LEGAL DEVELOPMENTS IMPACTING HEALTH AND WELFARE PLANS 2017 YEAR-END UPDATE

2018-05-17T00:36:23+00:00 February 2018|
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  1. The Tax Cuts and Jobs Act was signed into law in December 2017. The Act eliminated the individual mandate of the Affordable Care Act (ACA) beginning in 2019. And so individuals will no longer owe a tax penalty for failure to have health coverage.  Also under the Act, employers can no longer deduct commuting and transportation benefits (e.g., parking, bus and train passes), but employees may continue to exclude them from income.  And employees cannot exclude bicycle commuting benefits from income for tax years 2018 through 2025, but employers may deduct them.
  1. The IRS updated its guidance on the employer shared responsibility (a.k.a. play-or-pay) requirements and employer reporting of offers of coverage, and has begun issuing preliminary play-or-pay assessments against Applicable Large Employers. Guidance was also issued regarding employer information reporting via Forms 1094-C and 1095-C, and the IRS has extended the deadline for furnishing the 2017 Forms 1095-B and 1095-C to individuals from January 31, 2018 to March 2, 2018 but did not extend the filing deadline. The IRS also extended its transition relief for incorrect or incomplete information returns, so that reporting entities need only show they made a good-faith effort to comply with the information reporting requirements.
  1. In December 2016, the DOL updated the ERISA claims procedure regulations for disability benefits to include many of the same requirements the ACA imposes on claims for group health plan benefits. Following a delay and a second review, the procedures are now effective for claims filed on or after April 1, 2018.
  1. Pursuant to the 21st Century Cures Act passed at the end of 2016, in 2017 the Departments (the DOL, HHS, and Treasury) issued FAQs clarifying that an eating disorder diagnosis is a mental health diagnosis, and so eating disorder benefits are considered “mental health benefits” that are protected under the Mental Health Parity and Addictions Equity Act. The Departments also requested public comment on ways that participant requests for information on a plan’s coverage of mental health and substance abuse benefits could be standardized and simplified, including through the use of a proposed model form.
  1. In several instances, HHS imposed multimillion-dollar penalties for HIPAA privacy and security breaches. For example, one company paid $2.5 million after the theft of an employee’s laptop, which contained health information for nearly 1,400 people. HHS noted the company had not adopted any HIPAA policies or procedures to protect health information stored on mobile devices.
  1. To resolve a fiduciary breach lawsuit, a third-party administrator agreed to pay over $16 million in fees and penalties, in addition to issuing certain disclosures and modifying its fee practices. In the lawsuit, the DOL had alleged that in addition to charging a monthly per-capita fee for its services, the administrator also charged but failed to disclose an ancillary “Network Management Fee” that was bundled together with provider charges and passed on to health plans and their members.1
  1. The District Court for the District of Columbia directed the EEOC to revisit its regulations limiting the incentives that can be offered in employer wellness programs. Although initially the court declined to vacate the regulations, it reversed course in December 2017 after the EEOC announced new regulations would not be applicable until at least 2021. Finding the delay unacceptable, the court vacated the portion of the regulations on incentive limits, effective January 1, 2019.2
  1. A district court permitted an employee to bring Americans with Disability Act (ADA) claims of discrimination and retaliation against her employer, which she alleged modified its health plan to specifically exclude ABA therapy as a result of her son’s disability. Just before modifying the plan, the employer had denied the employee’s claim for coverage and provided inconsistent bases for the denial. The court found that these inconsistent bases undermined the employer’s argument that the new ABA therapy exclusion was meant to embody and clarify the SPD’s existing terms, and so allowed the employee’s claim to go forward.3
  1. The Eighth Circuit Court of Appeals affirmed the dismissal of claims of sex discrimination in the workplace arising from the employer’s health plan’s denial of coverage of medical treatment for a beneficiary’s gender dysphoria, but allowed ACA discrimination claims related to the denial to proceed for a later determination.4
  1. A district court noted that a short term disability plan properly denied benefits for a transgender employee transitioning from male to female who was absent from work to receive breast augmentation surgery. The court found that Aetna, the third-party administrator, had not abused its discretion in deciding that the surgery was cosmetic and not a medically necessary treatment for the employee’s gender dysphoria, in part because the employee had developed average-size female breasts following hormone therapy.5
  1. The Eighth Circuit Court of Appeals affirmed a district court’s ruling that a policy covering only “intermittent skilled nursing care in your home” and which excluded “private-duty nursing” did not cover 24-hour, at-home nursing care. The court rejected the participant’s argument that the policy’s definition of “intermittent skilled nursing care” as “a visit by a registered nurse or licensed practical nurse of up to four (4) consecutive hours in duration” permitted stacking multiple four hour visits each day.6
  1. The ACA prohibits plans from discriminating against health care providers who are acting within the scope of their license. However, a Third Circuit district court recently dismissed a chiropractic association’s claim of provider discrimination, holding that the ACA’s provider nondiscrimination rule does not permit a private right of action.7
  1. Another federal court has held that a health plan may use a combined plan document and SPD. Joining a “plethora” of other federal courts, the Fifth Circuit agreed that the U.S. Supreme Court decision in CIGNA Corp. v. Amara does not preclude this common practice. Thus, the court found that health plan terms embodied in a single plan/SPD document remain enforceable.8
  1. The Ninth Circuit Court of Appeals confirmed healthcare providers cannot sue a plan under ERISA for payment of healthcare services unless the participant executes a valid assignment of benefits. In addition, the court held that an assignment will not be valid if plan terms prohibit assignment, or if the assignment does not cover the type of relief sought.9
  1. The Second Circuit Court of Appeals held that an insured plan’s choice of law provision (which stated the plan would be “construed” under Connecticut law) did not exempt the plan from complying with New York’s anti-subrogation law. The court determined that the choice of law provision only applied to laws of contract interpretation; as the New York law involved subrogation, not contract interpretation, the choice of law provision had no effect. The court also held that because the New York law regulates insurance, it is saved from ERISA preemption. 10
  1. The Seventh Circuit Court of Appeals upheld a plan’s forum selection clause that required any lawsuits against the plan be brought in Illinois district court. As ERISA permits lawsuits to be brought in any district court, the participant argued that the plan’s forum selection clause violated ERISA. The Seventh Circuit disagreed, noting that forum selection clauses reduce administrative costs and do not unduly limit participants’ access to federal courts.11
  1. Under the ERISA claims procedures, benefit denial letters must contain a description of the plan’s appeals process. A West Virginia district court held that merely including a copy of the SPD (which contained full claim and appeal procedures) with the denial letter, without describing the appeals process in the letter itself, was not a sufficient description of the plan’s appeals process.12
  1. Two district courts separately held that two ERISA plans lacked “special circumstances” sufficient to impose a 45-day extension of time to decide claim appeals. In one of the cases, the court held that the plan’s improper extension of time (without proof or an explanation of how the delay was necessary or beyond its control) triggered de novo review of the benefit denial – a loss of deference to the plan administrator’s decision otherwise provided under the plan.13  In the other case, the court held that delaying a benefit claim decision without strictly following ERISA’s requirements for an extension of time could support a claim for ERISA fiduciary breach.14
  1. Courts continued to find that employer and third party administrator business records showing a COBRA notice was sent will defeat a qualified beneficiary’s claim that because the beneficiary never received the notice, it was not mailed 15
  1. There were several noteworthy court decisions regarding preemption of state laws that impact self-funded ERISA plans:
  • The Eighth Circuit Court of Appeals rejected an Iowa law regulating how pharmacy benefit managers determine and disclose generic drug pricing.16
  • The Ninth Circuit Court of Appeals found that a provision in the California Insurance Code which prohibited discretion by a plan administrator applied to an insured long term disability plan, but did not apply to an uninsured short term disability plan.17
  1. The IRS provided guidance on Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). With a QSEHRA, employers with fewer than 50 full-time employees can offer employees a healthcare allowance of up to a specified dollar limit (the annual limit for 2018 is $5,050 for self-only coverage and $10,250 for family coverage). To offer a QSEHRA, the employer cannot offer any group health coverage, and employee contributions aren’t permitted. To receive payments from the QSEHRA, the employee must be covered by an insured health plan. However, some states do not permit employers to fund individual insurance coverage.
  1. The Patient Centered Outcomes Research Institute (“PCORI”) fee increased to $2.39 per covered life for plan years ending after September 2017 and before October 2018. The next PCORI fee must be paid by July 31, 2018.
  1. For 2018, the annual dollar limit on employee contributions to a health FSA will increase from $2,600 to $2,650. The limit on HSA contributions for self-only coverage will increase from $3,400 to $3,450 and the limit for family coverage will increase from $6,750 to $6,900. The over-age 55 catch-up contribution limit remains at $1,000.

