On April 13, 2023, the DOL, HHS and IRS (the “agencies”) jointly issued FAQs (Part 59) to provide initial guidance on how the recent court decision in Braidwood Management Inc. v. Becerra affects the requirement to cover preventive services without cost-sharing under the ACA. According to the FAQs, the agencies anticipate issuing additional guidance in the future to further address plans' and issuers' obligations in light of the Braidwood decision.

As background, under the ACA, non-grandfathered group health plans must cover certain preventive services without cost-sharing when they are delivered by an in-network provider. The covered requirements have historically included services given an “A” or “B” rating from the US Preventive Services Task Force (USPSTF), vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), and preventive care and screenings for children and women recommended by the Health Resources and Services Administration (HRSA). On March 30, 2023, the US District Court for the Northern District of Texas (the “court”) issued a final judgment in Braidwood Management Inc. v. Becerra, which invalidates and prohibits the agencies from enforcing all USPSTF-recommended preventive care mandates issued since the ACA’s March 23, 2010, enactment, on a nationwide basis. Additionally, the final judgment prevents the agencies from enforcing the PrEP coverage requirements as to the plaintiffs with religious objections. For additional background information, please see our April 11, 2023, article.

Below is the key summary of the FAQs:

Preventive Service Coverage Requirements Affected by the Decision
The FAQs emphasize that the court ruling only removes the ACA coverage requirements and cost-sharing prohibitions for preventive care based on the USPSTF recommendations (e.g., lung cancer screening and pre-exposure prophylaxis (PrEP) drugs to prevent HIV infection). Preventive care recommendations by ACIP (e.g., vaccines and immunizations) and HRSA for women's health services, including contraceptive coverage requirements, would not be affected and, therefore, could not be subject to the cost-sharing requirement.

Specifically, the ruling prevents the agencies from implementing and enforcing preventive items and services given an “A” or “B” recommendation by the USPSTF on or after March 23, 2010. However, the agencies encourage plans to continue coverage without cost-sharing. Furthermore, plans and issuers must continue to cover, without cost-sharing, items and services recommended by ACIP or HRSA that overlap with stricken USPSTF recommendations.

Impact of State Laws and Midyear Coverage Changes
The court ruling does not impact state insurance law requirements to cover preventive care with an "A" or "B" rating by the USPSTF on or after March 23, 2010. Therefore, the agencies encourage issuers to continue to comply with any applicable state laws. Further, any midyear changes would need to comply with applicable state and federal laws, contractual provisions, and, if applicable, collective bargaining agreements.

Notice Requirements
Plans must comply with applicable notice requirements. If SBC content is affected, notice must be 60 days in advance of the change. Additionally, ERISA requires a summary of material reduction in covered services or benefits within 60 days following the change.

Qualified HDHP status
Until further notice, an HDHP can continue to provide benefits without cost-sharing for items and services recommended with an "A" or "B" rating by the USPSTF on or after March 23, 2010, before the minimum annual deductible is met.

Employers should be aware of the FAQ guidance and monitor future developments. The court’s decision has been appealed to the Fifth Circuit Court of Appeals, and the final outcome is not yet known. Employers considering any changes because of the court ruling should consult with counsel for guidance.

FAQs About ACA and Coronavirus Aid, Relief, and Economic Security Act Implementation »

On April 12, 2023, the HHS Office of Civil Rights (OCR) issued a Notice of Proposed Rulemaking that will expand reproductive healthcare privacy under HIPAA.

The proposed rule prohibits the use or disclosure of PHI by individuals, covered entities (which includes group health plans), or their business associates (collectively, “regulated entities”) for either of the following purposes:

• A criminal, civil, or administrative investigation into or proceeding against any person in connection with seeking, obtaining, providing or facilitating reproductive healthcare, where such healthcare is lawful under the circumstances in which it is provided.
• The identification of any person for the purpose of initiating such investigations or proceedings.

