PPI in the News Compliance Corner - February 16, 2023 Archive
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On January 30, 2023, the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury (collectively, the departments), issued proposed rules to amend regulations regarding coverage of certain contraceptive preventive services under the ACA.

Current regulations require non-grandfathered group health plans and non-grandfathered group or individual health insurance coverage to cover certain contraceptive services without cost-sharing unless an exemption exists. Exemptions may be granted to group health plans, student health plans, health insurance issuers, or individuals who purchase individual health insurance with religious or moral objections to coverage of contraceptive services.

The proposed regulations would leave the existing religious exemptions in place and rescind the moral exemption rule, while establishing a new program, called an individual contraceptive arrangement. The new program would allow an individual enrolled in an exempted plan to access contraceptive services at no cost directly from a provider or facility that furnishes contraceptive services. The individual contraceptive arrangement would not require any involvement from the objecting entity; instead, providers would receive reimbursement from issuers on the federally-facilitated exchange or state-based exchange on the federal platform.

Public comments on the proposed rule must be submitted by April 3, 2023. We will continue to report on further developments in Compliance Corner.

Proposed Rule »
Fact Sheet »

On February 6, 2023, a Texas federal district court ruled in Texas Medical Association v. HHS that the federal agency failed to follow legislative intent when it issued the second version of its rules governing the surprise billing independent dispute resolution (IDR) process of the No Surprises Act (NSA). As a result, the court remanded the rulemaking to the agency for another revision.

This case is one of a series of lawsuits brought against HHS by the Texas Medical Association (TMA) challenging the agency’s IDR rules. The same judge decided against the agency in a previous case, as discussed in a March 3, 2022, article in Compliance Corner. In that case, the judge determined that the original rules required arbitrators in IDR proceedings to place too much emphasis on the qualifying payment amount (QPA), the median in-network rate for a given service in each market, when determining the appropriate amount to pay out-of-network providers. The judge ruled that this emphasis on the QPA did not comply with the NSA, which required arbitrators to consider a variety of factors when determining the appropriate payment. Because of that case, HHS issued revised final rules on August 19, 2022 (see the September 1, 2022, article in Compliance Corner).

In this case, TMA asserted that the revised rules continue to improperly restrict arbitrators’ discretion and unlawfully tilt the arbitration process in favor of the QPA. The judge agreed, noting that the new rules required arbitrators to consider the QPA first and restricted how they may consider information relating to the non-QPA factors. Under the rules, arbitrators must determine if the information provided outside the QPA is “credible,” that it “relates to the offer submitted by either party,” and is not “already accounted for by the QPA.” If the arbitrator relied on information other than the QPA, then they must explain why they did so in writing. The judge determined that these additional burdens resulted in a process that favored the QPA, and this emphasis was not in accordance with legislative intent. The judge remanded the rules back to the agency to revise the rules so that they do not favor consideration of the QPA over other factors.

This legal development adds uncertainty to a backlogged IDR process. Employers with self-insured plans that are involved in payment disputes with out-of-network providers should be aware of this development and consult with legal counsel if questions arise.

Texas Medical Association v. HHS »

The IRS recently released the updated Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans for use in preparing 2022 tax returns. This publication provides basic information about Health Savings Accounts (HSAs), Medical Savings Accounts (MSAs), Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs), such as eligibility requirements, contribution limits and distribution rules.

The latest update includes reminders on important provisions for consumer-driven healthcare plans:

• HSAs:
  • HDHPs may have a $0 deductible for telehealth or other remote care services for plan years beginning before 2022, months beginning after March 2022 and before 2023, and plan years beginning after 2022 and before 2025 and still preserve HSA eligibility for individuals.
  • HDHPs may have a $0 deductible for selected insulin products for plan years beginning after 2022 and still preserve HSA eligibility for individuals.
  • HDHPs may provide benefits under federal or state anti-“surprise billing” laws with a $0 deductible for plan years beginning after 2021 and still preserve HSA eligibility for individuals.

• Health FSAs :
  • 2022 annual limit increased to $2,850, and carryover allowance increased to $570 for plan years beginning in 2022.
  • 2023 annual limit increases to $3,050, and carryover allowance increases to $610 for plan years beginning in 2023 (see our October 25, 2022, article in Compliance Corner).

