On August 28, 2023, the DOL announced a grace period for users to obtain new login credentials for its EFAST2 filing system, which is used to file Form 5500 series annual returns. Beginning January 1, 2024, users will have to log in via the new Login.gov process instead of using existing EFAST2 credentials. Login.gov allows users to securely log in to many government agency websites using a single username and password.

New user accounts created on or after January 1, 2023, were directed to obtain Login.gov credentials upon creation. However, accounts in existence prior to January 1, 2023, have continued to use existing EFAST2 login credentials, if desired. Users are encouraged to transition to Login.gov in advance of the December 31, 2023, deadline to avoid disruption in access.

This change is important for users who directly access the EFAST2 system with their own login. Employers who utilize a vendor ( Software - EFAST2 Filing (dol.gov)) generally do not have an EFAST2 login and may not need to create Login.gov credentials. Employers subject to Form 5500 filing requirements should work with their filing vendor, if they have one, to ensure proper login credentials are in place for 2024.

DOL Extending Grace Period for EFAST2 Login Credentials »

On August 15, 2023, in David P. v. United Healthcare Ins. Co., the Tenth Circuit Court of Appeals (Tenth Circuit) reversed the defendant group health plan’s claim denial because the court determined that the defendant claims administrator abused their discretion and failed to follow ERISA claims procedures. The case was remanded with instructions to the district court to determine the appropriate disposition of the plaintiffs’ claims.

The plaintiff, a participant in the defendant’s group health plan, submitted claims to the plan for residential mental health treatment for the plaintiff’s daughter (also a plaintiff). The plan covered mental health and substance abuse services that are “medically necessary” and defined “medically necessary” as “[t]hose services…that are determined by the health plan administrator to be: provided for the diagnosis, treatment, cure or relief of a health condition, illness, injury or disease.” In this case, the defendant claims administrator denied the claims because they did not have information to establish the treatment as medically necessary. However, the defendants did not provide the plaintiffs with an explanation of what they needed to approve the claim.

The plaintiffs appealed these denials. The plan provided four levels of claim review: an initial decision and two levels of administrative review conducted by the plan, with additional review, at the claimant’s request, by an external reviewer independent from the plan. During this appeal process, the plaintiffs provided information to support their assertion that the treatment was medically necessary, including recommendations from treating physicians that residential mental health treatment was appropriate under the circumstances. Despite this, the defendants denied the appeals.

The plaintiffs filed suit to reverse the defendants’ denials. The district court ruled in favor of the plaintiffs, determining that the defendants failed to follow ERISA procedures when it reviewed the claims. The defendants appealed to the Tenth Circuit.

The Tenth Circuit agreed with the district court that the defendants did not follow claims procedures established under ERISA. ERISA requires that “every employee benefit plan . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” Denial notices should include the reasons for the denial, the plan provisions upon which the denial is based, and an explanation of what information the plan requires from the claimant to perfect the claim. The district court and the Tenth Circuit determined that when the defendants denied the plaintiffs’ claims, they failed to provide the plaintiffs with an explanation of what plaintiffs needed to perfect the claims at issue until it was too late in the process.

ERISA also requires that “every employee benefit plan . . . afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” The appeal process must provide the claimant with an opportunity to submit additional information in support of their claim, and the reviewer must take that additional information into account when considering the appeal. The district court and the Tenth Circuit determined that the defendants did not appear to consider the recommendations from treating physicians that residential mental health treatment was appropriate under the circumstances, nor did the defendants appear to consider other information provided by the plaintiffs in support of the claims’ medical necessity.

It should be noted that the defendants asserted that they had internal notes that established the basis for their decisions; however, the Tenth Circuit determined that ERISA requires a meaningful dialogue between the plan and the claimant and that the information in those notes was never provided or relayed to the plaintiffs during the claim process, denying the plaintiffs the opportunity to engage with that information. In addition, the fact that the external reviewer agreed with the conclusions reached by the defendants earlier in the appeal process did not cure the defendants’ failure to follow ERISA procedures.

