PPI in the News Compliance Corner - March 30, 2023 Archive
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On March 17, 2023, the IRS published new frequently asked questions (FAQs) that address whether certain costs related to nutrition, wellness and general health, such as nutritional counseling, weight-loss programs, and mental health-related therapies, are medical expenses that may be paid or reimbursed under a HSA, health FSA, Archer MSA or HRA.

As background, IRC Code 213 defines the eligible expenses under a HSA, health FSA, Archer MSA or HRA. Code 213 defines eligible expenses as medical expenses that are the costs of the diagnosis, cure, mitigation, treatment, or prevention of disease and for the purpose of affecting any part or function of the body. Further, medical expenses must be primarily to alleviate or prevent a physical or mental disability or illness and not merely used to benefit general health.

The FAQs confirm whether the below services and items can be reimbursed by a HSA, health FSA, Archer MSA or HRA.

• Dental, eye and physical exams: Yes, because these exams diagnose whether a disease or illness is present.
• Smoking cessation programs: Yes, because it treats a disease.
• Program to treat a drug-related substance use disorder: Yes, because it treats a disease.
• Therapy: Yes, if the therapy is a treatment for a disease (e.g., to treat a diagnosed mental illness). Otherwise, it is not eligible (e.g., marital counseling).
• Nutritional counseling: Yes, but only if the nutritional counseling treats a specific disease diagnosed by a physician (e.g., obesity or diabetes).
• Weight-loss program: Yes, only if the program treats a specific disease diagnosed by a physician (e.g., obesity, diabetes, hypertension or heart disease).
• Food or beverages purchased for weight loss or other health reasons: Yes, but only if it meets certain requirements.
• Gym membership: Yes, only if the membership was purchased strictly for the purpose of affecting a structure or function of the body (e.g., a prescribed plan for physical therapy to treat an injury) or for the sole purpose of treating a specific disease diagnosed by a physician (e.g., obesity, hypertension or heart disease).
• Nutritional supplements: Yes, but only if the nutritional supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician.

Though these FAQs do not introduce new rules, they are helpful reminders to employers as they educate their employees on the eligible expenses under their HSA, health FSA, Archer MSA or HRA plans. Further, these FAQs remind employers and cafeteria plan administrators of the importance of obtaining sufficient and appropriate substantiation before reimbursing claims.

FAQs »
News Release »

The DOL, HHS, and IRS recently issued revised Federal Independent Dispute Resolution (IDR) Process Guidance for certified IDR entities and for disputing parties. The Federal IDR Process Guidance outlines the IDR process used by plans, insurers, providers, and certified IDR entities in resolving claims for payment for out-of-network services that are subject to the federal No Surprises Act surprise billing rules.

The Federal IDR Process Guidance was updated mainly to reflect a recent court ruling in Texas Medical Association v. HHS that vacated portions of the final regulations related to the information a certified IDR entity must consider in making a payment determination and the information required to be included in a certified IDR entity’s written decision. (See the February 16, 2023, article in Compliance Corner). The court determined that the final regulations issued in August 2022 swayed the IDR negotiation process in favor of the qualifying payment amount (QPA) by requiring certified IDR entities to consider the QPA before considering other information and limiting the situations where other information submitted by a party may be considered. In response to the court decision, the revised Federal IDR Process Guidance instructs certified IDR entities to consider both QPAs and other information to determine the payment amount.

The revised Federal IDR Process Guidance is effective for payment determinations made on or after February 6, 2023, for items and services furnished on or after October 25, 2022, for plan years beginning on or after January 1, 2022. Prior guidance issued on October 31, 2022, applies to payment determinations made before February 6, 2023, for items and services furnished by an out-of-network provider on or after October 25, 2022.

The revised Federal IDR Process Guidance is expected to accelerate the IDR payment determinations process again. Previously, payment determinations involving items or services furnished on or after October 25, 2022, have been on hold pending further guidance from the agencies. Particularly, employers with self-insured plans should review the revised Federal IDR Process Guidance to be familiar with the latest IDR process.

Federal Independent Dispute Resolution (IDR) Process Guidance for Disputing Parties »
Federal Independent Dispute Resolution (IDR) Process Guidance for Certified IDR Entities »

On February 23, 2023, in Yates v. Symetra Life Insurance Company, the Eighth Circuit Court of Appeals (the “Eighth Circuit”) affirmed a district court ruling that an ERISA plan participant is not required to exhaust administrative remedies before challenging a benefit denial in court when the written plan documents do not mention any review process or administrative remedies to be exhausted.

