PPI in the News Compliance Corner - April 28, 2022 Archive
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On April 13, 2022, the HHS renewed the COVID-19 pandemic Public Health Emergency (PHE) for an additional 90 days, effective April 16, 2022. With this extension, the PHE is now set to expire on July 15, 2022. The PHE is being extended for the ninth time since it was initially declared in January 2020, when the coronavirus pandemic began. The Biden Administration has said that it will give states a 60-day notice before the PHE expires. The PHE impacts several important benefits for employer sponsored plans, including coverage of COVID-19 testing and treatment.

Private insurers have been required to cover the full cost of COVID-19 tests and vaccines for the duration of the PHE. Beginning January 15, 2022, this requirement expanded to include up to eight over-the-counter at-home COVID-19 tests authorized or approved by the FDA per covered member per month. Once the PHE is ended, private insurers can charge co-pays or other costs so that COVID-19 tests and vaccines will no longer be free for insureds. The federal government has been paying for tests, vaccines and certain treatments for those covered by its Medicare and Medicaid health insurance programs.

Employers should be aware of the latest PHE extension and monitor the developments as the current July PHE ending date approaches to assess the impacts on their plans, including COVID-19 tests and vaccine coverage.

HHS: Renewal of Determination That a Public Health Emergency Exists »

On April 19, 2022, the DOL issued Part 53 of a series of FAQs concerning the ACA. Specifically, the FAQs cover the requirement under the Transparency in Coverage Rule (the Rule) to provide certain disclosures in machine-readable files.

The Departments of HHS, Treasury and Labor (the departments) promulgated the Rule on October 29, 2020. The Rule imposes new cost-sharing and pricing disclosure requirements upon group health plans and health insurers. Among other requirements, non-grandfathered group health plans and health insurance issuers offering non-grandfathered coverage must disclose, on a public website, information regarding in-network rates for covered items and services and out-of-network allowed amounts and billed charges for covered items and services in two separate machine-readable files. This requirement applies to plan years beginning on or after January 1, 2022, although the departments will defer enforcement of the requirements related to machine-readable files disclosing in-network and out-of-network data until July 1, 2022. We discuss the Rule in the November 12, 2020, edition of Compliance Corner.

The departments have a framework that plans or issuers may use to disclose required information in a machine-readable format (a “schema”). The FAQS cover situations when plans or issuers enter arrangements with providers that do not fit neatly into the schema, or do not provide the information the schema accounts for.

• [FAQ#1] Plans or issuers may enter contracts with in-network providers in which they agree to pay those in-network providers a percentage of billed charges. However, plans and issuers may not be able to assign a dollar amount to an item or service before the provider generates a bill pursuant to such arrangements. When disclosing those rates, plans and issuers may report a percentage number rather than a dollar amount.
• [FAQ#2] Plans or issuers may have arrangements with providers that the schema does not support, or they may have arrangements that require more information in order to describe them. Plans and issuers may disclose in an open text field a description of the formula, variables, methodology, or other information necessary to understand the arrangement.

Group health plan sponsors should be aware of this update and should work with their insurers and/or third-party administrators to ensure the machine-readable file disclosures are timely posted in accordance with applicable guidance.

FAQs About Affordable Care Act Implementation Part 53 »

On April 12, 2022, the US Court of Appeals for the Sixth Circuit ruled in Chelf v. Prudential, et al. that an employer may be acting as a fiduciary when mishandling premiums for group disability and life insurance.

As a full-time Wal-Mart employee, Elmer Chelf was insured under group short-term disability (STD), long-term disability (LTD) and basic life insurance plans. He further elected optional term life insurance under a group policy insured by Prudential. When Mr. Chelf died of natural causes in April 2016, he was on medical leave and receiving LTD benefits. From the onset of his medical leave in October 2014, Wal-Mart continued to charge Mr. Chelf STD and LTD premiums. Mr. Chelf paid those premiums for 18 months along with basic life premium payments. However, these premiums were charged in error by Wal-Mart; the STD and LTD plans contained a waiver of premium provisions relieving participants from paying them while on leave.

After his passing, Mr. Chelf’s widow filed claims with Prudential for life benefits due. Prudential approved the basic life claim but denied the optional life claim on the basis that coverage had terminated. Ms. Chelf sued, alleging Wal-Mart breached its fiduciary duties under ERISA by charging Mr. Chelf premiums in error, failing to send his premium payments to Prudential to cover the optional life coverage, failing to inform him that PTO could be used to cover any premiums due, and failing to notify him of his right to convert group life coverage to an individual policy. Ms. Chelf also sued Prudential, which eventually settled and was dismissed from the lawsuit.