Employers should ensure that plan claim processes, including appeals, conform with ERISA requirements. Communications to claimants should be clear regarding the basis for a claim denial and any additional information necessary to perfect the claim.

David P. v. United Healthcare Ins. Co.»

On August 29, 2023, in Bryant v. Walgreen Co., a federal district court dismissed most of the claims against a group health plan sponsored by Walgreens Co. (Walgreens), most notably the plaintiffs’ claim that Walgreens failed to adequately notify them of their right to continue health coverage as required by the COBRA statute.

COBRA rules require plan administrators to notify qualified beneficiaries of their rights to continued coverage in a manner calculated to be understood by the average plan participant, including information sufficient for qualified beneficiaries to obtain such coverage should they wish to do so.

COBRA administrators typically comply with this requirement with one election notice. Walgreens, however, used two different notices for this purpose, titling the first notice the “COBRA Enrollment Notice” and the second “Important Information About Your COBRA Continuation Coverage.”

The plaintiffs contended that these notices failed to provide adequate information for qualified beneficiaries to make informed decisions about their health coverage as required by COBRA, such as the name, address, and telephone number of the plan administrator, an explanation of the plan's procedures for electing continuation coverage, including an explanation of the time period during which the election must be made, and the date by which the election had to be made, and the address which payments should be sent. The plaintiffs further contended that Walgreens compounded the problem by confusing recipients with two separate election notices rather than a single notice, which the plaintiffs argued COBRA’s regulations implicitly require.

The court dismissed all of the plaintiffs’ claims except for an allegation that the notices provided inaccurate election deadline information to one employee whose qualifying event occurred during the COVID-19 Outbreak Period. As for the rest, the court decided the plaintiffs failed to show how the allegedly inadequate provisions did cause, or even reasonably could have caused, any harm to them. The court furthermore held that COBRA regulations neither expressly nor implicitly require that the election notice take the form of a single notice alone.

This case is important because it emphasizes that notice to qualified beneficiaries of their rights to the continuation of group health plan coverage is the linchpin of COBRA. Administrators should not construe this ruling as a license to take shortcuts with election notices. This decision was not so much a function of the court’s leniency regarding the adequacy of COBRA notices as it was a function of the plaintiffs’ failure to adequately plead their claims (e.g., the plaintiffs originally claimed that the notices did not identify a plan administrator only to have to concede later that the notices did indeed do just that). Accordingly, the court’s dismissal of these claims was “without prejudice,” meaning that the plaintiffs are free to refile these claims with more supporting information should they wish to do so.

On August 21, 2023, the Ninth Circuit vacated its prior decision and issued a new opinion in a complicated class action lawsuit against United Behavioral Health (UBH, a subsidiary of Optum, a division of UnitedHealth Group). The case, which began in 2016, was sent back to the trial court for the second time.

The Court describes UBH as one of the country’s largest managed healthcare organizations that makes determinations on claims for treatment for mental health and substance use disorders for around 3,000 healthcare plans. UBH was the insurer for some of these plans, so it had a dual role in authorizing the payment of claims and paying the claims. Among the many procedural questions involved were the standing of the multiple plaintiffs to bring the civil action and the certification of various classes that were certified by the district court.

Substantively, the plaintiffs alleged a breach of the fiduciary duty to act solely in the interests of the participants and beneficiaries and the arbitrary and capricious denial of benefits. These claims centered around the internal guidelines that were used by UBH’s clinicians to determine whether mental health and substance use disorder claims were covered by the plans. Plaintiffs also alleged that UBH failed to follow the plan’s provisions when making claims decisions and that UBH’s guidelines were more restrictive than the generally accepted standards of care. At one point in the multiple hearings and appeals, UBH was ordered to reprocess 67,000 denied claims using independent claim guidelines.

In this latest appeal, the Court reversed some fiduciary breach and denial of benefits claims and sent some back to the district court to determine whether the plaintiffs should have been required to exhaust the plan’s administrative remedies (appeals through the plan) before filing suit. The Court also reversed the trial court’s class certification for the denial of benefits claim.

