Federal Government Extends COVID-19 National Emergency
On February 18, 2022, President Biden announced that the National Emergency Declaration that began on March 1, 2020 is extended to March 1, 2023. A National Emergency Declaration lasts for one year, unless extended. If the President had not extended the national emergency, then it would have expired on March 1, 2022.
This extension impacts COVID-19 extension relief for certain COBRA and HIPAA deadlines. The Departments of Labor and the Treasury extended certain timeframes for group health plans, disability and other welfare plans, and pension plans in May of 2020.
This relief requires all group health plans, disability and other employee welfare benefit plans, and employee pension plans subject to ERISA or the Code to disregard an “outbreak period” when calculating certain deadlines. The outbreak period began on March 1, 2020, and ends on the first anniversary of the date that relief is sought or 60 days after the end of the national emergency, whichever is earlier. The deadlines affected by this relief include:
- The 30-day (or 60-day, if applicable) deadline to request a special enrollment under HIPAA.
- The 60-day COBRA election period.
- The 30-day (or 60-day, if applicable) deadline to notify the plan of a COBRA qualifying event (and the 60-day deadline for individuals to notify the plan of a determination of a disability).
- The 14-day deadline for plan administrators to furnish COBRA election notices.
- The 45-day deadline for participants to make a first COBRA premium payment and 30-day deadline for subsequent COBRA premium payments.
- Deadlines for individuals to file claims for benefits, for initial disposition of claims, and for providing claimants a reasonable opportunity to appeal adverse benefit determinations under ERISA plans and non-grandfathered group health plans.
- Deadlines for providing a state or federal external review process following exhaustion of the plan’s internal appeals procedures for non-grandfathered group health plans.
Although it is possible that the President will end the national emergency early, for now, the outbreak period will likely last until the first anniversary of the date relief was first sought or March 1, 2023, whichever is earlier. Notice on the Continuation of the National Emergency Concerning the Coronavirus Disease 2019 (COVID-19) Pandemic »
Eighth Circuit Affirms Insurer’s Right to Reimbursement
In Vercellino v. Optum Insight, et al., the Eighth Circuit Court of Appeals examined whether the ERISA self-insured health plan and its insurer have the right to reimbursement for medical expenses paid for a participant’s injury if the participant recovered any proceeds from the party who caused the injury. The Eighth Circuit ruled in favor of the health insurer and the plan because the health plan’s ERISA plan document clearly provided for such reimbursement rights.
When Vercellino was a minor in 2013, he was injured in an accident while riding on an all-terrain vehicle (ATV) operated by his friend, Kenney. Vercellino was a covered dependent on his mother’s self-insured health plan. Ameritas was the plan sponsor of the self-funded ERISA plan, and United HealthCare was the claim administrator, which contracted with Optum to pursue recovery on behalf of itself and the plan sponsor (collectively, the insurer).
For Vercellino’s injuries from the ATV accident, the insurer paid close to $600,000 in medical expenses. The insurer did not exercise its right to seek financial recovery from Kenney or Kenney’s parents during the applicable statutory period, nor did Vercellino’s mother ever file a lawsuit to recover medical expenses from the Kenneys.
After Vercellino became an adult in 2019, he filed suit against the Kenneys seeking general damages. Additionally, he filed a separate suit seeking that the insurer would have no right of reimbursement from any proceeds recovered in his litigation against the Kenneys. In response, the insurer sought a judgment in federal district court that it would be entitled to recover up to the full amount paid for Vercellino’s medical expenses from any recovery proceeds from the Kenneys. The district court granted summary judgment to the insurer.
On appeal to the Eighth Circuit, Vercellino presented three reasons for the court to find that the insurer cannot seek reimbursement from any recovery he obtains from the Kenneys. First, he argued that he was never the “real party in interest” to recover the medical expenses paid by the insurer because he was a minor at the time of the accident. The court denied this argument by stating that the plan language expressly includes “all dependents,” including a child who is under 26 years of age and a covered dependent without distinguishing between a minor vs. adult. Therefore, as a dependent covered by the plan, Vercellino is bound by its terms.
Second, Vercellino argued that the insurer waived its right to seek reimbursement from his recovery by not exercising its right to recover medical expenses during the statutory period. In response, the court noted that the plan contains an independent right to reimbursement not limited to settlements for medical expenses (and the statute of limitations applicable to the recovery of medical expenses). Therefore, the court declined Vercellino’s argument.
