News & Insights
Feb. 8, 2017
Plan Sponsors: Hold Off On Health Plan Changes Until ACA Replacement is Finalized
On January 20, President Donald Trump signed an Executive Order to “Minimize the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” (https://www.whitehouse.gov/the-press-office/2017/01/2/executive-order-minimizing-economic-burden-patient-protection-and) The Executive Order is a broad directive to the executive branch, instructing federal agencies to use their authority under law to “minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford states more flexibility and control to create a more free and open healthcare market.”
While the conversation on the repeal and replacement of the ACA continues, employers may be tempted to view the order as a sign that the Internal Revenue Service will not require ACA reporting or employer penalties for tax year 2017. However, until further regulatory guidance is released, employers should not make changes to group health plan offerings. Congressional leadership has not yet reached agreement about how the ACA should be repealed and replaced, and employers should continue to comply with ACA requirements in order to avoid penalties.
Agencies in the executive branch, including the Department of Health and Human services, the Department of Treasury, and the Department of Labor, are subject to a regulatory freeze pending review for 60 days following the inauguration (https://www.whitehouse.gov/the-press-office/2017/01/24/implementation-regulatory-freeze), meaning that the effective dates of many new rules will be postponed for at least 60 days and some new rules will be completely withdrawn. Additionally, because proposed new rules must be presented for a 60-day public comment period and then revised before final rules are released, new regulations regarding the ACA will likely not be finalized until mid-2017 at the earliest.
Given the length and complexity of the ACA, it may take years for its various components to be unraveled or re-worked. The law’s repeal and replacement will impact employers both directly and indirectly for years to come. For the time being, plan sponsors and employers should move forward with the “status quo” until any proposed changes are finalized.
The Boon Group, Inc.
May 19, 2016
HHS Publishes Final Rule on ACA Nondiscrimination Provisions
On May 13, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) published the final rule implementing Section 1557 of the Affordable Care Act (ACA). Section 1557 contains the nondiscrimination provisions of the ACA, which prohibits discrimination based on race, color, national origin, sex, age and disability. The final rule applies to any health program or activity that receives federal funding or that is administered by any government agency governed by the ACA.
The rule finalizes many of the provisions contained in the proposed rule that HHS published on September 8, 2015 following a 2013 Request for Information (RFI) regarding nondiscrimination issues. The proposed rule received 24,875 comments from activist groups, health care providers, consumer groups, insurers and individuals. While commenters asked for various changes, the final rule is essentially unchanged from the proposed rule.
The final rule includes broad prohibitions against discrimination, but HHS declined to include specific details and scenarios that might label specific actions as discriminatory or not discriminatory. Commenters requested clarification on a variety of specific situations, including whether limiting gender transition services to only individuals over the age of 18 is discriminatory, whether requiring individuals with psychiatric disabilities to receive ongoing mental health treatment in order to receive treatment for unrelated conditions is discriminatory and clarification regarding in what ways research trials can avoid being discriminatory. In response, OCR stated: "The determination of whether a certain practice is discriminatory typically requires a nuanced analysis that is fact-dependent." While some examples are included in the final rule, not every scenario brought up in the public comments is addressed.
One notable aspect of the final rule is the requirement that translation services be provided to individuals who do not speak English, including individuals who speak only American Sign Language. The provision of professional translators can sometimes be a life-and-death matter, as relying on bystanders, friends or family members to translate can result in fatal medical mistakes.
Another noteworthy aspect is the final rule’s declaration that blanket exclusions of gender transition care are a form of sex discrimination. However, the final rule does not specify which gender transition services must be covered; it simply states that excluding all gender transition services is noncompliant with the ACA. Additionally, the final rule reinforces a stance taken on previous FAQs issued by the DOL Employee Benefits Security Administration (EBSA), stating that insurers cannot deny coverage of sex-specific preventive care services based on transgender status (for example, denying coverage of a Pap smear for a transgender man or a prostate exam for a transgender woman). The final rule also specifies that providers cannot discriminate against patients based on transgender status. However, few providers are equipped to provide competent care to lesbian, gay, bisexual or transgender (LGBT) patients, though more hospitals are investing in training and infrastructure changes to help provide effective and respectful care to the LGBT community.