The number of lawyers listed in the opinion (three and one-half pages from across the country) as representing the parties and the amount of money at stake here (the possible reprocessing and paying of 67,000 claims), indicates that this case might be back with the Ninth Circuit in the future. The case serves as an important reminder that plan administrators should consult with counsel when considering deviating from the generally accepted standards of care in administrating behavioral health claims.

Wit v. United Behavioral Health»

An Individual Coverage Health Reimbursement Arrangement (ICHRA) is the only way an employer may reimburse an employee or directly pay the cost of an employee's individual health insurance policy or Medicare premium on a tax-advantaged basis. To do so outside of an ICHRA, an employer risks an excise penalty of up to $100 per day per employee for an impermissible employer payment plan.

ICHRA Basic Requirements

An employer must meet the following requirements to sponsor an ICHRA:

• No traditional group health plan (that is neither limited to excepted benefits nor account-based) can be offered to the class of employees who are offered the ICHRA.
• Permitted classifications include full-time, part-time, seasonal, hourly, salaried, collectively bargained, nonresident aliens with no US-based income, employees whose primary site of employment is in the same rating area, and employees who have not yet satisfied an ACA-compliant waiting period.
  Note: Classes are determined at the common-law employer level rather than on a controlled group basis (under Code Section 414).
• The minimum class size is 10 for an employer with fewer than 100 employees; a number (rounded down to a whole number) equal to 10% of the total number of employees for an employer with 100 to 200 employees; and 20 for an employer with more than 200 employees.
• The employee must be enrolled in individual health coverage or Medicare (Parts A and B or Part C) and requires annual substantiation generally no later than the first day of the plan year or before the date when the ICHRA coverage begins.
• The ICHRA must be offered on the same terms and conditions to all employees within a class.
• Employees must have the ability to waive coverage under the ICHRA. However, an employer cannot provide a cash incentive if employees opt out.
• An employer must distribute a notice to employees regarding the ICHRA’s benefits. A notice must be provided to eligible employees at least 90 days before the beginning of each plan year or no later than the date an employee is first eligible to participate in the ICHRA. A model notice is available here.
• An ICHRA is subject to ERISA, including the SPD, Form 5500, and plan fiduciary requirements.
• An ICHRA is also subject to COBRA, including the initial COBRA notice and COBRA election notice. Failure to maintain individual medical coverage is not a COBRA qualifying event.

ICHRAs and MSP Rules

Medicare Secondary Payer (MSP) rules generally prohibit employers from offering financial incentives to Medicare-eligible employees to waive or cancel coverage in an employer-sponsored group health plan. As a reminder, age–based MSP rules apply to employers with 20 or more employees, while disability-based MSP rules apply to employers with 100 or more employees.

However, employers subject to the MSP rules may offer ICHRAs to a class of employees without violating the MSP rules as long as all employees in the class are offered the ICHRA on the same terms.

The idea is that if an employer only provided the ICHRA to those employees who are not Medicare-eligible, it could be seen as discriminating against those employees. Second, allowing the ICHRA to reimburse Medicare expenses does not incentivize them to enroll in Medicare if the opportunity to enroll in the ICHRA is available to everyone in the class. Importantly, an employer who is subject to the MSP rules must allow employees in a class that is offered an ICHRA to enroll in either individual or Medicare coverage.

ICHRAs and ACA Employer Mandate

An ICHRA may be used to satisfy an employer’s obligation under the ACA’s employer mandate. An ICHRA is considered minimum essential coverage (MEC) for purposes of Penalty A. It will also satisfy Penalty B if the employee's required contribution after the employer's monthly ICHRA contribution is less than 9.12% (2023) or 8.39% (2024) of the employee's earnings. The employer may use the lowest-cost silver plan available in the worksite rating area based on the employee's age as a safe harbor (rather than each residential area). The difference between the employer's contribution and the premium cost is what would be reported on Line 15 of Forms 1095-C for purposes of affordability.

Additional information can be found in our prior Compliance Corner, July 21, 2022, article. Employers interested in implementing an ICHRA should contact their consultant for additional information.