Third, the court rejected Vercellino’s final claim that the insurer breached its fiduciary duty by not warning him that it would seek reimbursement from his recovery even though it did not pursue its own claims in subrogation during the statutory period. The court again rejected his claim stating that the insurer’s right to reimbursement is spelled out in the plan document in plain language, and the insurer had no duty to warn him because the plan document was available to him. The court concluded that because the plan’s language is clear, the insurer is entitled to seek reimbursement for medical expenses the insurer paid for Vercellino’s injuries from any judgement or settlement he receives in his litigation with the Kenneys.
In summary, this case exemplifies the importance of clearly written ERISA plan document terms that reflect the plan’s subrogation and reimbursement rights, and ensuring the document is available to the plan participants. Plan administrators should review those terms in their plans.
Vercellino v. Optum Insight, Inc. No. 20-3524. February 14, 2022 »
Texas Court Vacates Provisions of the No Surprises Act Arbitration Process
On February 23, 2022, in Texas Medical Association vs. HHS, a Texas district court struck down key parts of the federal rule governing the surprise billing independent dispute resolution (IDR) process of the No Surprises Act (NSA). The vacated provisions of the NSA’s Interim Final Rule Part II (the “Rule”) prescribed the methodology for determining the out-of-network (OON) payment amount for disputed claims between healthcare providers and group health plans or insurers. (For more information on the Rule, please see our prior article.) The legal challenge to the Rule was brought by healthcare providers (the “plaintiffs”) against the federal agencies, including the DOL, HHS and IRS (the “defendants”), that issued the Rule.
The NSA provisions of the Consolidated Appropriation Act, 2021 apply to both insured and self-funded group health plans and are effective for plan years beginning on or after January 1, 2022. Amongst other items, NSA provisions protect participants from surprise bills for OON emergency and air ambulance services, as well as certain OON services received at in-network facilities. The NSA limits participant cost-sharing for covered OON services, leaving plans and insurers to address the balance of the bill from an OON provider. In states with an applicable All-Payer Model Agreement or specified state law, the OON provider rate is determined by the Model Agreement or state law.
Otherwise, if a plan or insurer and provider cannot agree on the OON payment amount after a 30-day negotiation period, the federal IDR process can be initiated. The arbitrator in the federal IDR process (termed the “certified IDR entity”) must select either the payment amount proposed by the healthcare provider or the amount proposed by the plan or insurer. In evaluating the proposals, the certified IDR entity may consider various specified factors. However, the Rule requires that presumptive weight be given to the qualifying payment amount (QPA), which is the median contracted rate for an item or service for a geographic region. Accordingly, under the Rule, the certified IDR entity must select the offer closest to the QPA unless either party submits information that clearly demonstrates the QPA is materially different from the appropriate OON rate.
In the lawsuit, the plaintiffs challenged the Rule’s presumption that the QPA is the correct OON payment amount. Specifically, they argued that such a presumption is inconsistent with the NSA statutory language, which allows for equal consideration of the QPA and other factors (e.g., the provider’s level of training and experience, patient acuity, case complexity) when determining the OON payment rate. Furthermore, the plaintiffs asserted that the defendants improperly circumvented the required notice and comment process when issuing the Rule.
Upon review, the district court granted summary judgment in favor of the plaintiffs. As an initial matter, the court ruled that the plaintiffs had standing to bring the challenge because they would suffer injuries, including lower reimbursement rates, traceable to the Rule.
Significantly, the court then held that the Rule's rebuttable presumption that the QPA is the correct OON payment amount and the requirement that an IDR entity gives more weight to the QPA over other permissible factors conflicted with the “unambiguous terms” of the NSA. The court emphasized that the NSA does not specify that the QPA is the primary or most important factor in determining the appropriate OON payment amount. As a result, the court vacated that portion of the Rule.
Furthermore, the court ruled that the defendants improperly bypassed the notice and comment period under the Administrative Procedures Act when implementing the Rule. The court rejected the defendants’ assertion that notice and comment were not practicable given the deadline to issue a rule. The court noted the defendants had a full year to release guidance and could have issued a proposed rule with a notice and comment period rather than an interim final rule.
The court’s ruling has a nationwide effect, so the provisions of the Rule regarding the QPA presumption and weighting are vacated throughout the country. However, the Rule’s other provisions regarding the IDR process remain in effect.
In response to the ruling, the DOL released a memorandum on February 28, 2022, which stated they are reviewing the court's decision and considering the next steps. The memorandum also indicated that guidance documents based upon the invalidated portion of the rule would be withdrawn, updated and reposted. Training will also be provided to parties involved in the IDR process based upon the revised guidance. Additionally, the memorandum specified that the IDR process would be open for submissions through the IDR Portal. However, for payment disputes for which the open negotiation period has expired, submission of a notice of initiation of the IDR process will be permitted within 15 business days following the opening of the IDR Portal.
