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What the Supreme Court is Hearing Today: Monday – Anti-Injunction Act

Update: Audio of today’s arguments are now available here.

Over the next few days we are going to post brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”).  As the audio of the oral arguments is released, we will post any links to the audio here.

By way of background, there are three parties to this litigation: (1) the U.S. Government who is defending the constitutionality of the law, (2) individuals (sometimes jointed by the National Federation of Independent Businesses) who are essentially arguing that they are harmed by the requirement to purchase insurance, and (3) 26 States, some of which are advocating that the individual mandate violates laws they have passed and some of which are advocating that the Medicaid expansion enacted under the health reform law is unconstitutionally coercive.

First up is the 90 minutes of argument on the Anti-Injunction Act.

What are they arguing about? The Anti-Injunction Act (the “AIA”) is a tax statute that prevents anyone from suing to preemptively prevent the collection or assessment of a tax.  Its purpose is to keep all of us from suing about taxes we do not like until after the IRS has had a chance to determine how the tax will be enforced and assessed.  Once the tax is assessed,

Preventing Assignment of Health Plan Benefits

Preventing Assignment of Health Plan Benefits

March 22, 2012

Authored by: benefitsbclp

A recent South Carolina federal district court case underscores the importance of a robust anti-assignment clause in health plan documents.  In the case, the court held that a hospital could not stand in the shoes of a plan participant and sue a health plan to force payment of benefits to the hospital.  Prior to receiving treatment, the participant had signed a standard form assigning his benefits to the hospital.  When the plan denied benefits, the hospital sued to force the plan to pay.

The plan in question had a strong anti-assignment provision.  The court basically said that the plan’s anti-assignment clause governed and rendered the participant’s assignment invalid.  The court said that the fact that the plan could, and did, pay benefits directly to providers on behalf of participants in other circumstances did not change the result.  The court stated that the direct payment of benefits to providers was not inconsistent with the anti-assignment provision because payment to a third party (here, the hospital) made that party a beneficiary, not an assignee.  The hospital had its own rights as a third-party beneficiary, but was not an assignee because it did not receive an assignment of the participant’s rights due to the anti-assignment provision in the plan.

This case highlights the need for plan sponsors to make sure their health plan documents and SPDs contain robust, unambiguous anti-assignment provisions.  While this case involved a single provider and a single participant, there are circumstances where a single provider could acquire

Data Security Breaches – Are you Prepared?

Data Security Breaches – Are you Prepared?

March 16, 2012

Authored by: Denise Erwin

In the event of a data security breach, evaluating the situation and taking action right away is important. One type of data security breach that employers need to be aware of and that has been receiving attention lately relates to the privacy and security of health information. Over the past year, enforcement of the HIPAA Privacy and Security Rules has become a priority for the Department of Health and Human Services (“HHS”) Office of Civil Rights (“OCR”), as seen by the amount of settlement fines related to violations and the recent flurry of HIPAA compliance audits. For example, last year, Massachusetts General Hospital was fined $1 million to settle potential HIPAA violations related to patient information left on a train by an employee commuting to work. Just this week, HHS announced that Blue Cross Blue Shield of Tennessee agreed to pay $1.5 million to settle possible violations of the HIPAA privacy and security rules, which was the first enforcement action which resulted from a breach report required by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act Breach Notification Rule.

This increased activity in HIPAA enforcement is the result of provisions in the HITECH Act, which introduced new breach notification standards and requires OCR to develop procedures for auditing compliance with HIPAA.

HITECH Requirements

The HITECH Act, enacted in 2009, addresses the privacy and security concerns associated with the electronic transmission of health information, in part, through several provisions that

W-2 Reporting of Health Coverage and EAPs, Wellness Programs, and On-Site Clinics

On Tuesday, the IRS released additional interim guidance on the health reform requirement to include the cost of health coverage on an employee’s Form W-2.  Employers are permitted, but not required, to report these amounts on 2011 W-2s issued by the end of this month, but reporting will be required for 2012 W-2s issued in January 2013.

