Recent Developments in Employee Benefit Programs (Benefit Minute)
With a Republican controlled Senate and a Democratic controlled House of Representatives, it is unlikely there will be major legislative changes in the next two years. New developments in the employee benefits landscape are now coming primarily through judicial decisions and regulatory action. Below are some benefit areas that have been recently impacted.
The ACA and Texas v. Azar
On December 14, 2018 a federal District Court judge in Texas declared that the entire Affordable Care Act (ACA) was unconstitutional. There were two important aspects of the Judge’s decision that led him to this conclusion. The first was that the elimination of the penalty for failing to comply with the individual mandate meant it could no longer be construed as a tax. As it was no longer able to be considered a tax, the individual mandate was an unconstitutional exercise of legislative authority by Congress. The second was that the judge found the individual mandate was inseverable from the remainder of the ACA, and so the entire ACA must fall with the individual mandate.
On December 20, 2018 the judge issued a stay of his opinion, confirming that the decision has no immediate legal effect and the ACA remains current and enforceable law. The decision has now been appealed to the Fifth Circuit, and it appears likely that the case will end up having to be decided by the Supreme Court. With Democrats now in control of the House of Representatives, the House has filed a motion attempting to intervene in the case to defend the ACA. It may take a year or more for the case to work entirely through the appellate process. Until it is finally resolved and all appeals are exhausted, employers should continue to follow and comply with all provisions of the ACA.
On January 15, 2019 the Eighth Circuit decided the case of Peterson v. UnitedHealth Group, Inc. In this case, an insurer who also served as a third party administrator (TPA) for a self-insured plan was sued by an out-of-network provider because the TPA engaged in cross-plan offsetting. The practice allowed the TPA to recoup previous overpayments made to the provider by the TPA on behalf of a self-insured plan by withholding later payments owed to the same provider, even if the previous overpayment originated from a different plan. The Court ruled that nothing under the governing plan documents permitted the TPA to engage in this practice.
The Court also noted that a TPA using one self-insured plan’s assets to recoup overpayments made by another self-insured plan, or in some cases overpayments by the insurer/TPA’s own fully insured plans, may also be problematic under ERISA. The Department of Labor (DOL) filed an amicus brief in the case supporting the Court’s decision and stating their own view that cross-plan offsetting violates ERISA.
Plan sponsors should expect their TPAs to engage in overpayment recovery services as part of their fiduciary obligation to properly manage the assets of the plans they administer, and plan documents should appropriately describe and authorize these practices. While same-plan offsetting would not pose a problem because the plan is recouping overpayments against its own assets, any use of cross-plan offsetting may subject the plan to provider lawsuits when the TPA does not pay legitimate plan claims in order to recover another plan’s overpayments.
Wellness Programs, the ADA & GINA
On December 20, 2018 in response to a court decision invalidating the existing wellness program regulations under the American with Disabilities Act (ADA) and the Genetic Information Non-Discrimination Act (GINA), the Equal Employment Opportunity Commission (EEOC) formally amended those regulations to remove the 30% incentive limitation. This means there is no longer any direct guidance from the EEOC as to what incentive amount will make a wellness program involving medical exams or inquiries be considered a voluntary wellness program.
Until further guidance is issued by the EEOC, employers will have to decide what incentive amount, if any, may be provided for wellness programs to be deemed voluntary. Most employers will likely continue to operate under the old EEOC rules when administering wellness program incentives subject to the ADA or GINA until such time as new guidance is issued. Existing wellness regulations under the Health Insurance Portability and Accountability Act (HIPAA) were not impacted by the court decision or EEOC’s regulation and are being enforced by the DOL.
Wellness Programs, Tobacco Cessation
The DOL continues to actively enforce the HIPAA requirements for employers that operate wellness programs targeting tobacco use. On November 30, 2018 the DOL announced a settlement against Dorel Juvenile Group, Inc. for administering a tobacco surcharge program in violation of HIPAA’s requirements. The employer did not provide a reasonable alternative standard to employees who smoked so that they could avoid the tobacco surcharge. As a result of administering an improper wellness program, Dorel agreed to make restitution of $145,635 to the 596 impacted employees who paid a surcharge from 2013 to 2017. Dorel was also fined $14,563 by the DOL and was required to amend their wellness program to conform to HIPAA requirements. Other DOL litigation involving improper tobacco cessations programs remains ongoing.
ACA Contraceptive Coverage Mandate
Two federal District Courts issued preliminary injunctions that kept the administration’s final rule on religious and moral objections to the ACA’s contraceptive mandate from taking effect on January 14, 2019. The California Court’s injunction applied in 13 states, while the Pennsylvania Court’s injunction applied nationwide. Unless overturned on appeal, the injunctions will remain until the cases conclude.
The final rule expands the available exemption to the ACA’s contraceptive mandate to any nongovernmental entity that objects to providing contraceptive coverage based on a sincerely held religious belief. It also allows non-profit organizations and closely held for-profit entities that object to contraception on a sincerely held moral conviction to be exempt from the mandate. The final rule provides these entities the choice of either maintaining the current accommodation process whereby the coverage is provided to participants outside of the plan or no longer providing contraceptive coverage at all.