Court Blocks Final Section 1557 Rule
On August 17, 2020, in Walker v. Azar, the US District Court for the Eastern District of New York blocked the Trump administration’s final rule concerning Section 1557 of the ACA. As reported in the June 25, 2020, edition of Compliance Corner , HHS issued a final rule that amended the agency’s prior regulation concerning Section 1557 of the ACA. This rule scaled back explicit protections based upon gender identity introduced by the previous administration, relying instead on broader protections against discrimination on the basis of sex provided for in the ACA. The final rule was to take effect on August 18, 2020.
This federal district case was initiated by two transgender women seeking medical care for ongoing health conditions. Both claim that they experience discrimination in their efforts to obtain that care and they asked the district court to vacate the final rule because it is contrary to a recent Supreme Court ruling that held that discrimination based upon gender identity is prohibited by Title VII of the Civil Rights Act of 1964. As a preliminary matter, the plaintiffs asked that the Trump administration be enjoined from enforcing the final rule, pending the resolution of the litigation.
In this case, the district judge agreed that the final rule was contrary to the Supreme Court ruling in Bostock v. Clayton Cty., Ga . As was also previously reported in the June 25 edition of Compliance Corner , the Supreme Court ruled that discrimination based upon sexual orientation or sexual identity is prohibited under Title VII of the Civil Rights Act of 1964. That opinion resolved three cases involving homosexual and transgender plaintiffs alleging that they were fired from their jobs based upon their sexual orientation or sexual identity. The court reasoned that Title VII’s prohibition against discrimination based on sex was broad enough to include sexual orientation and sexual identity because those things are inextricably linked to sex. Accordingly, employers cannot rely upon traditional notions of gender when considering terminating someone’s employment.
The federal district court noted that HHS adopted a position in its final rule regarding what constituted discrimination based upon sex that was soon to be rejected by the Supreme Court. HHS was aware that the Supreme Court case was coming when it issued its final rule, and did not attempt to change or pull down its final rule after the Supreme Court issued its ruling. So it appeared to the district court that the agency was taking a position that was rejected by the Supreme Court and was, therefore, contrary to law. In addition, by failing to take action that harmonized with the Supreme Court’s ruling, the agency was deemed to be acting in an arbitrary and capricious manner. As a result of these determinations, the federal district court stayed the implementation of the final rule until further order from the court.
This ruling is part of ongoing litigation and could be appealed, so the ultimate disposition of the final rule is unknown. Employers that would operate their plans in a manner consistent with the final rules should consult with legal counsel about the implications of this decision. We will keep an eye on developments in this area to see how they may affect the benefits employers provide to their employees.
Stolen Laptop Leads to $1M Settlement for HIPAA Covered Entity
Lifespan Health System Affiliated Covered Entity (Lifespan ACE), a Rhode Island based non-profit health system comprised of hospitals and other healthcare providers, agreed to pay $1,040,000 to HHS’s Office of Civil Rights (OCR) and to implement a corrective action plan in order to resolve an investigation into potential violations of HIPAA. The investigation arose from the theft of an unencrypted laptop.
Specifically, in April 2017, an affiliated hospital employee’s laptop was stolen. The laptop reportedly had the electronic protected health information (ePHI) of over 20,000 individuals including patient names, medical record numbers, and medication information. The breach was reported to OCR, which oversees enforcement of the HIPAA Privacy and Security rules.
OCR’s investigation found a failure to encrypt ePHI on laptops after Lifespan ACE’s internal polices had determined encryption was reasonable and appropriate. There also wasn’t a business associate agreement in place with Lifespan ACE’s parent company and business associate, Lifespan Corporation.
The breach resulted in a settlement in which Lifespan ACE agrees to pay OCR $1,040,000, implement encryption within 90 days, revise its policies and procedures, and be monitored by OCR for two years.
OCR Director Roger Severino cautioned “laptops, cellphones, and other mobile devices are stolen every day, that’s the hard reality. Covered entities can best protect their…data by encrypting mobile devices to thwart identity thieves.”
Employer plan sponsors should review their policies and procedures for compliance. While encryption is still not required of covered entities or business associates, employers should consider it as an effective defense against a breach of privacy information.
IRS Updates Safe Harbor Notices for Eligible Rollovers
On August 6, 2020, the IRS released Notice 2020-62, providing updates to the safe harbor explanations that are provided when a participant is eligible to take a rollover distribution from their retirement plan. As background, the IRC requires plan administrators to provide terminating participants with a written explanation discussing their options for rolling over account balances to another account and the related tax consequences of doing so. Participants must receive this type of explanation within a reasonable period of time before making an eligible rollover distribution.