The final rule does not include a religious exemption to the nondiscrimination provisions. The nondiscrimination provisions do not contradict any provider conscience laws, the Religious Freedom Restoration Act (RFRA) or any religious exemptions provided elsewhere in the Affordable Care Act.
The effective date of the rule is July 18, 2016. Any changes that must be made to health insurance plans—including changes in cost-sharing, covered services and coverage exclusions—must be made by the first day of the plan year beginning on or after January 1, 2017. The plan applies to excepted benefits in addition to plans that offer minimum essential coverage or minimum value under the Affordable Care Act.
Read the final rule at the Federal Register here regarding the final rule.
May 16, 2016
Americans Aren't Prepared to Retire—But Retirement Plan Sponsors Can Nudge Participants in the Right Direction
More Americans in today’s workplace are planning to defer retirement until later in life or to forego retiring at all. In fact, one in five Americans aged 65 and over are currently working due to financial need, the need for health insurance benefits, or a desire to stay mentally, physically or socially active.
What factors are contributing to this trend? One consideration: health insurance. Retiree health benefits can affect the timing of employees’ retirement decisions; employers that offer retiree health benefits may see employees retiring earlier in life and even saving for retirement less rigorously. However, a Kaiser Family Foundation study found that fewer than 25 percent of plan sponsors offered retiree health benefits last year—a rapid and steady decline from 66 percent in 1988. Most employees approaching retirement express urgent concern about whether they will be financially able to pay for health care in retirement; therefore, employees may defer retirement to avoid ending up dependent on Medicare or Medigap and Medicare Advantage plans.
Lack of financial preparation for retirement is another factor. While over half of employees aged 51 to 64 are worried about covering out-of-pocket medical costs in retirement, the same number are worried about potentially outliving retirement savings. While most full-time employees have access to employer-sponsored retirement plans, and voluntary defined contribution plans (like 401(k)s) are the most popular retirement savings option, employees simply aren’t saving enough. While plan participants are worried about retirement readiness, employees who lack financial literacy end up saving at rates that won’t be sufficient to support them in retirement. Generally, Americans don't realize that saving for retirement as early as possible and as consistently as possible is key to a stable future; studies show that individuals underestimate the importance of compound interest, too.
How can retirement plan sponsors encourage plan participants to save robustly? Participant education is key, especially on often-misunderstood subjects like compound interest, matching contributions and taxation. Some retirement plan sponsors are taking an even broader view of overall participant financial fitness, with a focus on helping employees reduce financial stress and increase financial literacy. Plan sponsors can also ensure that the plan is being run responsibly and offering maximum value to participants—for example, by examining plan fees. The TIAA Institute (the research arm of the organization formerly known as TIAA-CREF) has noted that many retirement plan sponsors use multiple service providers and third-party administrators instead of one single service provider, which can sometimes lead to unreasonable or unfair fee structures for plan sponsors and participants.
Plan sponsors aiming to nudge plan participants towards a comfortable retirement should keep changing regulatory requirements in mind, too. In April, the U.S. Department of Labor published a final rule laying out new regulations regarding fiduciary responsibility and retirement plan investment advice. The purpose of the rule is to define the difference between specific investment advice and general investment education and to require that retirement professionals give advice that is in the best interest of the plan and plan participants.
April 29, 2016
DOL Publishes New FMLA Guide for Employers
The Department of Labor (DOL) has published a new guide to help employers understand their obligations under the Family and Medical Leave Act (FMLA). The Employer's Guide to the Family and Medical Leave Act was announced by DOL FMLA Branch Chief Helen Applewhaite at the 2016 FMLA/ADA Employer Compliance Conference on April 25.
According to the DOL, the Guide’s purpose is “to provide essential information about the FMLA, including information about employers’ obligations under the law and the options available to employers in administering leave under the FMLA.” The Guide is organized along a loosely chronological timeline of a typical FMLA leave request; the Guide begins at the employee's request for FMLA leave, continues through the duration of the leave, and concludes with the employee's successful return to work.
