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Fourth Circuit Upholds Health Care Reform Law

by Michael T. Graham

On September 8, 2011, the U.S. Court of Appeals for the Fourth Circuit dismissed two lawsuits challenging the constitutionality of President Obama’s health care reform legislation, both on procedural grounds.  In one case filed by the State of Virginia, the court dismissed a challenge to the legislation’s constitutionality finding that the State of Virginia did not have standing to challenge the law.  The State of Virginia argued that the federal health care reform law conflicted with a state law that says no Virginia resident can be forced to buy health insurance.  The court found that the only basis for the Virginia state law was “to declare Virginia’s opposition to the federal insurance mandate.”  In the second case, the Fourth Circuit dismissed a challenge to the federal legislation’s constitutionality on the ground that the individual mandate was an improper tax on citizens.  The court found that it did not have jurisdiction to rule on the case because federal law prohibits challenging a “tax” before it is collected.  In this case, one dissenting judge wrote that jurisdiction did exist, but also stated that he would hold that the health care reform law was a constitutional exercise of Congress’ power under the Commerce Clause.

The Fourth Circuit is now the third federal Court of Appeals to rule on the constitutionality of health care reform.  Previously, the U.S. Court of Appeals for the Sixth Circuit upheld the constitutionality of the individual mandate under health care reform, while the U.S. Court of Appeals for the Eleventh Circuit struck down the individual mandate requirements as being unconstitutional.  There are several other lawsuits pending across the Country.  These new decisions, along with the prior decisions from the Sixth and Eleventh Circuits, set the stage for the issue of the constitutionality of the individual mandate under health care reform to reach the Supreme Court of the United States, perhaps as early as its 2012 term.




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Live Audio Conference: Why Is This Guy Still on My Health Plan?

Lorman Education Services Live Audio Conference

Why Is This Guy Still on My Health Plan?
September 26, 2011
1:00 pm (EST), (12:00 p.m. [CST], 11:00 a.m. [MST], 10:00 a.m. [PDT])

1 hour 30 minutes

Instructor:  Amy Gordon, Co-Chair of McDermott Will & Emery’s Health and Welfare Benefits Group

Companies have encountered many situations where an employee remains on the company’s health benefits as an active employee for many years past the date in which the employee was actively at work for the company, both intentionally and unintentionally.  This live audio conference will answer a common problem employers experience: what date should an employee be treated as a terminated employee when he/she is on a leave of absence or fails to return from a leave of absence, and how does this coordinate with the company-provided health and welfare benefits? This program will discuss the legal issues surrounding a leave of absence.  It will explore how an employee may fall through the cracks and how to possibly change the administrative process. Finally, the program will address some of the potential pitfalls given the new Health Care Reform rules.

This live audio conference is designed for human resource managers, benefits administrators, payroll managers, controllers, CFOs, presidents, vice presidents, business and office managers, insurance professionals and attorneys.

Click here to register for the audio conference.

To receive a 20% discount courtesy of McDermott Will & Emery, please enter this code: 9696163.




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HHS Releases Guidance Exempting Existing HRAs from Applying for Restricted Annual Limit Waivers

by Amy M. Gordon and Jamie A. Weyeneth

Under Health Care Reform, for plan years starting on or after September 23, 2010, health plans may impose only "restricted annual limits" on essential health benefits as defined by Health and Human Services (HHS).  All annual limits are prohibited for plan years starting on or after January 1, 2014.  HHS issued guidance for health plans seeking a waiver of the restricted annual limit for plan years beginning before January 1, 2014.  On August 19, 2011, HHS released guidance exempting all health reimbursement arrangements (HRAs) that were in effect on September 23, 2010, from applying for a restricted annual limit waiver.  This guidance effectively excuses existing HRAs (including stand-alone HRAs) from complying with the restricted annual limit on essential health benefits for all plan years beginning before January 1, 2014.




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Webcast: Strategies to Deal with the Patient Protection & Affordable Care Act

Live Knowledge Congress Webcast
Strategies to Deal with the Patient Protection & Affordable Care Act
September 13, 2011, Noon to 2 pm (EST)

Panel includes Susan Nash, Co-Chair of McDermott Will & Emery’s Health and Welfare Benefits Group.

The Patient Protection & Affordable Care Act (PPACA or “Health Reform Bill”) has been the subject of significant legal and policy debate since it was enacted in April 2010. The legislation has been both hailed as an important victory in the battle to improve the quality and accessibility of healthcare in the United States, and challenged as unconstitutional and ineffective in reducing medical costs and otherwise incenting choice and value in medical care and services.

Amidst this debate, legal and business strategies for dealing with the aspects of Health Reform that have been, or soon will be, implemented are often left in the background. These strategies are critical for ensuring compliance and optimizing business performance as PPACA rolls out. No matter how the broader policy or legal debate resolves, entities affected by PPACA must consider the Act’s impact on reimbursement, cost protection, and other day-to-day operational issues.

