HIPAA Privacy Rule and Same-sex Marriage Guidance Released

Posted by admin on October 24, 2014  |   No Comments »

On Sept. 23, 2014, the HHS OCR issued guidance clarifying the role HIPAA plays for same-sex married couples. In accordance with the U.S. Supreme Court’s majority ruling in United States v. Windsor, HHS officially considers same-sex spouses to be family members for purposes of sharing PHI.

The guidance states that under certain circumstances, covered entities are permitted to share an individual’s PHI with a family member of the individual. Legally married same-sex spouses, regardless of where they live, are family members for the purposes of applying this provision.

The definition of a family member is also relevant for purposes of use and disclosure of genetic information for underwriting purposes. This provision prohibits health plans, other than issuers of long-term care policies, from using or disclosing genetic information for underwriting purposes. For example, such plans may not use information regarding the genetic tests of a family member of the individual, or the manifestation of a disease or disorder in a family member of the individual, in making underwriting decisions about the individual. This includes the genetic tests of a same-sex spouse of the individual or the manifestation of a disease or disorder in the same-sex spouse of the individual.

This guidance was designed to assist covered entities (those subject to HIPAA) in understanding how the Windsor decision may affect certain privacy rule obligations. Note that employers sponsoring self-insured group health plans are generally covered entities subject to these provisions, as well as “hands-on” employers sponsoring fully insured group health plans. Finally, the OCR stated that they intend to issue additional clarifications through future guidance to address same-sex spouses as personal representatives under the privacy rule.

HHS Guidance

U.S. Supreme Court Rejects Same-sex Marriage Appeals

Posted by admin on October 22, 2014  |   No Comments »

On Monday, Oct. 6, 2014, the U.S. Supreme Court began its October Term 2014 by declining to review cases involving the issue of same-sex marriage. The U.S. Courts of Appeals for the Fourth Circuit, Seventh Circuit and Tenth Circuit had previously ruled that same-sex marriage bans in Indiana, Oklahoma, Utah, Virginia and Wisconsin were unconstitutional. The decisions were stayed while the cases were appealed to the Supreme Court. The Supreme Court’s rejection of the appeals means that the lower-court rulings will stand. Recognition of same-sex marriage in the above mentioned states is expected to begin in the coming days. This will most likely mean that group health insurance policies issued in those states will need to amend their plan documents to offer coverage to same-sex spouses. We are expecting further guidance from the states.

The court’s action could also affect same-sex marriage in Colorado, Kansas, North Carolina, South Carolina, West Virginia and Wyoming, which are also part of the Fourth, Seventh and Tenth Circuits. Further, there are currently cases involving the issue of same-sex marriage pending in the Fifth, Sixth, Ninth and Eleventh Circuits which could affect Alaska, Arizona, Idaho, Montana and Nevada.

As we went to press with this edition of Compliance Corner, the Fourth, Seventh and Tenth Circuit Courts put their ruling into immediate effect for the Virginia, Oklahoma, Utah, Indiana and Wisconsin cases. We will continue to monitor this issue and report any developments in future issues of Compliance Corner.

CMS Publishes HPID Quick Reference Guide, FAQs and Other Useful Resources

Posted by admin on October 20, 2014  |   No Comments »

On Sept. 25, 2014, CMS published “A Quick Reference Guide to Obtaining a Controlling Health Plan HPID.” The quick reference guide is a step-by-by-step outline of how a controlling health plan (CHP) can obtain a health plan identifier (HPID). As background, CHPs (defined as group health plans that control their own business activities, actions and policies) are required to obtain an HPID by Nov. 5, 2014. Smaller CHPs have an additional year to obtain an HPID (by Nov. 5, 2015). HPIDs are obtained via a multi-step process using the CMS website and systems. The reference guide describes those steps and includes screenshots to assist.

In conjunction with the quick reference guide, CMS also published several FAQs relating to the HPID requirement. The FAQs clarify that the carrier is the entity responsible for obtaining an HPID in the fully insured context. For self-insured plans, the employer as plan sponsor is generally responsible for obtaining an HPID. TPAs, even those that administer self-insured plans, are not required to obtain an HPID on behalf of a self-insured plan. Such plans may contract with a TPA to obtain an HPID on their behalf, but the HPID would belong to the plan, not the TPA.