The notice updates the safe harbor explanations to reflect a number of changes that have been made to retirement regulations under the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief and Economic Security (CARES) Act. Specifically, the explanations were updated to add the increased age for required minimum distributions and the tax treatment of birth or adoption distributions, and to clarify that a CARES Act distribution is not an eligible rollover for certain purposes.
Two updated safe harbor explanations are included as appendixes in the notice — one for payments that are from a designated Roth account and one for payments that are not from a designated Roth account. As always, plan administrators can update the samples to indicate their specific plan terms.
IRS Releases Retirement Plan Reporting and Disclosure Publication
The IRS, in consultation with the DOL and the Pension Benefit Guarantee Corporation (PBGC), recently released Publication 5411, a guide to the Retirement Plans Reporting and Disclosure Requirements under the IRC and ERISA. The guide was designed as a quick reference tool for retirement plan sponsors regarding their obligations under the IRC and provisions of ERISA administered by the IRS. This handbook was intended for use in conjunction with the DOL Reporting and Disclosure Guide for Employee Benefit Plans.
As background, retirement plan sponsors are generally required to report certain information to the IRS, DOL and/or PBGC, and provide disclosures to plan participants and other affected parties. These reporting and disclosure obligations vary based upon a plan’s type, size and particular circumstances.
Accordingly, the guide outlines the annual reports that must be provided to the regulatory agencies, the annual notices that must be furnished to participants, and other notices required due to specific plan or participant events. The information is presented in chart format. For each necessary document, the IRS provides a brief explanation of the content, purpose, required recipients and due date. As applicable, statutory references and links to other available regulatory instructions or resources are included.
For example, the annual report section explains the Form 5500 filing requirement to report on the plan’s qualification, the due date seven months after the plan year end, and the extension option. Links are provided to the Form 5500 electronic filing system, instructions and other guidance.
The annual notice section includes common notices for both defined benefit pension plans and defined contribution plans, including the various 401(k) safe harbor contribution plan notices.
Retirement plan sponsors may find the guide to be a helpful and user friendly resource. However, the guide is not meant to provide a complete overview of all possible reporting and disclosure requirements or penalties for violations.
What are some FFCRA considerations now that the school year is about to begin?
The Families First Coronavirus Response Act (FFCRA) requires employers to provide emergency paid sick leave (EPSL), as well as expanded FMLA (EFMLA), to employees if they must take care of their children whose school or daycare is unavailable due to COVID-19. Absent additional guidance from the DOL, this could likely result in a diminished ability to take FFCRA leave for the coming school year. Specifically, if schools and daycare centers are open and providing in-person instruction, then employees would seemingly not be eligible for this leave if, for example, they simply did not feel comfortable sending their kids to school or daycare due to risk of contracting the virus.
As a reminder, employers with fewer than 500 employees must provide FFCRA to their employees under certain circumstances. In order for their employees to qualify for EFMLA, they must have been employed for 30 calendar days immediately prior to the day their leave would begin and they must be unable to work OR telework due to a need to care for their children under 18 years of age whose school or place of care has closed, or whose childcare provider is unavailable, for reasons related to COVID-19, among other requirements. Note that an eligible employee is entitled to up to 12 weeks of EFMLA under the FFCRA to care for a child due to school/daycare closure related to COVID-19. If the employee did not exhaust the entire 12 weeks during the spring, they may be entitled to additional time in the coming fall semester.
In order for employees to take EPSL, one or more of six specific reasons enumerated in the FFCRA must apply, including that the employees cannot work because they are taking care of their child and the school or place of care of their child has been closed, or the childcare provider of such child is unavailable, due to COVID-19 precautions. According to DOL regulations, EPSL can be taken for this reason only if no other suitable person is available to care for the child during the period of such leave. If this reason applies, then employees are entitled to take up to 80 hours of EPSL, regardless of how long they have worked for their employers.
So employees may be entitled to FFCRA leave when their children’s schools are closed due to COVID-19. However, if they are open and available for in-person instruction, employees would seemingly be ineligible for paid leave under the FFCRA if they simply choose not to send their children. If the school or daycare is “partially” open – so that part of the curriculum is not in-person and is instead on-line only – employees (if otherwise eligible) would seem to qualify for the FFCRA leave if they cannot work (or telework) due to needing to care for their children during said partial closure.