The lower district court found Wal-Mart was not acting as a fiduciary but merely performing administrative functions in collecting and applying premiums. The Sixth Circuit disagreed, finding Wal-Mart acted as a life plan fiduciary because it exercised control over plan assets (handling Mr. Chelf’s premiums) and was clearly designated in plan documents with authority to make decisions, including the power to correct errors. The case has been sent back to the lower court to examine the facts and determine what remedy is owed to Ms. Chelf.

The Chelf case serves as a good illustration of how employers can find themselves in hot water when administering life insurance coverage. Depending on which plan functions the employer controls, they may be unknowingly acting as a fiduciary and potentially liable for errors. ERISA plan sponsors should always take great care to adequately communicate benefit eligibility and handle premium payments consistent with the plan terms. Procedures related to employee’s STD, LTD and life coverage while on leave, including any obligation to provide notice of conversion rights, must not be overlooked.

Chelf v. Prudential, et al »

On April 12, 2022, the DOL, IRS and HHS jointly released revised process guides for independent dispute resolution (IDR) under the No Surprises Act (NSA), enacted as part of the Consolidated Appropriations Act, 2021 (CAA). Additionally, the online Federal IDR system portal for resolving payment disputes between insurers/plans and providers for certain out-of-network (OON) charges is now open.

The NSA provisions protect participants from surprise bills for OON emergency and air ambulance services and certain OON services received at in-network facilities. The NSA requirements apply to both insured and self-funded group health plans and are effective for plan years beginning on or after January 1, 2022.

If a plan or insurer and provider cannot agree on the OON payment amount after a 30-day negotiation period, the federal IDR process can be initiated. The arbitrator in the federal IDR process (termed the “certified IDR entity”) must select either the payment amount proposed by the healthcare provider or the amount proposed by the plan or insurer. The previous Rule required that presumptive weight be given to the qualifying payment amount (QPA), which is the median contracted rate for an item or service for a geographic region. Accordingly, under the Rule, the certified IDR entity must select the offer closest to the QPA unless either party submits information that clearly demonstrates the QPA is materially different from the appropriate OON rate.

However, in response to the recent court’s ruling that invalidated a portion of the regulations that required the certified IDR entity to prioritize the QPA over other factors in determining the OON rate (for more information on the court ruling, please see our prior article), the revised IDR guides require the certified IDR entity to consider additional credible information in addition to the QPA.

For non-air ambulance items and services, the additional factors are:

• A provider’s level of training, experience and outcomes
• The provider’s market share
• The patient’s acuity or the complexity of furnishing the services to the patient
• Other relevant information provided by either party

For air ambulance services, the IDR entity should consider credible information independently from the QPA so that the information clearly demonstrates that the QPA is different from the appropriate OON rate for the qualified air ambulance service. The Federal IDR Portal is now live, so plans and insurers will want to familiarize themselves with these reworked process guides since some timeframes for action are quite short. Keep in mind that further changes may be forthcoming, and litigation by providers may necessitate other changes to the process.

Employers who sponsor group health plans should be aware of the revised guidance and familiarize themselves with the Federal IDR Portal system. Employers should also monitor future guidance and developments as further changes may be forthcoming.

CMS: Federal Independent Dispute Resolution (IDR) Process Guidance for Disputing Parties – April 2022 »
CMS: Federal Independent Dispute Resolution (IDR) Process Guidance for Certified IDR Entities – April 2022 »
CMS: Federal IDR System Portal »

On March 25, 2022, the IRS released an information letter on qualified transportation plan rules, and Qualified Transportation Fringe (QTF) benefits, which are frequently going unused with recent increases in remote work. In general, employers may provide transportation benefits excludable from taxable income (up to indexed $280 per month in 2022) if the benefit satisfies the requirements of Code §132.

This information letter specifically addressed whether unused QTF benefits may be transferred to a health FSA under a cafeteria plan. Starting with the rule that under no circumstance can an employer provide a cash refund of unused QTF benefits, the IRS explained unused QTF benefits could also not be transferred to a health FSA.

QTF benefits remain flexible in the ability to carry over unused balances year-to-year for future commuting expenses. However, one notable limitation in the Code’s rules is for terminated employees who must forfeit unused QTF benefits. This is consistent with the prohibition on cash refunds.

This information letter serves as a reminder that, like with all employee benefits, communication is key. Employers should clearly convey the risk of accruing unusable benefits. They may also want to prompt employees to check QTF balances throughout the year, submit reimbursement requests on a timely basis, and adjust elections accordingly. These communications can prevent accruing large balances later rendered unusable due to a change in employment circumstances, such as when shifting to remote work or changing jobs.

