, and that certain cost-sharing information be provided to participants upon request for plan years beginning on or after January 1, 2023. As described in our separate article, the Consolidated Appropriations Act, 2021 also added provisions requiring increased disclosure and transparency, including for pharmacy benefits and drug costs.
  9. HHS continues to assess penalties for HIPAA violations, including a $6+ million settlement with Premera for data breaches resulting from a 2014 cyberattack. (Premera previously paid $74 million to settle a class action for the same breaches.) Common penalty triggers also included failure to timely give individuals access to their health information, failure to encrypt laptops and smartphones, and inadequate policies and procedures.
  10. The Tenth Circuit upheld a health plan’s denial of coverage of surrogacy expenses, concluding the plan’s exclusion was unambiguous.8
  11. Two federal circuit court decisions reached opposite conclusions on whether plan cost-containment provisions applicable to dialysis might violate the Medicare Secondary Payor (MSP) rules, based on evidence that they disproportionately impact participants with end-stage renal disease (ESRD). The Sixth Circuit held such a “disparate impact” claim may be cognizable;9 however, a subsequent Ninth Circuit decision disagreed,10 holding—like a pair of 2019 district court decisions11—that the MSP rules only prohibit express differentiation based on the existence of ESRD or the need for renal dialysis. A separate issue in these cases is whether the providers have a right of action under the MSP statute against health plans for an alleged violation of the MSP rules.12
  12. A federal district court ordered an insurer to reprocess 67,000 mental health and substance use disorder claims following its 2019 ruling that the insurer had breached its fiduciary duties by implementing medical necessity standards which were overly restrictive and inconsistent with generally accepted standards of behavioral health care.13 The court also awarded injunctive relief governing the criteria the insurer must apply to behavioral health coverage determinations for up to the next ten years.
  13. A federal district court ruled a plan may be able to obtain relief for a claim that a third-party administrator breached its fiduciary duties with a delay in processing health claims that allegedly caused a loss of over $800,000 in stop-loss insurance payments. Recognizing that claims processing may be considered a “ministerial,” non-fiduciary task, the court has tentatively allowed the fiduciary breach claim to proceed in the “extraordinary and urgent circumstances” presented by the timing issues that can make or break claims under such stop-loss policies.14
  14. A Second Circuit case provided a reminder that ERISA liability can “transcend the plan” when plan participants are misled, even if by its third-party service provider. A Verizon employee contacted Aon Hewitt, which had been hired to perform participant communications and administration services. The employee was told that her life insurance benefit would be over 50 times higher than what the terms of the plan provided, and there was evidence that the employee and her beneficiary relied on this representation. The Second Circuit held that while the plaintiff was not entitled to relief under the terms of the plan, she had stated an actionable claim for fiduciary breach and could potentially recover the full amount represented by Aon Hewitt under equitable doctrines. The court found that Verizon itself could potentially be liable for the misrepresentation of its agent.15
  15. Under long-standing DOL guidance, a multiple employer welfare arrangement (MEWA) will be considered a single plan for ERISA and ACA purposes only if its participating employers constitute a “bona fide group or association” with a shared “commonality of interest” beyond just the provision of benefits. DOL regulations issued in 2018 would have greatly relaxed these rules to permit single plan treatment of any “association health plan,”16 but a federal district court struck down key aspects of this rule17—an issue now on appeal before the D.C. Circuit.

    Separately, a federal district court decision18 has suggested a potential alternative method of obtaining single plan treatment involving a partnership model where individuals characterized as “limited partners”19 were given the option to purchase health insurance coverage through the partnership. Although the DOL had opined that health insurance provided through the partnership arrangement would not constitute a single ERISA plan (largely because it didn’t consider the individuals bona fide partners with self-employment income), the court disagreed, finding the plan met the definition of a single-employer welfare plan under ERISA. This case is on appeal.

  1. Grandfathered health plans are exempt from certain ACA mandates, such as the requirement to cover preventive care at 100%. In order to maintain grandfathered status, however, strict limitations must be met regarding changes to plan benefits, cost-sharing requirements and contribution rates. A change to the grandfathered plan regulations issued in December 2020 provides some flexibility, permitting plans to make some changes to participant cost sharing but still maintain their grandfathered health plan status.
  2. The DOL updated its model COBRA general and election notices which plan administrators may use to notify plan participants and beneficiaries of their rights under COBRA and qualified beneficiaries of their rights to elect COBRA.
  3. Dozens of class actions suits were filed claiming COBRA notices differing from the U.S. Department of Labor “model notice” were deficient because they violated a variety of legal requirements, such as: not being “calculated to be understood by the average plan participant”; not properly explaining how to enroll in COBRA; not including an election form for the employee or family member to fill out (as the model notice does); and allegedly intimidating participants by including “ominous” warnings of the consequences of failing to provide accurate information. Many of the cases have been settled or voluntarily dismissed.20
  4. The Patient Centered Outcomes Research Institute (PCORI) fee increased from $2.54 to $2.66 per covered life for plan years ending after September 2020 and before October 2021. Payments are due by July 31, 2021.
  5. For 2021, the PPACA out-of-pocket maximumson in-network benefits cannot exceed $8,550 per person and $17,100 per family.
  6. For 2021, the annual dollar limit on employee contributions to health Flexible Spending Accounts (FSAs) remains $2,750. The limit on Health Savings Account (HSA) contributions for self-only coverage is increased from $3,550 to $3,600, and the limit for family coverage is increased from $7,100 to $7,200. The age 55+ HSA catch-up limit remains at $1,000.