Employers who sponsor group health plans should be aware of the court’s decision and the DOL response memorandum and should consult with their service providers regarding the potential impact. Employers should also monitor future guidance and developments regarding the federal IDR process.
Texas Medical Association et al v. United States Department of Health and Human Services et al, Docket No. 6:21-cv-00425 (E.D. Tex. Oct 28, 2021), Court Docket »
DOL Memorandum Regarding Continuing Surprise Billing Protection for Consumers »
DOL Requests Comments on Climate-Related Financial Risk to Retirement Plans
On February 14, 2022, the DOL published a request for information (RFI) on possible actions the agency can take to protect retirement savings from threats of climate-related financial risk. This RFI comes after President Biden issued Executive Order 14030 on Climate-Related Financial Risk, directing the DOL to determine steps they can take to safeguard the financial security of America’s workers and businesses against the threat that climate changes pose to their life savings.
The RFI asks stakeholders to provide comments on several issues, including:
- How the DOL should address and implement the action items in the executive order.
- Identifying the most significant climate-related financial risks.
- Whether the DOL should collect data on climate-related financial risks for plans and whether Form 5500 or other methods should be used for such collection.
- Identifying the best sources of information for plan fiduciaries to use in evaluating climate-related risks to plan investments.
- Whether annuities help individuals efficiently mitigate some of the losses from climate-related financial risk.
- How the DOL should review the Federal Thrift Savings Plan to identify risk and vulnerabilities from climate change.
- Several other miscellaneous issues pertaining to the risk to IRAs and need for education of participants.
Written comments may be submitted on or before May 16, 2022. Interested parties should consider commenting on DOL’s RFI.
Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk »
Executive Order on Climate-Related Financial Risk »
IRS Issues Proposed Regulations Updating Required Minimum Distribution Rules
On February 24, the IRS published proposed regulations on required minimum distributions (RMDs). The changes to the existing RMD rules come on account of the amendments found in the Setting Every Community Up for Retirement Enhancement (SECURE) Act. We discussed the SECURE Act in detail in the January 9, 2020, edition of Compliance Corner.
Specifically, the SECURE Act revised the beginning date of RMDs to April 1 of the calendar year following the later of the calendar year in which the employee either turns age 72 or retires. Prior to the SECURE Act, the triggering age was 70 ½. This change in the rules applies with respect to employees who have attained age 70 ½ after January 1, 2020. The proposed rules also clarify that the employee doesn’t have to survive until age 70 ½ to have the amended age apply; an employee’s beneficiaries can wait until the deceased would’ve turned 72 to begin distributions if the deceased would’ve turned 70 ½ after January 1, 2020.
The bulk of the proposed regulations addresses the elimination of “stretch” individual retirement accounts (IRAs) or plan distributions. The SECURE Act now requires that distributions to non-spouse beneficiaries be completed within 10 years of the plan participant or IRA owner’s death. Distributions may only be distributed over the course of the beneficiary’s life if the beneficiary is an “eligible designated beneficiary.” The definition of an eligible designated beneficiary is now clarified to be a designated beneficiary who, as of the date of the employee’s death, is either:
- The surviving spouse of the employee
- A child of the employee who has not yet reached the age of majority
- Chronically ill
- Not more than 10 years younger than the employee
The rules go on to clarify that the age of majority is the child’s 21st birthday. Likewise, whether the designated beneficiary is disabled or chronically ill will depend on the age of the person at the employee’s death and the nature of their impairment.
The proposed regulations are applicable for taxable years beginning on or after January 1, 2022. Interested stakeholders may submit comments until May 25, 2022. Employer plan sponsors should be mindful of the updates to the RMD rules and work with their service providers to implement them accordingly.
Upcoming IRC 6055 and 6056 Reporting Deadlines
Employers that were applicable large employers (ALEs) in 2021 and sponsored group health plans (whether insured or self-insured) must comply with IRC Section 6056 reporting in early 2022. Specifically, ALEs must complete and distribute Form 1095-C to full-time employees (FTEs) by March 2, 2022 (changed from January 31, 2022). The form should detail whether the employee was offered minimum value affordable coverage during 2021. The forms may be mailed, electronically delivered or delivered by hand (although proof of delivery in some manner is recommended).
If an employer sponsored a self-insured plan during 2021, it must comply with Section 6055 reporting in 2022. Self-insured employers with 50 or more FTEs must complete Section III of Form 1095-C detailing which months the employee (and any applicable spouse and dependents) had coverage under the employer’s plan. If the self-insured employer has fewer than 50 FTEs, it must complete and distribute a Form 1095-B with such information. Again, the forms must be delivered to employees by March 2, 2022.