Importantly, the FAQs also clarify how the HPID requirement applies to health FSAs, HRAs and HSAs. The FAQs state that FSAs and HSAs are individual accounts directed by the consumer to pay health care costs, and therefore are not required to obtain an HPID. Note that the underlying HDHP, though, would likely be considered a CHP, and would be required to obtain an HPID. HRAs may require an HPID if they meet the definition of CHP. However, most HRAs will be structured to pay deductibles and other costs associated with the underlying major group medical plan, and therefore would not be a CHP. Such an HRA would instead rely on the group plan’s HPID.

According to the FAQs, where an employer sponsors several benefit package options, but the options are bundled together via a wrap document, the employer may obtain one HPID for the bundled plan rather than multiple HPIDs for each benefit package option. For example, with a wrap plan that includes a fully insured medical plan, self-insured dental plan, and an HRA that covers deductibles, the employer would obtain an HPID only for the self-insured dental plan. Since the HRA covers only deductibles, the HRA would not be required to obtain an HPID-the HRA would rely on the HPID of the fully insured medical plan (obtained by the carrier).

CMS also published a user manual and web page relating to the HPID requirement. The user manual is a detailed description of the Health Insurance Oversight System-the system used by CMS for assigning HPIDs and related identification numbers. The web page includes general information on the HPID requirement, as well as links to other helpful resources that CMS previously made available.

HPID Quick Reference Guide
CMS HPID FAQs
CMS HPID User Manual
CMS HPID Web Page

IRS Issues FAQs relating to PPACA Informational Reporting under Sections 6055 and 6056

Posted by admin on October 17, 2014  |   No Comments »

On Sept. 22, 2014, the IRS released two sets of FAQs discussing the informational reporting requirements under Internal Revenue Code Sections 6055 and 6056. Section 6055 requires employers that sponsor self-insured plans to report specific information to the IRS and to plan participants which will assist the IRS in administering and enforcing the individual mandate. Section 6056 requires applicable large employers who are subject to the employer mandate to report certain information to the IRS and to plan participants to help administer and enforce the employer mandate and eligibility for premium tax credits. Reporting under both sections is required in early 2016 for calendar year 2015.

The Section 6055 FAQs address the basics of employer reporting, including which entities are required to report, what information must be reported and how and when reporting entities must report required information. The Section 6056 FAQs cover the same topics and also address questions related to the methods of reporting.

Importantly, the FAQs clarify that due to the leap year in 2016, for the first year (reporting on 2015 calendar-year compliance), reports are due Feb. 29, 2016, rather than March 1, 2016 as previously reported. The reports are due March 31, 2016, if filing electronically. Electronic filing is required of employers filing 250 or more Section 6056 returns (employee statements). These dates apply regardless of the plan year of the employer-sponsored coverage. For example, reporting is due on those dates for 2015 compliance, even if the plan year runs from May 1 through April 30. In addition, like the Form W-2, employers must distribute employee statements by Jan. 31 of the following year (i.e., Feb. 1, 2016, for 2015 compliance because Jan. 31, 2016 is a Sunday) although employers may apply for a 30-day limited extension

Section 6055 FAQs
Section 6056 FAQs
Additional information on Informational Reporting

Excepted Benefits Regulations Finalized

Posted by admin on October 15, 2014  |   No Comments »

On Oct. 1, 2014, the IRS, EBSA and HHS released final regulations related to excepted benefits. As background, plans or programs that qualify as excepted benefits are generally exempt from PPACA’s mandates such as preventive care services and the prohibition on annual dollar limits. There are four types of excepted benefits:

  • Coverage that is not health insurance (e.g. workers compensation, automobile and liability insurance)
  • Limited excepted benefits (e.g. limited scope vision or dental and long-term care insurance)
  • Non-coordinated excepted benefits (e.g. specified disease or illness coverage and fixed indemnity)
  • Supplemental excepted benefits (e.g. coverage that is supplemental to Medicare, TRICARE or group health insurance)

