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Takeaways from a Recent COBRA Notice Class Action Settlement

There has been a flurry of class action lawsuits and settlements relating to the deficiency of required election notices under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The notices provide employees and their beneficiaries who participate in an employer’s group health plan with the option to elect to continue their coverage following a COBRA qualifying event. A recent class action lawsuit illustrates the stakes and provides some valuable lessons.

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Inflation and ERISA Penalties: Hand in Hand for 2022

The Federal Civil Penalties Inflation Adjustment Act of 2015 directs the US Department of Labor (DOL) to make annual inflation adjustments to specified Employee Retirement Income Security Act (ERISA) violations. The increased penalties generally apply to reporting and disclosure failures if the penalty is assessed after January 15, 2022, and if the violation occurred after November 2, 2015.

Access the updated DOL penalties.




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Paving the Way for More HRAs

President Trump signed an executive order last year directing the Secretaries of Labor, Treasury and Health and Human Services to consider proposing regulations to “increase the usability of HRAs.” This month, the collective departments issued proposed regulations containing changes to the prohibition on pairing HRAs with individual health policies, as well as other changes to the current HRA rules.

Proposed effective date January 1, 2020; comments due December 28, 2018.

Access the full article.




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Congress Passed the 21st Century Cures Act

Congress has passed, and President Obama is expected to sign the 21st Century Cures Act, H.R. 34. Among other things, the new legislation will permit small employers (those that are not considered applicable large employers under the Affordable Care Act (ACA)), to maintain general-purpose stand-alone Health Reimbursement Arrangements (HRAs) if they do not offer a group health plan to any of their employees. Stand-alone HRAs are not permitted based on ACA guidance. Annual benefits under these new HRAs cannot exceed an indexed maximum of $4,950 per year ($10,000 if family members are covered), must be funded solely by employer contributions (employee contributions are not permitted), and can only be used for the reimbursement of Internal Revenue Code §213(d) medical care expenses.




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Phase 2 HIPAA Audits Are Underway

The US Department of Health and Human Services Office for Civil Rights (OCR) will soon begin a second phase of audits for compliance with HIPAA privacy, security and breach notification standards as required by the HITECH Act. In this second phase, OCR will audit both covered entities and their business associates, unlike the pilot audits of 2011 and 2012, which focused on covered entities alone. This On the Subject details practical steps that covered entities, including employer-sponsored group health plans, and their business associates can take to prepare for a potential audit.

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New Cafeteria Plan Change in Status Options

In Notice 2014-55, the Internal Revenue Service (IRS) announced two new situations in which employees may change their health plan elections midyear under their employer’s cafeteria plan.  In the first, an employee’s hours are reduced below 30 per week (without a corresponding loss of eligibility for the employer’s group health plan).  In the second, an employee decides to enroll in coverage through a Marketplace Exchange (Exchange).  Both of these are optional changes in status; neither is mandatory.

Reduction in Hours

If an employee who was expected to work on average at least 30 hours per week is then expected midyear to work on average less than 30 hours per week, the employee may drop his or her employer-provided group health plan coverage, even if the reduction in hours does not result in the employee’s loss of eligibility under the group health plan.  The change in election must correspond to the employee’s intended enrollment (and the intended enrollment of any family members whose coverage is being dropped) in other minimum essential coverage (group health plan or Exchange).  The new coverage must be effective no later than the first day of the second month following the month in which the employer-sponsored coverage is dropped.  The administrator of the employer’s cafeteria plan may rely on an employee’s reasonable representation about the intended enrollment.

Exchange Coverage

An employee who is eligible to enroll in Exchange coverage (during an Exchange open enrollment or special enrollment period) may drop employer-provided group health plan coverage midyear.  The change must correspond to the employee’s intended enrollment (and the intended enrollment of any family members whose coverage is being dropped) in Exchange coverage that is effective no later than the day after the last day of the employer-sponsored coverage.  The administrator of the employer’s cafeteria plan may rely on an employee’s reasonable representation about the intended enrollment.

Plan Amendment

If an employer chooses to adopt one or more of these midyear election changes for its cafeteria plan, a plan amendment is necessary.  The amendment generally must be adopted on or before the last day of the plan year in which the additional changes are allowed and can be effective retroactively to the first day of that plan year, provided that the plan operates in accordance with the guidance, including notification to participants of the amendment.

Special Rule for the 2014 Plan Year

Under a special rule, an employer that adopts these new midyear election changes for its 2014 cafeteria plan year has until the last day of the 2015 plan year to adopt the amendment.  Although plan amendments may be adopted retroactively, election changes to revoke coverage retroactively are not permitted.




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Summary of Benefits and Coverage Disclosure Requirements

by Amy M. Gordon, Joanna C. Kerpen and Susan M. Nash

Recently issued final regulations and related guidance clarify the requirement under the Patient Protection and Affordable Care Act that group health plans and health insurance issuers provide a summary of benefits and coverage and a uniform glossary.  The guidance includes final regulations and sample summaries and instructions.

To read the full article, click here.




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HHS Provides Additional Guidance on Health Plan Coverage of Contraceptive Services by Nonprofit Religious Employers

by Amy Gordon and Susan Nash

The Patient Protection and Affordable Care Act (PPACA) requires non-grandfathered group health plans to provide coverage for certain preventive services on a first dollar basis (i.e. without deductibles, co-payments, co-insurance or other cost-sharing).  Interim final regulations provide an exemption for a very narrow subset of religious employers with respect to coverage of contraceptive services.  To qualify for the exemption the entity must be a nonprofit religious employer that offers insurance to its employees.  Many entities affiliated with religious institutions, such as hospitals and universities, do not meet this narrow exception.

Now, the U.S. Department of Health and Human Services (HHS) has provided additional guidance for nonprofit employers that do not cover contraceptive services under their current plans because of religious beliefs and that do not fit within the previous exemption.  These employers will have an additional year, until August 1, 2013, to comply with the new law.  Employers wishing to take advantage of the additional year will have to certify that they are eligible for this delayed implementation.  The announcement also indicates that employers that do not offer coverage of contraceptive services will be required to provide notice to employees stating that such services are available with income-based support at sites such as community health centers, public clinics and hospitals.




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