• Home testing for COVID-19 and personal protective equipment remain eligible medical expenses that can be paid or reimbursed under health FSAs, HSAs, HRAs or Archer MSAs.

Employers should be aware of the availability of the updated publication and reference as needed.

2022 Publication 969 »

On January 23, 2023, in Erban v. Tufts Medical Center Physicians Organization, et al., the US District Court for the District of Massachusetts found that employers and human resources personnel, when acting as plan fiduciaries, have an affirmative obligation to not make any harmful omissions in communications with participants and beneficiaries regarding options to continue life insurance coverage.

The plaintiff in this case, Lisa Erban, sued Tufts Medical Center Physicians Organization (Tufts) and its HR director Nicolas Martin for life insurance benefits totaling $800,000, following a lapse in coverage for her late husband, Dr. John Erban. Tufts’ group life insurance policy was issued by the Hartford and named Tufts as Plan Administrator, making Tufts an ERISA plan fiduciary with a duty to act in the interests of participants and beneficiaries.

Dr. Erban worked as an oncologist at Tufts Medical Center for over 30 years. In August 2019, he was diagnosed with glioblastoma, an especially aggressive type of brain tumor that left him cognitively impaired. He passed away in September 2020. Immediately following his diagnosis, Dr. Erban went on medical leave. Tufts terminated his employment six months later. During his leave, Dr. Erban and his family communicated with Tufts, specifically Martin, about how to preserve his life insurance coverage. Tufts provided Dr. Erban with a form to convert his group life insurance coverage into an individual policy.

However, Tufts never addressed another provision in the life plan, i.e., the Sickness or Injury Continuation provision. This provision allowed life insurance coverage to remain in effect for twelve months following an employee’s last day of work if premium payments continued. Just before Tufts terminated Dr. Erban’s employment, Lisa Erban emailed Martin pleading, “I just want to make sure there is no lapse in coverage.” Martin’s response did not state that Tufts would stop making premium payments when Dr. Erban’s employment terminated, or that the life insurance coverage would lapse if Hartford did not receive the conversion form within 31 days.

Following Dr. Erban’s passing, Hartford denied Lisa Erban’s claim for payment as a beneficiary under Dr. Erban’s life insurance policy because the coverage had lapsed. Specifically, the Hartford’s denial explained that premiums stopped when Dr. Erban’s employment terminated, thereby terminating group coverage, and no conversion form was received by Hartford within 31 days after the group policy terminated. Following an unsuccessful appeal, Lisa Erban filed the lawsuit.

In reviewing the validity of Erban’s claims on a Motion to Dismiss (an early stage in litigation), the court focused on ERISA plan fiduciaries’ affirmative duty to provide certain material plan information when it is known that failure to convey the information would be harmful. When Dr. Erban sought information on how to continue group life insurance coverage at the onset of his medical leave, and later when Lisa Erban sought assurances that coverage would not lapse with his employment termination, Tufts was aware of Dr. Erban’s terminal diagnosis and the critical importance of preserving life coverage. Tufts remained silent on the option to continue group coverage under the Sickness or Injury Continuation provision, and the Erbans relied on that silence to their detriment. Further, Tufts provided inconsistent information on when it would stop making premium payments, thereby misleading the Erbans on the deadline to convert the group coverage to an individual policy. Tufts had an affirmative duty to fully and plainly inform Dr. Erban (as the participant) and Lisa Erban (as an inquiring beneficiary) of all the options to continue group coverage and that failure to file the conversion form by a certain date would result in the loss of benefits.

The court also addressed HR director Martin’s individual status as ERISA plan fiduciary by examining his interactions with the Erbans. Those interactions revealed that the Erbans needed and asked for the HR department’s help. The Erbans developed a working relationship with the HR department and reasonably relied on HR to work together with them, explain and employ all options to preserve or continue all available benefits and guide them through that process. The court found a plausible claim that Martin, as HR director, acted as a fiduciary by developing a position of trust with the Erbans, going beyond conducting mere administrative tasks to affirmatively take on the responsibility of making sure there was no lapse in benefits.