The case involved employee Terri M. Yates, who worked at Phelps County Bank and participated in the company’s ERISA employee benefit plan (the “Plan”), which also covered her husband as a dependent. The Plan was issued and managed by Symetra Life Insurance Company (“Symetra”), and the various benefits were summarized in an employee benefits insurance certificate distributed to participants. Among the Plan’s benefits was an accidental death insurance policy, which paid benefits if a covered individual suffered certain losses, including a loss of life due to an accidental bodily injury that was sudden and unforeseen. However, the policy excluded coverage for losses caused by “intentionally self-inflicted injury.”

After Yates’s husband died of a heroin overdose, she sought accidental death benefits under the Plan. Symetra denied her claim. The denial letter explained that Yates could request a review of Symetra’s decision by submitting a written request within 60 days. The letter detailed the internal review process and noted that Yates could file a civil ERISA lawsuit after completing Symetra’s appeal process. However, the written Plan documents issued by Symetra did not mention this internal review process nor provide for any other appeal procedures following a benefit denial.

Yates did not request that Symetra review its decision; instead, she sued Symetra for a denial of ERISA benefits. Symetra argued that Yates’s suit was barred by her failure to exhaust the Plan’s internal review procedures described in the denial letter. (ERISA allows a plan participant to sue to recover plan benefits. However, a participant generally must first pursue and exhaust the plan’s administrative remedies, or their legal claims for relief may be barred). The district court reviewing the case concluded that Yates was not subject to an exhaustion requirement because the written Plan documents did not describe any appeal or review procedures for her to exhaust. As a result, the district court granted summary judgment in Yates’s favor.

Symetra appealed the district court’s decision to the Eighth Circuit. On appeal, Symetra conceded that the written Plan documents did not provide for any internal review procedures following a benefit denial. Nonetheless, Symetra argued that the denial letter, which specified the Plan’s internal review process, triggered an exhaustion requirement. Alternatively, Symetra asserted that Yates’s husband’s death was caused by his intentional act of using heroin and, therefore, was excluded from the accidental death coverage as an “intentionally self-inflicted injury.”

On appeal, the Eighth Circuit affirmed the district court’s ruling that an ERISA plan participant is not required to exhaust administrative remedies before suing for a benefit denial in court when the written plan documents fail to reference any review process or administrative remedies. The Eighth Circuit explained this opinion was consistent with their prior cases and noted that the Sixth Circuit recently addressed the same issue and concluded that a plan could not avail itself of an exhaustion requirement unless the underlying plan documents detail the required internal appeal procedures. The Eighth Circuit also emphasized the primacy of written plan documents when resolving ERISA claims.

ERISA plans must establish and maintain reasonable procedures governing the filing of benefit claims and appeals that participants can rely upon. These procedures must be described in the summary plan description. The Eighth Circuit observed that Symetra’s written Plan documents did not appear to satisfy these requirements and rejected Symetra’s argument that the denial letter triggered an exhaustion requirement. In the Eighth Circuit’s opinion, requiring Yates to exhaust internal review procedures that cannot be found in the Plan documents would render her reliance on those documents largely meaningless.

After determining Yates’s suit was not barred by an exhaustion requirement, the Eighth Circuit reviewed de novo the merits of her benefit denial claim. Symetra argued it properly denied Yates’s claim for accidental death benefits under an “intentionally self-inflicted injury” exclusion to coverage. The Eighth Circuit concluded that the plain language of Symetra’s “intentionally self-inflicted injury” exclusion did not apply to unintended injuries like Yates’s husband’s heroin overdose. Thus, Symetra’s denial of Yates’s claim for accidental death benefits based on that exclusion was erroneous. The district court had reached the same conclusion; accordingly, the Eighth Circuit affirmed the district court’s judgment.

For plan administrators, this case highlights the importance of ensuring their ERISA plan documents reflect required information, including a plan’s procedures governing the filing of claims and appeals. Importantly, these procedures must also be described in the summary plan description distributed to plan participants. As the case illustrates, if a plan fails to meet these disclosure requirements, a participant may be able to bring a lawsuit for a denial of benefits before exhausting the plan’s internal claim review requirements.

Yates v. Symetra Life Insurance Company »

On March 7, 2023, in Schuyler v. Sun Life Assurance Co. of Canada (Sun Life), the US District Court for the Southern District of New York found ERISA rights were waived through an employment separation agreement.

The plaintiff in this case, Kristen Schuyler, filed a long-term disability (LTD) claim through her employer-sponsored plan insured by Sun Life, following an injury that left her unable to work. Sun Life denied the claim asserting insufficient information to support disability and upheld that denial on appeal. Schuyler then sued Sun Life, challenging the LTD benefit denial in court.