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

Not intended as legal advice.

  1. Rutledge v. Pharmaceutical Care Management Association, 141 S. Ct. 474 (2020).
  2. Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020).
  3. Jimenez v. Laborer’s Welfare Fund, No. 18-CV-07886, 2020 WL 5979653 (N.D. Ill. Oct. 8, 2020).
  4. However, a recent district court decision illustrates how additional layers of analysis—in that case, application of the Religious Freedom Restoration Act—may limit or provide exceptions to arguments that Title VII and other civil rights laws require coverage of gender transition services. See Religious Sisters of Mercy v. Azar, No. 3:16-CV-00386, 2021 WL 191009 (D.N.D. Jan. 19, 2021).
  5. Whitman-Walker Clinic, Inc. v. HHS, No. CV 20-1630 (JEB), 2020 WL 5232076 (D.D.C. Sept. 2, 2020), appeal filed; Walker v. Azar, No. 20CV2834FBSMG, 2020 WL 4749859 (E.D.N.Y. Aug. 17, 2020).
  6. Note, however, that certain taglines and language assistance may still sometimes be required in SPDs, SBCs, and in claim denials.
  7. Denise M. v. Cigna Health, No. 2:19-CV-764-JNP-DAO, 2020 WL 5732321 (D. Utah Sept. 24, 2020); M.N. v. United Healthcare Ins., No. 218CV00710DBBCMR, 2020 WL 1644199 (D. Utah Apr. 2, 2020); Daniel R. v. UMR, No. 2:19-CV-00069, 2020 WL 1188144 (D. Utah Mar. 12, 2020); Julie L. v. Excellus Health Plan, Inc., 447 F. Supp. 3d 38 (W.D.N.Y. 2020).
  8. Moon v. Tall Tree Administrators, LLC, 814 F. App’x 371 (10th Cir. 2020).
  9. DaVita, Inc. v. Marietta Memorial Hospital Employee Health Benefit Plan, 978 F.3d 326 (6th Cir. 2020).
  10. DaVita, Inc. v. Amy’s Kitchen, 981 F.3d 664 (9th Cir. 2020).
  11. See, e.g., Dialysis of Des Moines, LLC v. Smithfield Foods Healthcare Plan, No. 2:18CV653, 2019 WL 8892581 (E.D. Va. Aug. 5, 2019); DaVita, Inc. v. Amy’s Kitchen, Inc., 379 F. Supp. 3d 960 (N.D. Cal. 2019).
  12. The prevailing view in these cases thus had been that providers have no standing to sue health plans on this basis; however, a recent Ninth Circuit case, DaVita, Inc. v. Virginia Mason Memorial Hospital, 981 F.3d 679 (9th Cir. 2020), held otherwise.
  13. Wit v. United Behavioral Health, No. 14-CV-02346-JCS, 2020 WL 6479273 (N.D. Cal. Nov. 3, 2020).
  14. Technibilt Group Insurance Plan v. Blue Cross & Blue Shield of North Carolina, 438 F. Supp. 3d 599 (W.D.N.C. 2020).
  15. Sullivan-Mestecky v. Verizon Communications, Inc., 961 F.3d 91 (2nd Cir. 2020).
  16. A primary purpose was to allow small employers to be able to purchase through the AHP health insurance subject to the “large group market” ACA rules, which are less stringent in several key respects than the individual or small group market rules that would otherwise apply.
  17. New York v. U.S. Dep’t of Labor, 363 F. Supp. 3d 109 (D.D.C. 2019).
  18. Data Marketing Partnership, LP v. U.S. Dep’t of Labor, 4:19-cv-00800-O, 2020 WL 5759966 (N.D. Tex. Sept. 28, 2020), appeal filed.
  19. The partnership was in the business of producing and selling electronic data and the “limited partners” had simply agreed to install and allow access to software that would capture and transmit data concerning their electronics usage.
  20. E.g., Carter v. Southwest Airlines Co., No. 8:20-CV-1381-T-02JSS, 2020 WL 7334504 (M.D. Fla. Dec. 14, 2020).