While not a final judgment, the court’s Motion to Dismiss opinion signals Tufts’ liability for the value of the lapsed group life benefits, $800,000. The Erban case serves as yet another illustration of the risk imposed by inaccurate or incomplete communications with employees regarding life insurance coverage. ERISA requires employers and their designees, when acting as plan fiduciaries, to accurately communicate the plan terms. Unsolicited advice is not required, but when answering questions from employees, technically not misinforming may not be good enough. There must also be no harmful omissions. To guard against this risk, employers should carefully review the terms of their life plan in order to understand what’s required of them (e.g., sending conversion or portability forms). Further, a process should be established to timely provide complete and clear information on how to preserve coverage following changes in eligibility status. This may include sending life plan documents to participants in response to a coverage inquiry, even if the documents were previously provided.

Erban v. Tufts Medical Center Physicians Organization, Inc., et al. »

On February 9, 2023, the DOL issued Field Assistance Bulletin (FAB) 2023-1 to provide guidance to internal staff regarding remote workers. Among other items, the FAB addresses FMLA eligibility when employees telework or work away from an employer’s facility.

FAB 2023-1 explains that employees who telework are eligible for FMLA leave on the same basis as employees who report to any other worksite to perform their job. To review, employees are eligible for FMLA leave when they have worked for the employer for at least 12 months, have at least 1,250 hours of service for the employer during the 12-month period immediately preceding the leave and work at a location where the employer has at least 50 employees within 75 miles.

According to the FAB, when an employee works from home or teleworks, their worksite for FMLA eligibility purposes is the office to which they report or from which their assignments are made. Therefore, the count of employees within 75 miles of a worksite includes all employees whose worksite is within that area, including employees who telework and report to or receive assignments from that worksite.

The FAB provides examples to illustrate these concepts. In one example, many employees of an advertising company telework from different cities and states, but all are assigned projects by the manager at the company headquarters. Accordingly, the headquarters is the worksite for these employees for FMLA eligibility purposes, and they would be included in the count of employees within 75 miles of a worksite, regardless of where they are geographically located. In the example, 300 employees, including the teleworking employees, work at or within 75 miles of the company’s headquarters. Therefore, a teleworking employee is employed at a worksite where 50 or more employees are employed by the employer within 75 miles, even though the employee does not physically work within 75 miles of the company headquarters.

Employers, particularly those with remote workers, should be aware of this FMLA guidance. The FAB also provides guidance regarding proper pay for remote work and reasonable break time for nursing remote employees under the Fair Labor Standards Act, which employers may want to review with their employment law counsel.

DOL FAB No. 2023-1 »

On February 9, 2023, the DOL released an opinion letter regarding whether the FMLA entitles an employee to reduce their workday hours indefinitely due to a chronic serious health condition. The letter also explains that FMLA leave is in addition to and distinct from employee protections provided under other laws, including the Americans with Disabilities Act (ADA).

A DOL opinion letter provides a fact-specific response to an inquiring employer’s questions. Although limited in scope to the issues posed, an opinion letter can help to clarify the requirements to comply with a particular law, such as the FMLA.

Here, the requesting employer was having difficulty satisfying the 24-hour coverage needs of a department because multiple employees presented medical certifications for taking FMLA leave. The employees were regularly scheduled to work more than eight hours per day and sought to take FMLA leave for the scheduled daily hours exceeding eight. Accordingly, the employer inquired whether employees may use FMLA leave to limit their work schedule indefinitely due to a chronic serious health condition.

The employer also questioned whether ADA protections might be more appropriate than FMLA leave to address the employees’ schedule limitations. The ADA prohibits employers from discriminating against an employee based on disability regarding employment terms and conditions. If an employee is disabled under the ADA, the employer is required to make reasonable accommodations, which could include a flexible work schedule, barring undue hardship.

In the opinion letter, the DOL explains that the FMLA entitles each eligible employee of a covered employer to take up to 12 workweeks of job-protected leave with group health coverage maintained in a 12-month period due to a serious health condition. The letter notes that if an employee is regularly scheduled to work more than 40 hours per week, they are entitled to more than 480 hours of FMLA leave per 12-month period.