Of particular interest in the guidance is the following Q&A:

Q-32: Is the cost of coverage provided under an employee assistance program (EAP), wellness program, or on-site medical clinic required to be included in the aggregate reportable cost reported on Form W-2?

A-32: Coverage provided under an EAP, wellness program, or on-site medical clinic is only includible in the aggregate reportable cost to the extent that the coverage is provided under a program that is a group health plan for purposes of § 5000(b)(1). An employer is not required to include the cost of coverage provided under an EAP, wellness program, or on-site medical clinic that otherwise would be required to be included in the aggregate reportable cost reported on Form W-2 because it constitutes applicable employer-sponsored coverage, if that employer does not charge a premium with respect to that type of coverage provided to a beneficiary qualifying for coverage in accordance with any applicable federal continuation coverage requirements. If an employer charges a premium with respect to that type of coverage provided to a beneficiary qualifying for coverage in accordance with any applicable federal continuation coverage requirements,

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

November 29, 2011

Authored by: benefitsbclp

Has your company recently acquired another company or its assets? Did the purchase agreement require continuation of any particular level of benefit for acquired employees or retirees? If so, the Fifth Circuit appears to believe that the purchase agreement may have amended your company’s employee benefit plans to provide those benefits described in the purchase agreement. What does this mean? That acquired employees and retirees can potentially sue your company for benefits described in a contract to which the employees and retirees were neither a party nor a third party beneficiary.

Evans v. Sterling, 2011 WL 4837847 (5th Cir. 2011).

In December of 1996, Sterling Chemicals acquired American Cyanamid’s (“Cytec”) acrylic fibers business in an asset purchase transaction. In connection with the acquisition, Sterling offered employment to certain Cytec employees. The asset purchase agreement included a provision requiring Sterling to provide certain levels of retiree medical coverage for the acquired Cytec employees unless Cytec agreed to changes. Sterling provided these retiree benefits to Cytec employees under its own retiree plans following consummation of the acquisition.

A few years following its acquisition of the Cytec business, Sterling increased retiree medical premiums for the acquired Cytec employees. The acquired Cytec employees sued, and the Fifth Circuit held that Sterling could not increase retiree premiums for the acquired Cytec employees without Cytec’s consent.

The court reasoned that the asset purchase agreement between Sterling and Cytec amended Sterling’s existing retiree medical programs. Following earlier precedent in Halliburton Co. Benefits Committee v. Graves,

New EBSA Consumer Assistance Website

New EBSA Consumer Assistance Website

November 23, 2011

Authored by: benefitsbclp

The Department of Labor’s Employee Benefit Security Administration (EBSA) is making it easier for consumers to submit questions and complaints regarding their health and retirement plans. EBSA has created a new consumer assistance website which allows users to submit inquiries electronically.  If you hablo Espanol, it’s also available in Spanish.

The DOL claims the new website provides easy access to useful information through links for resources/tools, hot topics, and publications. It also provides links to electronic forms where a user may “Ask a Question”, “Submit a Complaint”, or “Report a Problem.” EBSA seems to be serious about wanting to hear from consumers and give them assistance by promising to respond to all inquiries within three business days.

What does this mean for employers? The increased ease in which employees can submit complaints regarding their health and retirement plans to the DOL may lead in increased government scrutiny. Employers should now, more than ever, make it a point to respond to employee inquires quickly and adequately. If an employee is not satisfied with their employer’s response, they now have a quick means to complain to the government. Employers should also be sure to thoroughly document their responses to employee questions and complaints, including the rationale, just in case the DOL comes knocking.

Special Action Items for October

Special Action Items for October

October 13, 2011

Authored by: benefitsbclp

This is a brief reminder on common time-sensitive matters. We distribute these by email every month. If you would like to be added to the list, please comment below or email one of us. If you have questions, please call one of us. Thanks very much.