IRS Information Letter 22-0002 »

The Department of Health and Human Services (HHS) recently issued two reports to Congress regarding HIPAA compliance, breach notifications and enforcement actions for the calendar year 2020. Annually, HHS is required to submit HIPAA reports to Congress and post this information on the HHS website.

The first report focuses on compliance with the HIPAA privacy and security requirements. According to the report, in 2020, HHS received 27,182 new complaints alleging HIPAA violations. The top five alleged violations involved uses and disclosures of protected health information (PHI), unspecified safeguards, access rights, administrative safeguards for electronic PHI and technical safeguards.

HHS resolved 26,530 of these complaints; the majority were resolved before an investigation was initiated. Of the investigations that were conducted, 54% resulted in the covered entity or business associate taking corrective action. Eleven complaint investigations were resolved with resolution agreements/corrective action plans (RA/CAPs) and monetary payments totaling $2,537,500; the details are provided in the appendix to the report. These complaints included situations in which the investigated entities failed to perform a risk analysis, erroneously misdirected electronic PHI, denied patients access to their own PHI or failed to terminate staff access to PHI upon employment termination.

Notably, HHS initiated 60.7% more compliance reviews in 2020 than in 2019. Of the 566 completed compliance reviews, 86% resulted in the subject entity being required to take corrective action or pay a civil monetary penalty. Eight compliance reviews were resolved with RA/CAPs and monetary payments totaling $13,017,400. No audits were initiated in 2020.

The second report identifies the number and nature of breaches of unsecured PHI that were reported to HHS during 2020. HHS received 656 notifications of large breaches (i.e., those affecting 500 or more individuals), which represented a significant increase of 61% from 2019. These reported breaches affected a total of approximately 37,641,403 individuals. The most reported category of breaches was hacking of electronic equipment or network servers, which involved the use of malware, ransomware, phishing and posting PHI on public websites. The largest breach of this type involved approximately 3,500,000 individuals.

HHS initiated investigations into all 656 large breaches, as well as 22 smaller breaches. HHS completed 547 investigations, achieving voluntary compliance through corrective action and technical assistance, and resolution agreements. HHS resolved eight breach investigations with RA/CAPs or the imposition of civil monetary penalties, which resulted in more than $13 million in collections. Based on the 2020 investigations, HHS also identified the following security standards and implementation specifications requiring improvement: risk analysis/management, information system activity review, audit controls, security awareness and training, and authentication. The report also explains actions that can be taken to prevent potential breaches.

Employers that sponsor group health plans may find these reports helpful in focusing and improving their HIPAA compliance efforts.

CY 2020 Annual Report to Congress on HIPAA Privacy, Security and Breach Notification Rule Compliance »
CY 2020 Annual Report to Congress on Breaches of Unsecured Protected Health Information »

On April 20, 2022, the US Court of Appeals for the Fourth Circuit held, in Garner v. Central States, Southeast and Southwest Areas Health and Welfare Fund Active Plan, that the trustees of the plan had abused their discretion by denying the plaintiff’s spinal surgery claim based on two independent physicians’ review.

Dorothy Garner suffered from back and neck pain for several years. Upon being advised by her neurosurgeon, she performed postural exercises and used medication to manage the symptoms. When her pain worsened, the neurosurgeon she had been working with ordered an MRI, and upon review, recommended surgery to relieve Garner’s symptoms. After Garner received the surgery, she received a letter from the Central States, Southeast and Southwest Areas Health and Welfare Fund Active Plan (the plan), stating that her claim involving the surgery had been denied as having been not medically necessary.

The plan trustees came to this decision based on the independent medical review (IMR) of the claim conducted by a general surgeon. However, the surgeon was not provided with any of the records containing the official MRI report or notes from Garner’s neurosurgeon. After Garner and the hospital filed a second appeal, the plan authorized another surgeon to review the claim. That surgeon received full records, including the MRI and office notes. However, this time, the IMR concluded that the surgery was not medically necessary in part because Garner had not taken any conservative measures other than medication. The trustees denied the claim a third time following an appeal of the IMRs of both physicians.

When the case was originally filed with the District Court, that court ruled that the plan trustees had abused their discretion by failing to engage in a reasoned and principled decision-making process. The Fourth Circuit agreed. Specifically, the plan trustees failed to rely on the IMR of the first general surgeon because they failed to provide him with any of her critical MRI records or doctor’s notes. They also pointed out that the second IMR making the decision in part due to the failure of Garner to exhaust conservative treatment options was errant. For one, the plan terms did not set forth the requirement that conservative treatment options be exhausted before surgical treatment. And second, that IMR did not take note of the fact that Garner had unsuccessfully engaged in postural exercises to relieve her pain.