The prohibition would apply where the relevant criminal, civil, or administrative investigation or proceeding is in connection with one of the following:

• Reproductive healthcare that is sought, obtained, provided or facilitated in a state where the healthcare is lawful and outside of the state where the investigation or proceeding is authorized.
• Reproductive healthcare that is protected, required or expressly authorized by federal law, regardless of the state in which such healthcare is provided.
• Reproductive healthcare that is provided in the state where the investigation or proceeding is authorized and is permitted by the law of the state in which such healthcare is provided.

Although the proposed rule places new restrictions on the disclosure of PHI, it will allow a regulated entity to use or disclose PHI for purposes otherwise permitted under the Privacy Rule. However, regulated entities can use or disclose PHI as long as the request for PHI is not made primarily for the purpose of investigating or imposing liability on any person for the mere act of seeking, obtaining, providing or facilitating reproductive healthcare.

When a regulated entity receives a request for PHI potentially related to reproductive healthcare, the proposed rule requires that entity to obtain a signed attestation that the use or disclosure is not for a prohibited purpose. This attestation requirement would apply when the request is for PHI in any of the following circumstances:

• Health oversight activities
• Judicial and administrative proceedings
• Law enforcement purposes
• Disclosures to coroners and medical examiners

Employers, particularly those with self-insured plans, should be aware of this proposed rule. Interested parties have 60 days from the date OCR published the proposed rule in the federal registry to submit public comments.

Proposed Rule »
Fact Sheet »
Guidance Relating to HIPAA Privacy Rule and Disclosures of Information Relating to Reproductive Health Care »

On April 19, 2023, the DOL announced a settlement with Prudential Insurance Company of America (Prudential) following an investigation into the carrier’s group supplemental life insurance claims practices. The DOL investigation found that Prudential, based on the terms of its group life insurance policies, has denied claims for failure to provide evidence of insurability (EOI) after collecting supplemental life insurance premiums from participants (via employer payroll deductions) for extended periods of time.

Specifically, from 2017 to 2020, Prudential denied more than 200 claims related to supplemental coverage on the grounds that the participant failed to produce EOI, despite collecting premiums for many months or even years. The DOL’s announcement noted that parallel investigations found other life insurers also engaged in similar practices.

The Prudential settlement provides protections for participants who have paid premiums for extended periods of time and were thereby led to believe their coverage is in force. First, Prudential is prohibited from denying a death claim based on lack of EOI when premiums were collected for more than three months. Second, Prudential is prohibited from denying continued coverage based on EOI for any participant who has been paying premiums for more than one year. Third, for any participant who has not submitted EOI as required under the group life policy terms but has been paying coverage for less than one year, Prudential can only require EOI as of the date of the participant’s first premium payment. Meaning, Prudential cannot request nor consider information regarding a medical issue, diagnosis, new prescription, or any other relevant insurability fact arising after Prudential’s receipt of the participant’s first premium payment. Fourth, Prudential must notify all group policyholders of these new protections and corrective premium collection procedures going forward. Finally, separate from the settlement agreement, Prudential advised the DOL they will voluntarily reprocess and pay any claims denied for lack of EOI since June 2019.

Importantly, for employers sponsoring group life insurance plans, the DOL settlement affirms that employers may be liable for claims if they collected premiums without first confirming that Prudential approved the employee’s or eligible dependent’s EOI. This is consistent with federal courts across the country that have found employers liable for breach of fiduciary duty under ERISA when collecting premiums on life insurance coverage that is not in force. Two of these cases were recently featured in Compliance Corner: Gimeno v. NCHMND, Inc. and Skelton v. Radisson Hotel Bloomington.

Employers should work with their life insurance carriers to maintain a safeguarded system for verifying enrollment and collecting premiums. Any discrepancies should be reviewed with legal counsel.

DOL and Prudential Settlement Agreement »

The Seventh Circuit Court of Appeals (Seventh Circuit) has remanded two of three of the plaintiffs’ claims for further proceedings in Hughes v. Northwestern University after the US Supreme Court overturned its previous ruling that dismissed all three claims.