In December 2013 the agencies released proposed regulations which specifically addressed limited excepted benefits. The agencies finalized those regulations with a few amendments. According to the final regulations, in order to be an excepted benefit, a long-term care plan and limited scope dental or vision plans must be provided under a separate policy, certificate or contract of insurance, or not be an integral part of a group health plan. To be considered a non-integral part of a group health plan, participants must have the right to waive coverage for the benefits, or claims for the benefits must be administered under a separate contract from claims administration for any other benefits under the plan. Previously a limited benefit plan qualified as an excepted benefit only if participants had the right to waive coverage and, if coverage was elected, the participant was charged a premium or contribution amount for coverage. Both the proposed and final regulations removed the requirement that participants be charged a premium for coverage. This means an employer’s self-insured stand-alone dental plan qualifies as an excepted benefit even if premiums are paid solely by the employer. Stand-alone dental or vision HRAs are also permissible.

In relation to an EAP, the program must meet four criteria in order to qualify as an excepted benefit. First, the program must not provide significant medical care. While many hoped the regulations would provide specific parameters for determining whether a plan provided significant care (such as a certain number of outpatient visits), the regulations only provide that the amount, scope and duration of covered services are taken into account in determining whether significant medical care or treatment is provided. As an example, the agencies state that a plan that provides only limited short-term outpatient counseling (without covering inpatient, residential or intensive outpatient care) without requiring prior authorization does not provide significant medical care.

Secondly, participation in an EAP cannot be contingent upon participation in a group health plan. Further, participants cannot be required to exhaust EAP benefits before being eligible for benefits under a group health plan. Finally, the EAP must have no cost sharing for participants. The final regulations removed a requirement which was included in the proposed regulations that EAP benefits could not be financed by another group health plan.

The 2013 proposed regulations also addressed wraparound coverage for individual policies. The agencies indicated that they will issue future guidance on this issue.

The final regulations apply to plan years starting on or after Jan. 1, 2015. Until then, plans may comply with the requirements of either the proposed or final regulations.

Third Circuit: Related Supplemental Insurance Cannot Be Unbundled for ERISA Coverage Analysis

Posted by admin on October 3, 2014  |   No Comments »

On Aug. 6, 2014, the U.S. Court of Appeals for the Third Circuit, in Menkes v. Prudential Ins. Co. of America, No. 13-1408 (3rd Cir. 2014), held that certain supplemental components of a broader ERISA benefit plan could not be unbundled to determine if the supplemental benefit constitutes an ERISA plan. As background, ERISA provides a regulatory safe harbor under which certain supplemental benefits are not considered ERISA plans. Specifically, an insurance program is not considered an ERISA plan if employees pay the full premium for voluntary coverage and the employer’s involvement is minimal (this is often referred to as the “voluntary plan” safe harbor exemption from ERISA).

In this case, defense contractor employees sought disability benefits for conditions that resulted from their work in Iraq. However, the insurer denied benefits under both basic and supplemental insurance coverage. The employees sued the insurer, claiming fraud under state law, among other things, because the policy provided no coverage in the event of a disability due to war or an act of war. To assert state claims, the employees argued that the supplemental coverage was not an ERISA plan, since it was excluded from the scope of ERISA by virtue of the voluntary plan safe harbor.

The court found that the basic and supplemental coverage constituted two components of one benefit plan and could not be unbundled. In analyzing the benefits, the court noted that the plan documents, terms and claims procedures of the basic and supplemental coverage were the same. In fact, coverage for both options was provided under a single group contract, with the supplemental benefit merely offering additional coverage. The court also noted that ERISA policy goals required viewing the programs as a single plan in order to promote uniform administration of benefit plans. Since the court held that the two benefits could not be unbundled, the supplemental benefits were also subject to ERISA. Since ERISA pre-empts state law, the plaintiffs could not bring claims under state law, but would have to seek remedies through ERISA.