The Guide is designed to complement the corresponding employee guide to FMLA that was released last June. The Employer’s Guide answers basic FMLA questions and illustrates common FMLA-related scenarios. The text is illustrated with explanatory graphics, including cartoons showing model employer-employee interactions and flow charts like “The Employer's Road Map to the FMLA.”
However, employers should note that the FMLA guide doesn't address the sometimes messy questions that can arise from FMLA-related court opinions. For example, in Bonkowski v. Oberg Industries, Inc., the Third U.S. Circuit Court of Appeals ruled that an employee who was admitted to a hospital just after midnight and discharged less than 24 hours later did not qualify for FMLA leave because his “overnight stay” did not consist of an inpatient stay that spanned from one calendar day into another calendar day. On the other hand, in Caggiano v. Illinois Department of Corrections, the U.S. District Court of the Northern District of Illinois ruled that an employee who appeared to have worked fewer than 1,250 hours in 12 months did qualify for FMLA leave—because the employer failed to include the employee's thirty-minute paid lunch breaks in its calculation of hours. For questions that are murkier than the clear-cut questions presented in the Guide, employers should consider consulting counsel.
Still have general questions? The DOL Wage and Hour Division (WHD) has promised to hold free, public webinars on the Guide in the near future. Additional answers to frequently asked questions can be found on the DOL WHD website.
April 21, 2016
Business Associate Agreements Are Essential to HIPAA Compliance
If you're familiar with the Health Insurance Portability and Accountability Act (HIPAA), you may know that covered entities cannot disclose protected health information (PHI) to unauthorized persons. However, covered entities often work with third parties and need to disclose PHI to these non-covered entities for business reasons. HIPAA allows for covered entities to make these business-related disclosures—but the covered entity and the business associate need to formalize a relationship via a written business associate agreement first.
A business associate agreement is a contract that codifies the relationship of the covered entity to the business associate. A business associate is a person or entity that provides services to, performs work on behalf of, or otherwise touches PHI when working with a HIPAA covered entity. The written agreement specifies permissible uses and disclosures of PHI by the business associate, states that the business associate will comply with HIPAA requirements, includes information about procedures that will be followed in case of a HIPAA breach, and specifies how PHI will be handled upon termination of the covered entity's relationship with the business associate. The Department of Health and Human Services (HHS) provides sample provisions for a business associate agreement, though many covered entities use individually tailored agreements.
Handing over PHI to an unauthorized person or entity is a violation of HIPAA. Last week, HHS fined a North Carolina provider, Raleigh Orthopaedic Clinic, $750,000 for violating this rule. The clinic released X-ray films and related PHI for 17,300 patients to a third-party company in order for the third-party company to digitize those records. This transaction was arranged via an oral agreement. However, because the clinic and the third-party company didn't have a written business associate agreement in place, the clinic caused a HIPAA breach by releasing PHI to an unauthorized entity.
In addition to the $750,000 fine, Raleigh Orthopaedic must undergo a two-year corrective action plan and take actions including revising HIPAA policies and procedures, reviewing current business associate agreements and retraining employees.
To add insult to injury, the clinic never received the digitized PHI from the vendor. Instead of digitizing the PHI, the third-party company simply sold the X-ray films to a recycling company, which extracted and sold the silver from the X-ray films before apparently destroying the PHI.
Last month, HHS fined a Minnesota healthcare system $1,550,000 for failing to conduct a risk assessment and failing to execute a written associate agreement with a third-party billing company. The third-party billing company was not authorized to receive PHI but was given access to PHI of almost 300,000 patients for over six months before a business associate agreement was finally signed.
Jocelyn Samuels, Director of HHS Office for Civil Rights, stated: “HIPAA’s obligation on covered entities to obtain business associate agreements is more than a mere check-the-box paperwork exercise. It is critical for entities to know to whom they are handing PHI and to obtain assurances that the information will be protected.” As these two recent actions show, failing to execute a business associate agreement can be an expensive mistake.