Sun Life argued that a separation agreement Schuyler signed with her employer released all legal claims she could have under ERISA, including those against Sun Life. In particular, the separation agreement called out ERISA twice, stating that any potential ERISA claims “arising out of or in any way connected with [Schuyler’s] employment” were released. The court agreed with Sun Life, noting previous cases where a release of ERISA claims was enforced even in severance agreements that did not specifically name the ERISA statute but contained an expansive release of all claims arising out of an employment relationship.

The court further found that while Sun Life was not an explicitly named party in Schuyler’s separation agreement with her employer, the released entities stretched to “parties-in-interest.” ERISA defines a “party-in-interest” to include plan fiduciaries, such as Sun Life, with respect to the LTD plan.

In upholding the release, the court noted several other factors that supported Schuyler knowingly and voluntarily waived her right to ERISA litigation, including:

• Her education and business experience.
• The time she took to review the agreement.
• Her role in negotiating a higher separation payment.
• Her disability attorney’s review of the agreement.

It is unclear whether Schuyler’s employer intended their separation agreement to release all ERISA claims under its group benefits plans, including Schuyler’s right to challenge Sun Life’s LTD denial in court. Release language in separation agreements is typically very broad. The Schuyler case serves as an important reminder for employers to work with their legal counsel when drafting and negotiating employment separation agreements to ensure claims are released only as intended.

Schuyler v. Sun Life »

Retirement plan fiduciaries may continue to consider the potential financial benefits of investing in funds that take “the economic effects of climate change and other environmental, social, and corporate governance factors” (“ESG factors”) into account without fear of automatically running afoul of ERISA’s fiduciary duty requirements after President Biden’s veto of a House resolution on March 20, 2023.

The point of controversy was a rule promulgated by the Democratic Biden administration (“the Biden rule”) that changed a Republican rule made final in the waning weeks of the Trump administration (“the Trump rule”). The Trump rule required plan fiduciaries to base investment decisions solely on “pecuniary factors,” defined as factors that a fiduciary “prudently determines” are expected to have a “material effect” on the risk or return of an investment, and was viewed as limiting consideration of ESG factors in plan investment decisions.

Pursuant to President Biden’s executive order (issued just after his inauguration), the DOL announced it would not enforce the Trump rule in March 2021. The DOL then proposed a rule explicitly allowing for the consideration of ESG factors in October 2021 and finalized this rule in December 2022. Please see our December 8, 2022 article for further information regarding the Biden rule. The newly Republican-controlled House of Representatives then passed (and the Senate later agreed to) a resolution to nullify the Biden rule, which President Biden vetoed.

Thus, retirement plan fiduciaries wanting to consider ESG factors can take some comfort that the Biden rule is here to stay, at least for the foreseeable future. However, its long-term prospects remain murky, especially with the White House up for grabs in 2024.

Fiduciaries should also be mindful that while the Biden rule ensures that taking ESG considerations into account would not be deemed an automatic ERISA violation by those fiduciaries, the rule also does not absolve fiduciaries of ERISA’s standard duty of prudence in investment and financial decisions by simple virtue of those ESG considerations.

That is, the Biden rule is not a “safe harbor” rule. Retirement plan fiduciaries are still required to exercise the same level of prudence and care when considering ESG factors for investment and financial decisions as they are when taking into account any other consideration for the same purposes.

Message to the House of Representatives — President's Veto of H.J. Res 30 »

There is still time! The standard deadlines for an employee to notify the plan of a HIPAA special enrollment right (SER) have been significantly extended because of COVID-19 relief guidance. These deadline extensions are mandatory and are still in effect.

To review, HIPAA requires that group medical plans provide midyear special enrollment opportunities under certain circumstances. A HIPAA SER can arise in the event of a birth or a child’s adoption/placement for adoption, marriage, loss of eligibility for other group coverage or health insurance, loss of Medicaid or CHIP coverage, or a gain of eligibility for a Medicaid or CHIP premium assistance program.

The COVID-19 relief guidance extends the normal 30- and 60-day HIPAA special enrollment periods until the earlier of one year or 60 days after the declared end of the COVID-19 National Emergency. The COVID-19 National Emergency is scheduled to end on May 11, 2023. Since the event occurred in December 2022, the extension will end 60 days after the National Emergency ends, and the normal deadline will begin running.

Note that of the HIPAA SERs, only the birth, adoption or placement of adoption events allow for retroactive coverage. Therefore, a newborn would be eligible to enroll in the employer’s group health plan with coverage retroactive to the date of birth. If the employee was enrolled in the medical coverage and the employer offered more than one option, the HIPAA SER would also permit a change in benefit options (e.g., from HMO to PPO). Finally, the employee would be required to pay their share of the premiums for this coverage dating back to the date of birth.