Although many circuit courts have come to the same conclusion, this case is a good reminder to benefit plan sponsors that bundling a voluntary supplemental program with an employer-sponsored benefit (usually done via an ERISA wrap document) can most definitely make both offerings subject to ERISA. Once a supplemental program is considered ERISA-covered, ERISA would pre-empt state claims, but the fiduciary would be subject to all the fiduciary responsibilities imposed by ERISA. As such, any plan documents should be carefully drafted to reflect the plan sponsor’s intent when it comes to basic and supplemental coverage.

Menkes v. Prudential Ins. Co. of America

IRS Issues Notice Setting Adjusted Applicable Dollar Amount for PCOR Fee at $2.08

Posted by admin on October 1, 2014  |   No Comments »

On Sept. 18, 2014, the IRS published Notice 2014-56, setting the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015. As a reminder, the PCOR fee is calculated using the average number of lives covered under the plan and the applicable dollar amount for that plan year. The applicable dollar amount is $2 for plan years ending after Oct. 1, 2013, and before Oct. 1, 2014. Notice 2014-56 announces that the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015, is $2.08. For plan years ending on or after Oct. 1, 2015, the adjusted applicable dollar amount will be published in future Internal Revenue Bulletin guidance.

With respect to payment responsibility, if a plan is fully insured, then the insurance carrier is responsible for paying the fee. If a plan is self-insured, the plan sponsor is responsible for the fee. For this purpose, “plan sponsor” is defined as the employer for a single employer plan.

IRS Notice 2014-56

CMS Issues REGTAP FAQ on FF-SHOP Employer Billing in Certain Situations

Posted by admin on September 30, 2014  |   No Comments »

The Registration for Technical Assistance Portal (REGTAP), operated by CMS, continues to issue FAQs and guidance related to PPACA. The FAQ and information below address an issue that may be of interest to employers.

On Aug. 14, 2014, REGTAP posted FAQ 3794, which addresses how a member’s standing as a result of death or retroactive termination will be reflected to employers on their monthly invoice and if the employer will be credited for such previously paid amounts. The FF-SHOP will give a credit on the next monthly invoice for any amount due back to the employer due to either circumstance. The credit will be placed in the adjustment section of the invoice, along with the employee’s name and credit amount.

FAQ 3794

The information provided above is not intended to be a comprehensive resource. It only highlights one particular FAQ that may be relevant to employers. To ensure receipt of the most current information, employers should register for REGTAP updates.

New Optional Section 125 Midyear Qualifying Events Released by IRS

Posted by admin on September 29, 2014  |   No Comments »

On Sept. 18, 2014, the IRS published Notice 2014-55, which creates two new Section 125 midyear qualifying events. The two new events apply in very specific situations and – like all Section 125 events – are optional. Employers who wish to include these new Section 125 qualifying events as options in their plan design need to amend the plan document accordingly. These events will be especially relevant for employers sponsoring non-calendar-year plans and those utilizing look-back measurement periods for variable and seasonal workforces.

The first new event is known as “Revocation Due to Reduction in Hours of Service,” and it applies when an employee is expected to average less than 30 hours of service per week due to a reduction in hours, yet eligibility for coverage under the employer’s group health plan is not affected. In this case, the employee may revoke their election even if they continue to be eligible for group health coverage (such as when a look-back measurement period is being utilized), and enroll in another plan that provides minimum essential coverage (MEC). For this event, employers may rely on a representation from the employee that they have enrolled or intend to enroll in new coverage. The employee does not actually have to provide proof of enrollment to drop coverage.

Previously there was no qualifying event unless eligibility for coverage under the plan was affected, and there was no specific hour requirement for triggering this qualifying event — it all depended on whether the plan document included an hours requirement for eligibility. This new qualifying event allows the employee to revoke coverage for themselves and their covered beneficiaries and enroll in another plan – even a plan offered by the same employer – as long as the plan they are enrolling in provides MEC and the new coverage is effective no later than the first day of the second month following the date coverage was revoked. This new qualifying event may be especially useful for employers who offer MEC coverage to part-time employees (those working fewer than 30 hours of service a week), even if that coverage is not affordable and does not meet minimum value. In this case, an employee whose hours drop below 30 hours of service per week may choose to revoke coverage in the minimum value affordable coverage and voluntarily move to the MEC coverage offered by that employer (or available elsewhere).