April 14, 2016
Discussion About Prescription Drug Coverage Grows With Awareness of Opioids, Contraceptives, Spiking Prices
In the past year, legislators, employers, the media and healthcare consumers have focused on a variety of topics related to prescription drug coverage and use. The opioid epidemic sweeping the country, changes in access to contraceptives and the rising prices of prescription drugs have all contributed to a renewed interest in how insurance plans cover prescription drugs and how health care consumers use them.
The opioid epidemic has devastated communities across the United States, particularly poverty-stricken and rural areas. Strikingly, many people who become addicted to opioids first have contact with these drugs through legal prescriptions prescribed for legitimate reasons, such as automobile accidents or workplace injuries. In 2014, doctors wrote over 245 million prescriptions for opioids in the United States, and the trend of overprescription fueled an epidemic of abuse and a rising number of overdose-related deaths.
Widespread alarm about opioid abuse and addiction pushed the White House Office of National Drug Control Policy to propose a plan to prevent and treat opioid addiction on a national scale. The plan includes the establishment of a Mental Health and Substance Use Disorder Parity Task Force to examine whether insurance plans are conforming to the Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008, which requires that mental health and substance abuse benefits be covered at the same level as other medical benefits. In light of the focus on addiction treatment, plan sponsors should take the opportunity to evaluate whether MHPAEA applies to current plans and, if so, whether those plans are MHPAEA-compliant.
Meanwhile, contraceptive coverage has been the focus of both new state laws and Supreme Court Cases. On March 23, 2016, the Supreme Court heard oral arguments for Zubik v. Burwell, a challenge to the Affordable Care Act contraceptive coverage mandate. A week later, the Court issued an unusual response: an order instructing all parties involved in the case to re-evaluate whether an exemption process could be developed that is acceptable to both the U.S. Department of Health and Human Services (HHS) and to religious nonprofits and closely held companies. Plan sponsors that currently have a contraceptive coverage exemption should follow this case closely; its outcome may change the exemption process significantly.
Meanwhile, some state legislatures are making contraceptives more widely accessible. This spring, California joined Oregon and Washington in allowing women to obtain hormonal contraceptives directly from a pharmacist without an office visit to a family doctor or OB/GYN. Some experts speculate that law might lead to lower expenses for insurance plans, as only the prescription itself must be covered, not the cost of an office visit. The law may also lead to lower expenses for patients, as many forms of birth control are covered without cost-sharing, and patients would save on the cost of an office visit copay.
Only a few drugs must be covered without cost-sharing, however, and in general, prescription drug prices are trending upward. New drugs with exorbitant price tags, and sharp price hikes for existing drugs, have come under intense scrutiny in the wake of a pharmaceutical company’s controversial acquisition and re-introduction of Daraprim, a 60-year-old drug, at a 5,500 percent increase in price, from $13.50 to $750 per pill. Price increases are driving up health care spending overall. In 2015, U.S. spending on prescription drugs exceeded $425 billion, a 12 percent increase from 2014. More than half of that increase is attributable to name brand and specialty drugs approved by the Food and Drug Administration (FDA) within the past two years, rather than older, cheaper generic drugs.
Healthcare payers are exploring strategies to keep prescription drug costs from spiraling out of control while improving patient health. In March, Centers for Medicare & Medicaid Services (CMS) proposed that Medicare pay providers to prescribe the most effective drug—not the most costly drug—and reward providers with bonuses for good patient outcomes. As more private insurance plans base payment models on Medicare pricing, Medicare's payment innovations could spread throughout the health insurance industry. However, in the United States, prescription drug pricing is usually opaque and difficult for both patients and providers to understand.