The plaintiffs originally sued Northwestern in 2016, alleging breaches of ERISA fiduciary duties regarding its defined contribution retirement plans, including:

• Retaining plan recordkeepers that charged “excessive” revenue-sharing fees rather than a flat (or “per capita”) fee.
  
• Offering investments in “retail” share classes (generally intended for the individual investor market) rather than identical “institutional” share classes (generally made available for companies and organizations with employees that invest on behalf of others), even though institutional share classes charged lower fees than the retail classes.
• Presenting so many different and “duplicative” investment alternatives that caused confusion, “decision paralysis,” and bad investment decision making on the part of participants.

The lower district court dismissed all these claims and, on appeal, the Seventh Circuit affirmed that ruling. The Seventh Circuit reasoned, in part, that because Northwestern’s plan included the type of low-cost investment options plaintiffs claimed to prefer in addition to the “higher-cost” options complained of in their lawsuit, there was no need to further examine the latter options under ERISA.

However, in 2022, the Supreme Court (the Court) overturned the Seventh Circuit on the well-established grounds that plan fiduciaries have a continuing duty to monitor investment options separate from and in addition to the duty to prudently select those options in the first place. Please see our February 1, 2022, article on the Court’s decision.

Writing for a unanimous Court, Justice Sotomayor was especially critical of the Seventh Circuit’s rationale that the mere availability of some “prudent” investment options in a retirement plan precluded any need to review the investment options on offer: “That reasoning [is] flawed. Such a categorical rule is inconsistent with the context-specific inquiry that ERISA requires and fails to take into account [Northwestern’s] duty to monitor all plan investments and remove any imprudent ones.”

Considering this directive, the Seventh Circuit reassessed the plaintiffs’ claims as follows:

• Excessive Fees: The Seventh Circuit held that while the use of revenue sharing for plan expenses is not in and of itself a violation of a fiduciary duty under ERISA, neither does that mean that using such an arrangement necessarily fulfills a plan fiduciary’s duty of prudence. Therefore, the plaintiffs made a plausible claim of Northwestern’s breach of its fiduciary duty, which the trial court must evaluate further.
• “Retail” v. “Institutional” Share Classes: Emphasizing that “no prudent fiduciary would purposely invest in higher cost retail shares,” the Seventh Circuit requested that the trial court evaluate the plaintiffs’ plausible claims of institutional share class availability against Northwestern’s denial of same.
• Too Many Investment Options: Observing that “plans may generally offer a wide range of investment options and fees without breaching any fiduciary duty” and that the plaintiffs had failed to specify just “how [they] were confused and personally injured by the multiplicity of funds,” the Seventh Circuit dismissed this allegation as too vague and speculative to merit any further consideration and thus reaffirmed the trial court’s original dismissal of this claim.

Retirement plan fiduciaries should take this ruling (as well as the Supreme Court decision preceding it) as a stark reminder that their fiduciary obligations do not end once investment options have been selected. Rather, they’ve only just begun, given their duty to monitor those investment options on an ongoing basis, including removing the imprudent ones as may be required to comply with their obligations to plan participants under ERISA.

Hughes v. Northwestern University »

If an employer has 20 or more employees, the answer is no. Employers with 20 or more employees are subject to Medicare Secondary Payer (MSP) rules, which say an employer cannot provide a financial incentive to an active employee or spouse to encourage enrollment in Medicare instead of the group health plan. Reimbursing an employee’s Medicare premiums or providing additional compensation if the employee drops the group health plan are both considered to be providing a financial incentive.

There are two relevant guidelines under the MSP Regulations. The first prohibits an employer with 20 or more employees from taking an individual’s Medicare status into consideration. The second guideline prohibits an employer (again, with 20 or more employees) from providing a financial incentive for a Medicare-eligible individual to not enroll or terminate group coverage to make Medicare primary.

To summarize, employers should not take into account an employee’s or spouse’s Medicare status and should offer the same benefit options that are available to other employees and spouses who have not reached Medicare age. Employers who violate MSP rules can be subject to penalties of up to $5,000 per violation, legal action and liability for damages, and excise tax penalties.