DEADLINES

Only a few days left to comply with these deadlines:

  • October 15, 2011 is the last day that a calendar-year plan can be corrected by amendment and in operation to address failure of the minimum coverage requirements of Code Section 410(b) and the general nondiscrimination requirements of Code Section 401(a)(4) in 2010. Has your plan received these tests from the plan’s recordkeeper?
  • 2011 third-quarter contributions to defined benefit plans must be made by October 15, 2011.
  • Calendar-year defined benefit plans with 100 or more participants are required to submit online premium filings to the PBGC by October 17, 2011. Special rules apply for new plans and plans with changed plan years. Click here for instructions.
  • For calendar-year plans that filed for an extension through Form 5558 by August 1, 2011, the 2010 Form 5500 must be filed by October 17, 2011.
  • The due date for the Form 5500 of a direct filing entity, such as a master trust, is 9? months after the end of the DFE’s fiscal year. For a direct filing entity with a calendar fiscal year, the filing deadline for the 2010 Form 5500 is October 17, 2011.

Other upcoming filing deadlines:

Getting Ready for Open Enrollment

Getting Ready for Open Enrollment

September 16, 2011

Authored by: Serena Yee

The fall is the time many employers with calendar year group health plans begin to prepare for open enrollment.  Below is a list of required notices that employers should consider including in their enrollment materials.   

  • COBRA Notice.  Plan administrators must provide a written initial COBRA notice to each employee and his or her spouse when group health plan coverage first commences of his or her rights under the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”).  This notice must contain specific information, and the Department of Labor has issued a model notice.
  • HIPAA Privacy Notice.  If the group health plan is required to maintain a notice of privacy practices under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the notice must be distributed upon an individual’s enrollment in the plan.  Notice of availability to receive another copy must be given every three years.
  • Special Enrollment Rights.  A group health plan must provide each employee who is eligible to enroll with a notice of his or her HIPAA special enrollment rights at or prior to the time of enrollment.  Among other things, this notice must describe the recently enacted rights afforded under the Children’s Health Insurance Program Reauthorization Act.

2012 PPACA Checklist

2012 PPACA Checklist

September 12, 2011

Authored by: Serena Yee

While most of the design changes required for group health plans under the Patient Protection and Affordable Care Act, as amended (“PPACA”), became effective in 2010 or 2011, some additional requirements must be implemented for 2012.

All group health plans subject to PPACA must comply with the following requirements, regardless of its status as a “grandfathered health plan”:

  • Provision of a Summary of Benefits.  The summary must include the information specified in the regulations but cannot exceed four double-sided pages. A summary must be provided to participants and beneficiaries as part of any written enrollment materials and a summary must be included for each benefit package offered for which the participant or beneficiary is eligible. However, upon renewal, only the summary for the benefit package in which the participant is enrolled needs to be furnished, unless the participant or beneficiary requests a summary for another benefit package. Unless an extension is granted, summaries must be issued no later than March 23, 2012.  Instructions and a template of a draft summary of benefits is published in the Federal Register and can be viewed at http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21192.pdf.
  • W-2 Reporting Obligation.  Employers must begin reporting the aggregate cost of applicable employer-sponsored coverage on an employee’s Form W-2 beginning with the Form W-2 issued in January 2013 for the 2012 tax year.  Make sure that you have appropriate systems in place to collect and determine the value that must be reported.  IRS Notice 2011-28, available at http://www.irs.gov/pub/irs-drop/n-11-28.pdf, provides interim guidance

New York Marriage Equality and Benefits – Part 2

New York Marriage Equality and Benefits – Part 2

September 8, 2011

Authored by: benefitsbclp

Last week we looked at the implications of New York’s Marriage Equality Act (“Act”) upon the tax treatment of employer-provided health care benefits for same-sex married couples in New York. Today we’ll consider how the Act affects the administration of family and medical leave, HIPAA special enrollment rights and health care continuation coverage under COBRA and New York’s “mini-COBRA” law.

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