As the insurance landscape evolves in response to health care trends, plan sponsors should keep in mind that national trends touch individual employees in ways that affect the plan. Do plan participants live in an area with high rates of opioid overprescribing? Is the plan subject to MHPAEA, and if so, how does the plan cover mental health and substance abuse services? Does the plan comply with Affordable Care Act contraceptive coverage requirements? How are pricey prescription drugs driving plan spending, and how can plan participants be empowered to choose drugs that offer the best value and most efficacy? Engaged plan sponsors and educated plan participants are key to a healthy plan. If you have questions about prescription drug coverage and spending, contact The Boon Group today.
April 6, 2016
How Might Merrick Garland Tip Cases at the Supreme Court?
The death of Justice Antonin Scalia on February 13 left a vacancy on the Supreme Court that has yet to be filled. Without a ninth justice, the Supreme Court has turned out two 4-4 split decisions so far, and is accepting fewer new cases than usual in an apparent bid to avoid deadlocking the court before Justice Scalia's former seat is filled.
On March 16, President Obama nominated the Chief Judge of the U.S. Court of Appeals for the D.C. Circuit, Merrick Garland, to fill the vacant Supreme Court seat.
While the Senate was on a two-week recess, campaigning for and against Judge Garland's confirmation ramped up, with advertisements and editorials appearing in radio, television and print, particularly in states facing contested Senate races. While two Republican Senators have met with Judge Garland so far, the majority of the Senate has extended a chilly reception. Senator Mitch McConnell, the majority leader, has reaffirmed that he will not support any nomination put forward by President Obama, stating: "The American people may well elect a president who decides to nominate Judge Garland for Senate consideration. The next president may also nominate someone very different. Either way, our view is this: Give the people a voice in the filling of this vacancy." However, a handful of Republican senators have expressed some openness toward holding confirmation hearings during the “lame duck” period of President Obama’s final year in office, when the presidential election is over but the new president has not yet been sworn in.
If Judge Garland were to be confirmed by the Senate, it is difficult to forecast how his presence might affect the Supreme Court’s future decisions. Judge Garland's time on the D.C. Circuit Court has produced many technically proficient and even-toned opinions about the issues that are most often presented to that court: government, campaign finance, military proceedings and other cases related to the nation’s capital. However, the D.C. Circuit rarely hears cases about issues that fire voters and employers up, like the Affordable Care Act, health care, insurance, unionization and affirmative action. His record on the D.C. Circuit offers a few clues. In past decisions, Judge Garland has shown deference to executive agencies, and that deference might extend to the Department of Health and Human Services when it comes to cases involving the Affordable Care Act. He has also tended to side with labor unions, upholding findings by the National Labor Relations Board in 18 out of 22 majority opinions. If Judge Garland is eventually confirmed to the Supreme Court—in 2016 or next year—his comments and questions during oral arguments may reveal more about his stances and offer a preview of how his vote may affect employers for years to come.
March 3, 2016
HHS Office for Civil Rights Expands HIPAA "Access Right" Guidance
In January, the Department of Health and Human Services Office for Civil Rights (OCR) released a fact sheet and FAQ regarding patients' right to access their own medical records under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
On February 25, OCR released a second set of frequently asked questions focusing on the HIPAA Privacy Rule's right of patients to access their own protected health information (PHI). The FAQs focus on access issues including access fees, the scope of information covered by the access right and acceptable formats of accessed PHI.
Many questions on the new guidance focus on access fees. The HIPAA Privacy Rule allows covered entities to charge patients a reasonable fee to receive copies of their own PHI. The new guidance acknowledges that covered entities are allowed to charge fees to recoup the cost of labor, supplies and postage, but urges covered entities to voluntarily provide PHI at no cost in the interest of lowering barriers to access. The guidance also reminds covered entities that individuals must be informed of access fees in advance and that OCR regulates how access fees can be calculated, meaning that providing PHI at no cost may actually reduce administrative costs compared to charging an access fee.
The guidance also clarifies what types of costs can be included in calculating the fees. For example, access fees may account for the cost of labor for an employee to photocopy or scan the PHI, but not for the cost of labor for an employee to search for the requested PHI. Additionally, fees may not account for the cost of outsourcing the function of responding to patient requests for PHI.