The second new qualifying event is known as “Revocation Due to Enrollment in a Qualified Health Plan,” and it applies when an employee has experienced a midyear special enrollment event such as marriage, birth or adoption, making them eligible to enroll in a qualified health plan (QHP) available in a state health insurance exchange. It also applies during the exchange’s annual open enrollment period, which may be especially useful to employers sponsoring non-calendar-year plans. Under this qualifying event, the employee may revoke their election under the group health coverage as long as they enroll, or intend to enroll, in a QHP. Again, employers may rely on a representation from the employee. The employee does not actually have to provide proof of enrollment to drop coverage.

Previously there was no qualifying event allowing a Section 125 plan to recognize special enrollment periods in a QHP offered through the exchange, nor could an employee enroll in a QHP during the exchange open enrollment and drop coverage through an employer-sponsored plan if that employer sponsored a non-calendar-year plan. This resulted in periods of duplicate coverage or a period of no coverage when 1) employees experienced special enrollment periods and enrolled in exchange coverage midyear, as they were unable to drop employer-sponsored coverage being paid for on a pretax basis, or 2) employees participating in non-calendar-year plans were perpetually “locked” into their employer-sponsored coverage, since the exchange does not recognize an employer’s non-calendar-year open enrollment as a special enrollment period, allowing midyear enrollment in the exchange. This new qualifying event resolves this issue by allowing employees to revoke coverage for themselves and their covered beneficiaries in order to obtain coverage through the exchange following a special enrollment opportunity or during the exchange’s annual open enrollment period. Coverage provided under the QHP must be effective no later than the day immediately following the day original coverage was revoked.

Each of these events allows employees to revoke coverage midyear under an employer’s group health plan, but does not allow employees to revoke their health flexible spending account (health FSA) elections. Further, these events only apply when an employee is paying for coverage on a pretax basis. While the notice may be relied upon immediately, employers wishing to allow these two permitted election changes must amend their cafeteria plans to include them. The IRS is allowing employers to retroactively amend their plans to the first day of the plan year, as long as the amendment is adopted on or before the last day of the plan year in which the elections are allowed. Further, plan years beginning in 2014 may be amended any time on or before the last day of the plan year that begins in 2015. However, in no event should an employee’s request to revoke coverage retroactively be allowed.

IRS Notice 2014-55

IRS Issues Guidance on Look-back Measurement Period Changes

Posted by admin on September 26, 2014  |   No Comments »

On Sept. 18, 2014, the IRS published Notice 2014-49, which relates to proposed methods for applying the look-back measurement period method if the measurement period applicable to a particular employee changes. This change may occur in two different situations addressed in the notice. In the first situation, the change may occur because the employee transfers within the same applicable large employer (ALE) member from a position to which one measurement period applies to a position to which a different measurement period applies. For this purpose, two measurement periods are different if they are of different durations or if they start on different dates (or both).

In the second situation, the change may occur because an ALE member modifies the measurement method applicable to a position. A change in method may include a change from the look-back measurement method to the monthly measurement method (or vice versa), or a change in the duration or start date of any applicable measurement period under the look-back measurement method.

In general, the notice describes proposed methods to address these situations, both in cases where the employee is in a stability period at the time of the transfer and in cases where the employee is not yet in a stability period. Generally speaking, for an employee who is in a stability period at the time of transfer (i.e., has been employed for a full measurement period at the time of transfer and has a set status as either a full-time employee or a non-full-time employee), the employee retains his or her status through the end of the associated stability period. For an employee who is not in a stability period (or administrative period) at the time of transfer, the employee’s status is determined using the measurement period applicable to the second position, but hours of service in the first position are included in applying that measurement period.

The notice includes six specific examples describing how the proposed methods apply in the above situations. Notice 2014-49 requests comments on the proposed methods. However, the notice also states that employers may rely on the proposed methods until further guidance is issued, and in any case through the end of the 2016 calendar year. Employers should work closely with advisors and outside counsel in designing and implementing look-back measurement periods that best fit their needs and employee base.

IRS Notice 2014-49