Please note a few caveats. Several states, like New York, expand on the leave provided under the FFCRA, such as applying this or similar leave to employers with 500 or more employees. This could mean that there are additional state requirements to provide leave that could apply to children’s school circumstances whether instruction is provided in-person or not. Additionally, a recent federal court case struck down several DOL regulations that administer and enforce the FFCRA, including a requirement that employees can take FFCRA leave only if their employers have work for them do to that they cannot do because of the reasons for the leave. This case is discussed at more length in a separate article in this edition of Compliance Corner .
We are hoping for additional guidance from the DOL on this and related matters that are not directly addressed by current guidance. In the meantime, employers should consult with counsel if they have questions concerning the application of FFCRA leave to any particular case. We will pass along any new developments as we learn them.
August 18, 2020
COVID-19 Employer Playbook Now Available
The California Department of Health has released The COVID-19 Employer Playbook: Supporting a Safer Environment for Workers and Customers. Employers will find this a helpful resource that summarizes the various types of leave and benefits that must be made available to employees due to COVID-19, including paid sick leave, COVID-19 Supplemental Paid Sick Leave, Families First Coronavirus Response Act leave, California Family Rights Act leave, State Disability Insurance, and Paid Family leave. The playbook also provides guidance on COVID-19 testing and screening, reporting requirements for employees who test positive, and employer provided personal protective equipment.
August 18, 2020
Early Prescription Drug Refills During Emergencies
On August 5, 2020, Gov. Kemp signed the “Early Prescription Drug Refills During Emergencies” Act. This legislation requires health insurers to provide coverage for early refills of a 30 day supply of certain prescription medications under specified emergency situations.
As background, the measure was enacted with recognition of the significant delays experienced by state residents in obtaining necessary prescription drug refills during natural disasters and emergencies. These delays can potentially result in serious health consequences, particularly for those with chronic health conditions.
Accordingly, the legislation requires health insurers licensed in the state that provide prescription drug coverage as part of a contract or policy to waive time restrictions on prescription refills, including the suspension of electronic “refill too soon” limitations. Such waivers will allow insureds to refill prescriptions in advance.
Insurers shall also authorize payment to pharmacies for a 30 day supply of a prescription medication, regardless of the date upon which the prescription had most recently been filled, for a state resident of a county under either a state of emergency declared by the governor or a hurricane warning issued by the National Weather Service. The prescription must have refills remaining and the request must be within 30 days of the origination date of the emergency declaration or until such conditions are terminated by the issuing authority or cease to exist. Certain controlled substances are exempt from this new policy. The insurance commissioner can extend the time restriction waivers in 15 or 30 day increments, as necessary.
The law is primarily directed at insurers licensed in the state. However, employers offering insureds prescription drug benefits may also want to be aware of this development.
August 18, 2020
Paid Sick Leave Revised
Effective October 1, 2020, HB 880 revises the definition of a family member for Maryland paid sick leave (under the Maryland Healthy Working Families Act) to include the legal guardian or ward of the employee or the employee’s spouse. As a reminder, employees (of employers with 15 or more employees) earn one hour of paid sick leave for every 30 hours worked up to an annual maximum of 40 hours. Smaller employers must provide unpaid leave.
This leave may be taken so that an employee can care for an ill family member, among other reasons. For this purpose, the term family member already included a biological/adopted/step/foster child, a child under the employee’s legal guardianship, a child for whom the employee has physical or legal custody, a child for whom the employee stands in loco parentis, the employee’s or spouse’s biological/adoptive/step/foster parent, the employee’s spouse, an individual who stood in loco parentis of the employee or spouse, biological/adoptive/step/foster grandparent of the employee, biological/adopted/step/foster grandchild of the employee, and a biological/adopted/step/foster sibling of the employee.
Employers should revise their paid sick leave policy appropriately.
August 18, 2020
Final Regulations on Paid Family Medical Leave Released
On July 24, 2020, the Department of Family and Medical Leave released the final regulations for the Paid Family and Medical Leave Law (PFML). As background, Massachusetts employers must provide paid family and medical leave beginning in January 2021. The leave is funded through a payroll tax. (See the Massachusetts state update from July 12, 2018, and the February 8, 2019, editions of Compliance Corner for discussions of the PFML and the proposed rules.)
The final regulations make a number of changes to the proposed rules. Some of the major revisions are as follows:
- Employers that are seeking an exemption due to providing a private plan must provide leave to all employees, covered workers and former employees in order for their private plan to be exempted.