The new FAQs firmly state that covered entities cannot charge a fee for individuals who wish to view or download their own PHI through a certified electronic health record technology (CEHRT) patient portal. OCR's reasoning is that the act of accessing PHI through a patient portal doesn't incur labor or supply costs for the covered entity; therefore, a fee cannot be charged for a patient to use the view, download or transmit function.
The guidance examines even more granular details of access fees. For example, OCR notes that a covered entity cannot charge access fees if an individual wants to simply inspect their own PHI rather than request a copy of that PHI—even if the individual, while inspecting the PHI, "takes notes, uses a smart phone or other device to take pictures of the PHI, or uses other personal resources to capture the information." Access fees are only permissible if the covered entity itself expends resources to copy or transmit PHI, not if the individual uses their own resources to do so. Another FAQ notes that covered entities are not required to transfer PHI to portable media supplied by an individual (such as a flash drive or writable CD), but, conversely, that covered entities cannot require an individual to purchase a portable media device from the covered entity itself in order to receive PHI.
The guidance dovetails with President Obama's Precision Medicine Initiative, which uses health information donated by patients to further medical research. OCR cited the need for "robust access to patient data" as one motivation for the guidance, in addition to the need for every patient "to be fully engaged in their care and empowered to make health care decisions that are right for them."
February 25, 2016
Uncertain Future for Upcoming Supreme Court Cases
With the death of Justice Scalia on February 13, the Supreme Court has been thrown off-balance. Prior to Justice Scalia’s death, the Court was composed of four conservative judges, four liberal judges, and Justice Anthony Kennedy, who functioned as a swing vote. Now with Justice Scalia’s seat vacant, the liberal judges may have an advantage until a replacement is nominated by the President and confirmed by Congress.
President Obama has nominated two of the Justices that currently serve on the Court—Justices Elena Kagan and Sonia Sotomayor—and clearly signaled that he intends to nominate a third. The President stated: “I plan to fulfill my constitutional responsibilities to nominate a successor in due time. There will be plenty of time for me to do so, and for the Senate to fulfill its responsibility to give that person a fair hearing and a timely vote.”
However, the Senate Majority Leader, Mitch McConnell, countered that the Senate would not confirm a nomination by President Obama and that the task of selecting a nominee should go to the next President. Eleven senators of the Senate Judiciary Committee agreed, writing that the Committee will “withhold consent on any nominee to the Supreme Court submitted by this President” and “will not hold hearings on any Supreme Court nominee until after our next President is sworn in on January 20, 2017.”
The Supreme Court’s terms stretch from mid-fall to mid-summer, with a break from hearing cases and delivering opinions in July, August and September. If a replacement for Justice Scalia isn’t confirmed until after Inauguration Day, the Court will remain unbalanced for the remainder of its current term and the first half of its next term. This dynamic would affect the Court’s selection of which cases to hear as well as the results of those cases.
This issue directly touches plan sponsors, because several cases before the Court this term deal with employee benefits and related issues. Earlier this term, the Court ruled in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan that health plans have to act quickly to enforce the ERISA subrogation right to recover the cost of treatment of injuries from plan participants who obtain a settlement from the third party responsible for those injuries. The upcoming Freidrichs v. California Teachers Association deals with mandatory union contributions for public employees, while Zubik v. Burwell is a combination of seven separate challenges to the Affordable Care Act’s mandate that group health plans cover contraceptives. The Court has not yet decided whether to hear several other cases related to health care, such as Tibbs v. Bunnell, Doe v. Christie, and Home Care Association of America v. Weil.
February 8, 2016
Professional Employment Organizations and Service Contract Act Compliance
A Professional Employment Organization (PEO) that employs and leases employees back to a prime contractor subject to the Service Contract Act (SCA) is considered a subcontractor under the provisions of SCA and therefore subject to the full compliance of The Act as defined in the Code of Federal Regulations (29 CFR Part 4). In addition, each contract the prime contractor wins has a separate Wage Determination incorporated into that particular contract that specifies “minimum economic” requirements for employees working on that contract by labor category. SCA is a “flow down law,” which subjects all subcontractors to the full provisions of the SCA in the same manner as the prime contractor. Furthermore, the prime contractor is responsible for the compliance of all its subcontractors, including the PEO.