The Fourth Circuit ultimately found that the plan trustees had failed to give Garner’s claim the reasoned consideration that it deserved. In fact, they had three such chances to adequately review her claim. Although remand is sometimes appropriate in this sort of situation, the Fourth Circuit found that remand would simply send the case back to the trustees to potentially make the same errant review they had made before. As such, the court ruled in favor of Garner and affirmed the District Court’s decision to award benefits to Garner.

This case should serve as a reminder that plan fiduciaries should ensure that they are careful in their review of plan claims. Specifically, they should ensure that they are providing all records to any expert that is called in to review a claim, and they should review claims in a way that is consistent with plan terms.

Garner v. Central States, Southeast and Southwest Areas Health and Welfare Fund Active Plan  »

On April 18, 2022, the IRS released a Listing of Required Modifications and Information Package (LRM) to provide practitioners with samples of plan provisions that satisfy IRC Section 403(b). Specifically, the LRM has been updated to reflect changes made in the IRS 2022 Cumulative List of Changes for §403(b) Pre-approved Plans (which we recently discussed in this article from the February 17, 2022, edition of Compliance Corner). Plans being submitted for opinion letters for the second remedial amendment cycle under the IRS’ §403(b) Pre-approved Plan Program must comply with the changes found on the 2022 Cumulative List.

The LRM is intended to assist §403(b) plan providers with drafting compliant plan documents, but insurance companies and custodians may also review this language in the sample provisions in drafting terms of annuity contracts and custodial accounts. The LRM does not provide sample language for plans that may be covered by Title I of ERISA.

Part I of the LRM contains general sample plan provisions applicable to all §403(b) pre-approved plans and provisions that are applicable to §403(b) plans that only accept elective deferrals. Part II of the LRM contains additional sample provisions for those §403(b) pre-approved plans that accept contributions other than elective deferrals. Parts III and IV contain sample provisions for Standardized and Nonstandardized §403(b) pre-approved plans, respectively. Part V contains a simple plan provision for a retirement income account.

403(b) plan sponsors and providers should familiarize themselves with this guidance as they prepare §403(b) pre-approved plan submissions.

Section 403(b) Pre-Approved Plans Listing of Required Modifications and Information Package Revised April 2022 »

In short, likely no. A growing number of states have implemented or are planning to implement statutory PFML programs soon. A statutory PFML generally applies to an employee who works in the state (including telecommuting) regardless of the physical office location or employee’s residence state. For example, an employee who works from his or her home in California is subject to California’s paid family leave (PFL) and disability insurance even if his or her company is located outside of California and does not have any physical offices there. Having a basic STD insurance from a private insurer is likely not sufficient to satisfy the statutory PFML requirements for several reasons.

First, many of the states’ PFML programs require employers to offer not only medical leave insurance but also family leave insurance. Medical leave insurance covers employees’ own serious health conditions or disability (including incapacity from pregnancy) like what standard STD insurance covers. On the other hand, family leave insurance covers an employee to take time off to care for the employee’s eligible family members’ serious health conditions or to bond with the employee’s new child, which is generally excluded from standard STD coverage.

Second, even those states that permit a private plan option require employers to purchase a private plan that meets the specific state’s PFML requirements, and a private plan must receive approval from each state. Therefore, simply having a STD policy does not automatically provide an exemption from complying with a state’s PFML program.

Third, Washington DC and Rhode Island’s PFML programs do not allow a private plan option. In these states, employers must participate in the district and the state’s programs even when an employer’s STD coverage is comprehensive and satisfies all the requirements.

Finally, below is a list of states that have enacted PFML programs. The effective dates are noted for the new PFML programs that will begin soon. Employers should review their employees’ work locations to confirm that they understand and satisfy the applicable states’ PFML program requirements, including private plan option availability, premium collection and submission processes, and employee disclosures (e.g., notices and poster).

• California
• Colorado (Payroll deduction begins on 1/1/2023 and benefits effective 1/1/2024)
• Connecticut
• District of Columbia
• Hawaii
• Maryland (Payroll deduction begins on 10/1/2023 and benefits effective 1/1/2025)
• Massachusetts
• New Hampshire (Participation is voluntary for private employers. Benefits effective 1/1/2023)
• New Jersey
• New York
• Oregon (Payroll deduction begins on 1/1/2023 and benefits effective 9/1/2023)
• Puerto Rico
• Rhode Island
• Washington

Note: The above list is current as of the date this FAQ is issued. Furthermore, some states, such as NY and CA, label their programs as PFL and disability insurance rather than PFML. However, for simplicity, the FAQ uses the term statutory PFML programs to include paid family leave and disability insurance.

Lastly, we have a Quick Reference Chart on Statutory PFML programs that provides each state’s PFML program’s highlights. To receive a copy of the publication, please contact your NFP benefits consultant.