Employers must also file the forms with the IRS by February 28, 2022, if filing by paper, and March 31, 2022, if filing electronically. Those that are filing 250 or more forms are required to file electronically. Lastly, the employer is required to file the transmittal Form 1094-C (if filing Forms 1095-C) or Form 1094-B (if filing Forms 1095-B).
As a reminder, the IRS has provided penalty relief for employers that will allow them to forego distributing Form 1095-B to individuals. This comes after the IRS accepted comments on the necessity of Forms 1095-B now that the individual mandate penalty has been zeroed out. If employers post a notice on their website that the document is available upon request and fulfil any such request within 30 days, then they will not have to distribute the Forms 1095-B to covered individuals. But keep in mind that there is no such penalty relief for Form 1095-C.
2021 Instructions for Forms 1094-C and 1095-C »
2021 Instructions for Forms 1094-B and 1095-B »
2021 Form 1094-C »
2021 Form 1095-C »
2021 Form 1094-B »
2021 Form 1095-B »
Is providing a COBRA Initial Notice in our enrollment packet for eligible employees sufficient to meet the distribution requirement?
No, distributing the COBRA Initial Notice (also known as the General Notice) to all newly hired eligible employees in an enrollment packet is not sufficient for several reasons. As a reminder, the notice must be distributed to all newly enrolled employees and spouses within 90 days after commencement of coverage.
First, the Initial Notice should only go to covered participants. The first paragraph of the notice begins, “You’re getting this notice because you recently gained coverage under a group health plan (the Plan). This notice has important information about your right to COBRA continuation coverage.” Providing the notice to all newly eligible employees before enrollment is providing them with inaccurate information of rights that they do not yet have and never will have if they waive coverage. A plan administrator is required to provide the notice within 90 days after the participant enrolls and coverage begins.
Second, the Initial Notice is required to be distributed to covered employees and covered spouses. An enrollment packet is distributed only to the employee. The spouse is not considered a recipient of an enrollment packet. As such, the notice should be mailed to the home address on file with the spouse indicated in some manner on the envelope, such as John Doe and Spouse, John and Jane Doe or Mr. and Mrs. John Doe. If the employee and spouse enrolled at the same time, a single notice is sufficient if they are not known to have separate addresses.
This is one of the most difficult notices for a plan administrator in terms of compliance dates. Many employers only think of the notice as a new employee notice. However, the notice is required to be provided to any newly enrolled employee or spouse. Consider the following scenarios:
- A newly hired employee waives enrollment when initially eligible but enrolls in single-only coverage during the next open enrollment.
- An employee is enrolled in single-only coverage. During the year, he gets married and adds his spouse.
- A newly hired employee waives enrollment when initially eligible but enrolls in family coverage midyear upon the loss of other coverage.
A COBRA Initial Notice is required to be distributed in all these scenarios. Failure to comply could put an employer at risk for legal action brought by participants and an ERISA $110 per day fine. If the violation is not corrected within 30 days of discovery, then the employer may need to self-report the violation on IRS Form 8928 with a civil penalty of $100 per day being assessed.
Finally, an employer who fails to comply with the notice requirement related to spouses could not impose the 60-day notification period following a divorce for an ex-spouse electing COBRA coverage. If the spouse was never notified of the obligation to notify the plan within 60 days of the divorce to preserve their COBRA right, the employer might be responsible for offering the coverage regardless of when they are notified of the divorce. Further, a carrier (including a stop-loss carrier) could deny coverage because of the notice failure, which would leave the employer paying out-of-pocket for the ex-spouse’s claims.
If an employer is not in compliance with this requirement, the best practice is to distribute the notice to all currently enrolled employees and spouses, then implement a compliant procedure going forward.
If you have any questions or would like to request a copy of the model notice, please ask your consultant.
Bulletin Informs of No Surprises Act Requirements
On February 17, 2022, the Department of Insurance (the “department”) issued Bulletin No. 3-2022 regarding the federal No Surprises Act (NSA). The purpose of the bulletin was to provide information on NSA requirements that apply to healthcare providers and facilities and air ambulance services, effective in 2022.
The bulletin outlines the NSA prohibitions against balance billing of consumers for covered items and services, including out-of-network (OON) emergency and air ambulance services and certain non-emergency OON services received at in-network facilities. Additionally, the bulletin summarizes related NSA obligations regarding disclosures and the maintenance of updated provider directories. The guidance also reviews the available methods, including the use of an independent dispute resolution process, to resolve disputed OON bills between providers and group health plans or insurers.