Additionally, employers must permit employees to take intermittent or reduced schedule FMLA leave when medically necessary, including when employees are unable to work required overtime hours. The letter clarifies that if an employee would normally be required to work more than eight hours a day but is unable to do so because of an FMLA-qualifying reason, the employee may use FMLA leave for the remainder of each shift, and the hours which the employee would have otherwise been required to work are counted against the employee’s FMLA leave entitlement. An employee may continue to use FMLA leave for an indefinite period if they continue to be eligible, have a qualifying reason and have not exhausted their FMLA entitlement.

The letter also emphasizes that FMLA protections do not diminish an employee’s rights under other laws. In the case of an employee who needs leave for a serious health condition under the FMLA and has a disability under the ADA, requirements from both laws must be observed and applied in a manner that assures the most beneficial rights and protections to the employee. Thus, an employee who has exhausted their FMLA leave and is no longer entitled under the FMLA to work a reduced schedule may still have additional rights under the ADA.

Employers may find the opinion letter helpful in administering FMLA leave, particularly as applied to a reduced work schedule and understanding how the FMLA interacts with other laws.

DOL Opinion Letter FMLA 2023-1-A »

On February 6, 2023, the IRS released an Operational Compliance List (OC List) to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification and Code Section 403(b) requirements effective during a calendar year. The OC List was posted pursuant to IRS Revenue Procedure 2022-40, which was issued on November 7, 2022, and allows 403(b) retirement plans to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans. Please see our December 6, 2022, article for further information on IRS Revenue Procedure 2022-40.

The OC list is available on the IRS website and identifies matters that may involve either mandatory or discretionary plan amendments or significant guidance that affects daily plan operations. The IRS updates the OC List periodically to reflect new legislation and IRS guidance.

Examples of items updated in 2023 include, but are not limited to:

• Proposed regulations to allow the use of an electronic medium to make participant elections and spousal consents, which was discussed in our January 5, 2023, article.
• Guidance relating to certain required minimum distributions (RMDs) for 2021 and 2022 under Notice 2022-53, which provided clarification and transitional relief regarding changes to RMDs under the SECURE Act of 2019. Please see our October 27, 2022, article.
• Extensions of plan amendment deadlines relating to the CARES Act and Relief Act provisions that provide special tax treatment with respect to a COVID-19-related distribution or a qualified disaster distribution, respectively. Please see our October 11, 2022, article.
• Extension of plan amendment deadlines relating to the SECURE Act of 2019 and certain provisions of the Miners Act and Cares Act to December 31, 2025, under Notice 2022-33; please see our August 16, 2022, article.

However, the OC List is not intended to be a comprehensive list of every item of IRS guidance or new legislation for a year that could affect a particular plan. I.e., a plan must comply operationally with each relevant IRS requirement, even if the requirement is not included on the OC List. Additionally, a plan must be operated in compliance with a change in requirements from the effective date of the change.

Sponsors of qualified and 403(b) retirement plans may want to review the OC List and should consult with their advisors for further information.

Operational Compliance List »

On February 8, 2023, the IRS released Announcement 2023-6, indicating that they intend to issue opinion letters for pre-approved defined benefit plans that were amended based on the 2020 plan qualification requirements changes and were filed with the third six-year remedial amendment cycle. The IRS expects to issue the opinion letters on and after February 28, 2023.

Beginning in 2016, the IRS implemented a staggered remedial amendment process for pre-approved plans by creating separate six-year remedial amendment cycles. Originally, the third cycle was set to end on January 31, 2025. This announcement extends the third six-year remedial amendment cycle to March 31, 2025. As such, employer plan sponsors that would like to maintain their pre-approved defined benefit plan for the third six-year remedial amendment cycle will have from April 1, 2023, to March 31, 2025, to submit applications for individual determination letters. The IRS provided additional guidance on this update in Revenue Procedure 2023-4.

Defined benefit plan sponsors should be aware of this guidance and work with their service providers in adopting their plan documents.

Announcement 2023-6 »

Largely in response to Congress reducing the federal ACA individual mandate penalty to $0 (effective since 2019), several states have passed their own individual mandates. Similar to the ACA’s federal mandate reporting requirements, each state’s individual mandate, as applicable, generally requires employers to submit employee coverage reports and distribute statements to covered employees. Meaning, employers with employees located in the states with an individual mandate may have to comply with state individual mandate reporting requirements in addition to complying with federal reporting requirements.

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.