- Covered individuals must provide notice to their employer before they apply for PFML benefits, otherwise, their application can be rejected.
- Covered individuals must submit their application at least 30 days, but no more than 60 days, in advance of the leave unless they are reasonably unable to do so.
- Covered individuals with multiple employers will have their weekly benefit amount calculated based on wages for a specific employer, but they are not required to take leave from each employer at the same time.
- Substance use disorders can qualify as a serious health condition that would allow the use of PFML for treatment of the condition.
- Intermittent leave can be taken in 15-minute increments, but payment of PFML benefits will not be paid out in requests of less than eight hours.
- The wages or wage replacement benefits that will reduce PFMLA have been adjusted to include benefits received through an approved, exempted private plan or any wages that are received from another employer or self-employment.
- There will be an initial seven-day waiting period for every application for benefits, with the exception of PFML for pregnancy or recovery from childbirth. Also, no more than 12 weeks of leave benefits are permitted in a year, even if there are multiple births.
- The final rules also make changes to many of the definitions in the law.
Employers should review the final regulations as they will impact employers’ compliance with the PFML, which employees will be able to take as of January 1, 2021.
Carriers Must Cover Certain Contraceptives Without Cost Sharing
On August 7, 2020, the Division of Insurance issued Bulletin 2020-26, requiring insurance carriers to provide contraceptives without cost sharing. As background, the ACA’s preventive care mandate was interpreted to require coverage of contraceptives. Massachusetts followed suit and incorporated the requirement to offer contraceptives in Massachusetts law through Chapter 120 of the Acts of 2017. This bulletin updates Massachusetts’ guidance on this requirement.
Specifically, the bulletin discusses the different FDA-approved contraceptive methods and clarifies that carriers can choose to cover more than one product of each method (and could even charge for additional products) as long as at least one version is provided without cost sharing. Carriers must also provide a specific contraceptive without cost sharing if an individual’s physician recommends that particular product based on a medical determination. Additionally, coverage for voluntary female sterilization procedures and FDA-approved emergency contraception must be allowed without a prescription. The bulletin goes on to require that carriers provide coverage for patient education and counseling on contraception and follow-up services related to the contraception.
The bulletin exempts churches or qualified church-controlled organizations from its requirements provided that the church gives employees a written notice stating that they will not offer contraceptives or certain methods for religious reasons, and defines such an organization.
The bulletin and Chapter 120 are already effective and insurers must ensure continuing compliance. Employers should be aware of this guidance.
August 18, 2020
Discrimination on the Basis of Sexual Orientation Prohibited
On August 11, 2020, the Department of Insurance and Financial Services (DIFS) issued Bulletin 2020-34-INS reiterating that DIFS interprets “sex” in all rules it administers to include sexual orientation and gender identity. As such, discrimination based on sexual orientation and gender identity is prohibited.
As background, United States Supreme Court recently concluded in Bostock v. Clayton County, Georgia that the term “sex” includes sexual orientation and gender identity. Further, the court concluded that discrimination based on sexual orientation and gender identity violates Title VII of the Civil Rights Act of 1964. This recent decision provides additional support for DIFS to affirm its interpretation of “sex” in the rules it administers.
While the bulletin does not introduce any new guidance, employers should be aware that sexual orientation and gender identity discrimination is prohibited in Michigan and confirm their policies are compliant with this guidance.
August 18, 2020
Health Benefit Mandate: Expanded Coverage for Mammography
A new bill (H.B. 1682) signed into law on July 13, 2020, expands coverage for mammography and related breast imaging services. Effective August 28, 2020, health plans are required to cover annual mammograms for patients deemed by a treating physician to have an above-average risk for breast cancer, as well as additional or supplemental imaging (e.g., ultrasound or magnetic resonance imaging services) which a treating physician determines to be medically necessary for breast cancer screening.
As background, Missouri law requires health insurance issuers to include coverage for certain benefits and services in health plans that employers can purchase from issuers. These Missouri health benefit mandates apply to group health insurance plans delivered, issued for delivery or renewed in Missouri. Further, Missouri health benefit mandates do not apply to self-insured group health plans.
Employers who sponsor fully insured group health plans issued in Missouri should be aware of this new mandate and confirm that their policies are in compliance effective August 28, 2020.
August 18, 2020
Insurers Required to Pay Annual Tax on Health Premiums
On July 31, 2020, Gov. Murphy signed Assembly Bill No. 4389 into law. The bill imposes an annual 2.5% state tax on the premiums collected by most health insurers. As background, the ACA imposed a tax on health insurers (known as the HIT tax) that has been repealed and will no longer be levied in 2021. This NJ tax will essentially take the place of that federal tax.