Enforcement of the NSA provisions depends on the circumstances and may come from one of the several federal and state regulatory agencies, including the department. According to the bulletin, the department’s enforcement role includes receiving complaints from consumers on NSA issues and referring these complaints to federal agencies, as appropriate.
Although the guidance is primarily directed to insurers and providers, employers who sponsor group health plans may want to be aware of this bulletin.
2022 COVID-19 Supplemental Paid Leave
On February 9, 2022, Gov. Newsom signed SB 114 into law, which is the 2022 COVID-19 Supplemental Paid Sick Leave (SPSL). The 2021 version of the law expired on September 30, 2021. Like the prior version, employers with 26 or more employees must provide paid leave to employees who are unable to work (including telework) for a COVID-19 related reason.
The new law is retroactively effective to January 1, 2022. Employers must make available two different banks of 40 hours paid leave each; this varies based on the reason for leave.
The first bank of COVID-19 SPSL, up to 40 hours, is available to covered employees unable to work or telework due to any one of the following reasons:
- Employee’s own health: The employee is subject to a quarantine or isolation period related to COVID-19 or has been advised by a healthcare provider to quarantine due to COVID-19 or is experiencing symptoms of COVID-19 and seeking a medical diagnosis. This includes a quarantine period following exposure to COVID-19.
- Caring for a family member: The employee is caring for a family member who is subject to a quarantine or isolation period related to COVID-19 or has been advised by a healthcare provider to quarantine due to COVID-19, or the employee is caring for a child whose school or place of care is closed or unavailable due to COVID-19 on the premises.
- Vaccine-related: The employee or family member is attending a vaccine appointment or cannot work or telework due to vaccine-related side effects — this includes a booster shot.
The second bank of COVID-19 SPSL, up to 40 hours, is available only if an employee or a family member for whom they are providing care tested positive for COVID-19. As defined under the previous law, family members include a child, parent, spouse, registered domestic partner, grandparent, grandchild or sibling. A positive test result includes that from an over-the-counter testing product. The employer may require documentation of the test result, including a photo of the result or electronic communication from the testing provider. The employer may require an additional test five days after the initial negative test result, but only if the employer makes the test available to the employee either by securing a testing appointment or providing a test.
Employers should have posted a notice in the workplace by February 19, 2022. If employees do not report to a physical worksite, the employer should distribute the notice electronically. Starting with the paycheck related to the first full pay period following February 19, 2022, employers must identify on the paystub the amount of COVID-19 SPSL used by the employee.
Employers should take action to post the required notice, update their payroll system to reflect the required paystub information, revise their leave policies, and generally make the paid leave available to employees. Additionally, because the law is retroactive to January 1, 2022, employers should be prepared to reprocess payment, per employee request, for qualifying leave that occurred prior to February 19, 2022.
2022 COVID-19 Supplemental Paid Sick Leave FAQs »
District of Columbia
Vaccination Leave Requirements Extended
Since March 2020, employers of all sizes have been required to provide unpaid leave under DCFMLA to employees for reasons related to COVID-19. Separately, since November 18, 2021, employers of all sizes have been required to provide two hours of paid leave for employees receiving (or their child receiving) a COVID-19 vaccination and an additional eight hours of paid leave in the following 24-hour period for vaccination recovery. Both requirements were set to expire on February 16, 2022, and were previously reported in Compliance Corner. On February 3, 2022, Mayor Bowser signed Act 24-319, which extends both provisions until May 4, 2022.
Amended Proclamation Prohibits Adverse Actions Against Vaccinated Employees
- Receive a COVID-19 vaccination.
- Take a reasonable time off to receive a vaccination or recover from vaccination side effects.
- Take time off when the employee is subject to a quarantine or isolation order or advice to self-quarantine; or
- Wear a face covering while at work.
An adverse employment action is defined as any action taken or threatened by an employer against an employee for engaging in any of the above qualifying events. For instance, an adverse employment action includes termination, denial of paid leave and reduction of work hours.
This proclamation takes effect immediately. Employers who have employees in Washington should be aware of this update.
Proclamation 21-08.1 Safe Workers »
Washington Paid Family & Medical Leave (PFML) Quarterly Employer Reports’ Status Check Feature
The state recently announced that covered employers can view the status of submitted reports on their portals and verify that their filed reports are successfully processed. If a report fails to be processed, the status will show “Rejected.” Covered employers should ensure that their submitted reports are successfully processed by checking the status section after their reports are filed on their portals.
For more information, the link below to the PFML site is helpful:
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.
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Is providing a COBRA Initial Notice in our enrollment packet for eligible employees sufficient to meet the distribution requirement?
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