Strategies to Deal with the Patient Protection & Afford Care Act LIVE Webcast is a must-attend for healthcare professionals, health policy directors, health executives, pharmaceutical and medical device manufacturers and others who are interested in developing practical strategies to deal with healthcare reform. The Knowledge Group has assembled a panel of key thought leaders and regulators to discuss the fundamentals and updates regarding this topic.

Click here to register for the event.

To receive a discount courtesy of McDermott Will & Emery, please enter this code: will8992.




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New Guidelines Issued on Preventive Services for Women, Including Religious Employer Exception

by Amy M. Gordon, Susan M. Nash and Jamie A. Weyeneth

The U.S. Departments of Treasury, Labor, and Health and Human Services recently released joint guidance regarding mandatory coverage of contraceptive services for women under the preventive services requirements of health care reform.  The new guidance coincides with the issuance of expanded preventive care coverage requirements for women released by the Health Resources and Services Administration (HRSA).

Health care reform requires non-grandfathered group health plans and health insurance issuers to provide first-dollar coverage of certain preventive services furnished by in-network providers.  The preventive services coverage requirements are based on recommendations of the U.S. Preventive Services Task Force, the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention, and HRSA.  In addition, HRSA was charged with developing additional preventive care and screening guidelines for women.  HRSA commissioned the Institute of Medicine (IOM) to help to identify gaps in preventive care services already required under health care reform.

When the IOM released its recommendations in mid-July 2011, concerns about the inclusion of contraceptive services were raised by religious organizations.  The regulators determined it would be appropriate to take into account the religious beliefs of religious employers and issued guidance providing for limited religious accommodation.  Specifically, the interim final regulations on mandatory preventive care were revised to permit HRSA to create an exception for group health plans established or maintained by religious employers with respect to any requirement to cover contraceptive services.  A religious employer is one that has the inculcation of religious values as its purpose; primarily employs persons who share its religious tenets; primarily serves persons who share its religious tenets; and is a nonprofit organization under Section 6033(a)(1) and Section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code.  The regulators noted this approach is consistent with most states that require coverage of contraceptive services under state insurance laws.  The final guidelines released by HRSA on August 1, 2011, include this exception for religious employers.

Click here to view the new women’s preventive services guidelines issued by HRSA.  Recommended preventive services issued after September 23, 2009, are effective as of the first day of the first plan year/policy year beginning on or after the one-year anniversary of the date the recommendation is issued.  Therefore, these new guidelines (including the religious employer exception) will apply for plan years/policy years beginning on or after August 1, 2012.




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Potential Repeal of DOMA?

by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann

As same-sex marriages began taking place over the weekend in New York state (click here for more information on the benefit implications of that development), another development that could have even more far-ranging implications for benefit plans also occurred last week. Specifically, last week the Senate Judiciary Committee held hearings on a bill entitled the “Respect for Marriage Act” which would repeal the Defense of Marriage Act’s (DOMA) definition of marriage for purposes of federal law as a union between one man and one woman. If the Respect for Marriage Act were enacted, it would — among other things — significantly complicate the administration of benefit plans on a multitude of issues such income tax inclusion, COBRA, death benefits, etc. (For more information, click here). There could also be significant confusion regarding whether a same-sex marriage entered into in one state can or must be recognized by another state; the federal DOMA inspired many states to enact their own mini-DOMA statutes, the constitutionality of which might be in question if the Respect for Marriage Act were enacted.

Legislative prospects for the Respect for Marriage Act are difficult to predict. However, consistent with the Administration’s position to stop enforcing portions of DOMA (click here for more information), the President has indicated his willingness to sign the Respect for Marriage Act if presented to him.




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Same-Sex Marriage Legalized in New York: Implications for Employee Benefit Plans

by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann

Now that same-sex marriage has been legalized in the state of New York, employers should expect to begin seeing an increase in requests for spousal benefit coverage from employees who have legally married their same-sex partners.  The new law takes effect on July 24, 2011.

To read the full article, click here.




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Guidance Regarding Annual Waiver Application Deadline

by Susan M. Nash and Maureen O’Brien

On June 17, 2011, the U.S. Department of Health and Human Services (HHS) issued additional guidance with respect to the annual waiver limit program.  The annual waiver limit program allows issuers or other group health plan sponsors to apply for a waiver from the annual limit requirements if they present evidence that meeting the annual limits would result in diminished access to benefits or a significant increase in premiums.  Typically, issuers or group health plan sponsors that offer extremely basic coverage would be interested in applying for the annual limit waiver program.