Specifically, the tax would be levied on insurers and the funds would be passed on to a health insurance affordability fund that will be designed to subsidize premiums for low-income individuals and to bolster the state’s reinsurance pool. The bill also seeks to reduce racial disparities in coverage for the uninsured. To those ends, the bill also requires a report examining how the policy increases affordable healthcare options, reduces the uninsured rate and affects racial disparities in health insurance coverage.
While the law applies to insurers, it’s widely expected that insurers will pass this additional tax to consumers through health plan premiums. The tax is set to become effective in January 2021. We will continue to follow any developments with this law.
August 18, 2020
COVID-19 Insurance Update
On August 4, 2020, the Office of the Superintendent of Insurance issued Bulletin 2020-016. The bulletin expresses the state’s expectation that health insurers licensed in the state will notify contracted providers that they are not allowed to charge patients for COVID-19 testing or treatment. The bulletin states that provider charges for office visits are considered part of the COVID-19 testing process, so they should not require patients to share that cost. In addition, the bulletin states that network adequacy requirements include in-network COVID-19 testing services, although insurers are not required to cover testing as part of a “back to work” requirement. It also reminds insurers of the agency’s request that they avoid coverage cancellations.
Although this bulletin is focused upon health insurers, employers with plans regulated by the state should be aware of its contents.
August 18, 2020
Insureds Protected from PPE Fee Assessments
On August 5, 2020, the Department of Financial Services (DFS) issued Circular Letter No. 14 regarding personal protective equipment (PPE) fee assessments by healthcare providers. This communication was issued to all insurers authorized to write health insurance in the state, health maintenance organizations (HMOs), student health plans, municipal cooperative health benefit plans and prepaid health service plans.
As background, DFS recently received consumer complaints that healthcare providers, particularly dental providers, were improperly assessing PPE fees and other COVID-19 related charges for in-person visits by insureds. These costs were being passed to insurers and extended beyond the insured patient's applicable cost sharing.
The letter reinforces that participating providers should not bill a patient for any charges that are in addition to the patient's cost sharing obligations for covered services. Insurers should also not cover these charges. Additionally, DFS will not approve policy or contract provisions that hold the insureds responsible for the cost of a healthcare provider's PPE.
Accordingly, insurers are obligated to ensure covered individuals are not assessed PPE fees. To this end, the letter advises insurers to notify participating providers not to charge PPE fees, to hold insureds harmless for these charges, and to refund PPE fees already collected. Furthermore, insurers must notify insureds that they should not be charged for PPE fees and provide contact information to submit related complaints. The insurers are required to work with providers to resolve related issues and ensure refunds are provided. Finally, within 90 days, insurers are required to report to DFS the amount of PPE fees charged to insureds, the number of insureds impacted and a description of how refunds will be provided.
Although the letter is primarily directed at insurers, employers may also want to be aware of this guidance.
August 18, 2020
Expansion of Telehealth Services Extended
On July 31, 2020, Gov. Raimondo issued Executive Order 20-59, once again extending the applicability of several prior COVID-19 related executive orders in light of the continued public health emergency. Included in the order was reference to Executive Order 20-06 — extending its applicability through September 2, 2020 (unless renewed, modified or terminated by subsequent executive orders).
Executive Order 20-06 expands access to telemedicine by suspending the patient location requirement and the prohibition against audio-only telephone conversation (and the limitations on video conferencing). Further, the order provides that all medically necessary telemedicine services provided in-network must be reimbursed at rates not less than services provided in-person.
The order was originally effective beginning March 18, 2020, and was extended to continue until July 4, 2020, and then again through August 2, 2020. Executive Order 20-59 now further extends its applicability through September 2, 2020, in light of the continued public health emergency.
Employers should be aware of these developments.
August 18, 2020
COVID-19 Testing Rules Extended
On August 14, 2020, Commissioner Kreidler extended Emergency Order No. 20-02 until September 15, 2020, requiring that COVID-19 testing be provided without cost sharing or preauthorization and that insurers provide increased flexibility regarding the use of telemedicine.
Employers can notify their plan participants that may still need to receive testing that the testing will continue to be provided without cost sharing and that telemedicine will still be available.
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.
Industry news topics covered in the Compliance Corner are chosen based on general interest to most employers and may include articles about services not available through PPI.
What are some FFCRA considerations now that the school year is about to begin?