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

Not intended as legal advice.

  1. The DOL news release describing the agreement is available at: https://mmpl-law.com/wp-content/uploads/MagnaCare-Agreement.pdf.
  2. AARP v. United States Equal Employment Opportunity Comm’n, 267 F. Supp. 3d 14 (D.D.C. 2017), on reconsideration, 2017 WL 6542014 (D.D.C. Dec. 20, 2017).
  3. Whitley v. Dr Pepper Snapple Grp., Inc., 2017 WL 1739917 (E.D. Tex. May 4, 2017).
  4. Tovar v. Essentia Health, 857 F.3d 771 (8th Cir. 2017).
  5. Baker v. Aetna Life Ins. Co., 260 F. Supp. 3d 694 (N.D. Tex. 2017), appeal dismissed sub nom. Baker v. L-3 Commc’ns Corp., 2017 WL 6021831 (5th Cir. July 6, 2017).
  6. Spizman v. BCBSM, Inc., 855 F.3d 924 (8th Cir. 2017).
  7. Ass’n of New Jersey v. Horizon Healthcare Servs., Inc., 2017 WL 2560350 (D.N.J. June 13, 2017).
  8. Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan, 858 F.3d 340 (5th Cir. 2017).
  9. DB Healthcare, LLC v. Blue Cross Blue Shield of Arizona, Inc., 852 F.3d 868 (9th Cir. 2017).
  10. Arnone v. Aetna Life Ins. Co., 860 F.3d 97 (2nd Cir. 2017).
  11. In re Mathias, George W., 867 F.3d 727 (7th Cir. 2017).[
  12.  Turner v. Volkswagen Group of America, Inc., 2017 WL 3037803 (S.D. W.Va. 2017).
  13. Salisbury v. Prudential Ins. Co. of Am., 238 F. Supp. 3d 444 (S.D.N.Y. 2017).
  14. Hancock v. Aetna Life Ins. Co., 251 F. Supp. 3d 1363 (W.D. Wash. 2017).
  15. Perkins v. Rock-Tenn Servs., Inc., 700 F. App’x. 452 (6th Cir. 2017)(unpublished); DeBene v. BayCare Health Sys., Inc., 688 F. App’x 831, 840 (11th Cir. 2017) (unpublished).
  16. Pharmaceutical Care Mgmt. Assoc. v. Gerhart, 852 F.3d 722 (8th Cir. 2017).
  17. Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686 (9th Cir. 2017); Williby v. Aetna Life Insurance Co., 867 F.3d 1129 (9th Cir. 2017) (both addressing California Insurance Code § 10110.6).