Importantly, recipients of these waivers must take action between June 24, 2011 and September 22, 2011 in order to preserve those waivers through the end of 2013. In addition, new applicants must submit applications under the annual limit waiver program between June 24, 2011 and September 22, 2011 in order to receive a new waiver.  Extensions or new applications not received on or before September 22, 2011 will not be eligible for an annual limit waiver and will need to comply with the requirements of the Patient Protection and Affordable Care Act (PPACA).

Additional Modifications to the Annual Limit Waiver Program

The following additional modifications were made to the annual limit program:

  • Health plans and issuers will no longer need to apply for a waiver each year. 
  • Plans and issuers that have secured waivers must distribute a notice each year to all eligible participants informing them of the waiver.
  • As a condition of the extension, updates must be filed by December 31, 2012 and December 31, 2013 providing the same materials as are required for the extension.

Click here for the new HHS Guidance. 




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Illinois Civil Unions Complicated by Federal DOMA and Potential DOMA Repeal

by Todd A. Solomon and Brett R. Johnson

The Illinois Religious Freedom Protection and Civil Union Act, which legalizes civil unions for same-sex and opposite-sex partners, takes effect on June 1, 2011.  The law entitles civil union partners to all of the legal rights and obligations that opposite-sex spouses have under Illinois state law by requiring that a party to a civil union be included in any use of the terms “spouse,” “family,” “immediate family,” “dependent,” “next of kin” or other terms that denote a spousal relationship throughout Illinois law.  Illinois will recognize as a civil union any same-sex marriage, civil union or substantially similar legal relationship entered into in other states.

The application of the Illinois law is complicated by the intersection of federal and state law.  The federal Defense of Marriage Act (DOMA) continues to define a “spouse” as a husband or wife of the opposite sex.  A civil union in Illinois will not, therefore, be a “marriage” under DOMA.  As a result of DOMA, parties to an Illinois civil union will not be entitled to federal law benefits applicable to opposite-sex spouses (e.g., qualified joint and survivor annuity (QJSA) and qualified pre-retirement survivor annuity (QPSA) benefits under tax qualified retirement plans, COBRA coverage, etc.).  Note, however, that on March 16, 2011, both the U.S. House and Senate introduced legislation to repeal DOMA (The Respect for Marriage Act of 2011), and to tie federal law marital status to an individual’s marital status in the State where the individual entered into the marriage.  The Respect for Marriage Act bills currently rest with the Judiciary Committees of the House and Senate, and the next step for each (e.g., Committee vote, hearings, Senate and/or House floor vote) is unclear.

Because the new Illinois civil union law may impact areas such as employee benefit plans, employer leave policies (including the Illinois Family Military Leave Act) and any other employer-provided benefits covering spouses, employers should ensure such programs are in compliance with the June 1, 2011 law change.  More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here, while the impact on Religious Organizations benefits is discussed here.




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California Adopts Federal Tax Treatment of Health Coverage for Adult Children

by Susan M. Nash, Amy M. Gordon, Todd A. Solomon, Raymond M. Fernando and Adrienne Walker Porter

On April 7, 2011, Governor Jerry Brown signed into law California Assembly Bill 36 (AB 36).  AB 36 conforms certain California income and employment tax laws to certain changes to the United States Internal Revenue Code (the Code) and Internal Revenue Service (IRS) guidance relating to the favorable tax treatment of health benefits coverage for adult children under age 27.  The favorable state tax treatment afforded under AB 36 applies retroactively as of March 30, 2010, which also conforms to the effective date of the parallel provisions under the Code.  For a more detailed summary of AB 36, see our related On the Subject, "Health Care Reform: California Adopts Favorable Federal Tax Treatment of Health Coverage for Adult Children Under Age 27."

Background
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Act), generally requires group health plans that provide dependent coverage for children to continue to make such coverage available for adult children until age 26, beginning as of the first plan year commencing on or after September 23, 2010.  Effective as of March 30, 2010, the Act also afforded certain favorable tax treatment under the Code with respect to such coverage.  See our related On the Subject, "Health Care Reform: IRS Guidance on Health Coverage for Children Under Age 27."

Discrepancies Between State and Federal Tax Laws
Some states’ tax laws do not automatically conform to corresponding changes in federal tax laws.  Thus, although the Act made various changes to the Code relating to the tax treatment of health coverage and reimbursements for children under age 27, some states’ tax laws did not automatically conform to those changes.  California recently adopted AB 36 to conform to such changes under the Code.

Next Steps for Employers and Plan Administrators
Employers and plan administrators should take action now in the following ways:

  • Employers and plan administrators subject to California state tax should take steps to ensure that their reporting and payroll systems comply with the changes made under AB 36.
  • Employers and plan administrators should consider circulating employee communications regarding the impact of AB 36.
  • Employers and plan administrators should continue to monitor California and other state laws for further tax reform related to health coverage for adult children under age 27. 



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