The SCA compliance laws, rules and regulations include, but are not limited to, the following topics:
1. Fringe accounting
2. Bona fide benefits
3. Fully funded self-insured plans
4. Comingling of SCA and non-SCA fringe dollars
5. Tricare opt-out “prohibited incentives” – John Warner Act
6. Medicare opt-out “prohibited incentives” – Centers for Medicare & Medicaid Services
7. Minimum wages
8. Vacation requirements
9. Holiday requirements
10. Part-time employees
11. Temporary employees
PEOs exist because of the “economies of scale” they provide companies through consolidation of a single employee benefits package (typically unfunded self-insured insurance plans), a single vacation plan with a fixed vesting option, fixed holidays and flexible wages, etc. However, the contract-specific Wage Determination lists minimum labor category wages, vacations and holidays that prevent a “one size fits all” model that would otherwise make a PEO attractive to commercial companies not engaged in SCA work.
PEOs are not prohibited from hiring employees, and then leasing those employees back to the contractor as a subcontractor for SCA contracted work, if the PEOs fully comply with The Act as defined in 29 CFR Part 4 and the specified Wage Determination incorporated into each separate contract.
In reality, few PEOs consider themselves a subcontractor under the SCA, and thus are not complying with the SCA requirements or addressing the topics specified above. This is a very dangerous position for the prime contractor that leases employees back from the PEO, because the prime contractor will be punished to the full extent of the law for the PEO’s failure to follow these basic compliance principles applicable to every other prime contractor.
This article was written by Jim Stevenson, President of Stevenson Contract Advisors (SCA Solutions). SCA Solutions provides strategic solutions for domestic and international service companies. He can be reached at email@example.com.
January 19, 2016
EEOC Lawsuit Probes Intersection Between ADA, Wellness Programs
A new case out of the U.S. District Court for the Western District of Wisconsin tested the boundaries of the Americans with Disabilities Act (ADA) with respect to employer wellness programs.
The Equal Employment Opportunity Commission (EEOC) sued Flambeau, Inc., over the company’s employer wellness program. Employer wellness programs are legally required to be voluntary (not mandatory), and programs must make accommodations to ensure that employees are not discriminated against on the basis of disability.
The lawsuit centered on the definition of “voluntary.” While Flambeau, Inc. employees could choose not to participate in the wellness program, the Flambeau, Inc. employer-sponsored group health plan was only offered to wellness program participants. Employees who did not choose to participate in the wellness program were not permitted to enroll. The wellness program included a health risk assessment and biometric screening. Flambeau, Inc. received de-identified results of wellness program testing in aggregate, then used the results to set premium rates and adjust co-pays for the employer's self-funded group health plan.
The EEOC argued that because the ADA bans employers from instituting mandatory medical examinations, Flambeau had violated the ADA (see 42 U.S.C. §12112(d)(4)(A)). However, Flambeau argued that the wellness program requirement was permissible because wellness program results were used for underwriting and administrative purposes. In other words, the wellness program participation requirement was a "term" of the group health plan, falling within the ADA "safe harbor" exemption for activities related to administration of a bona fide health plan.
Is participation in a wellness program "voluntary" if the consequence of non-participation is ineligibility for the group health plan? The court’s answer: yes.
The court stated that because wellness program participation was not mandatory for continued employment, the wellness program met the definition of "voluntary" under EEOC guidelines—even though participation was mandatory for continued group health plan coverage. "Regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrolling in [Flambeau's] plan," District Judge Barbara Crabb wrote, meaning that the plan "clearly did not involve [a disability-based distinction] or relate to discrimination in any way." Therefore, the court found that Flambeau, Inc. had not discriminated against employees on the basis of disability and had not violated the ADA.
Employer wellness programs can be a valuable tool in encouraging employees to make healthy choices and potentially reducing health insurance claims, but case law and regulatory interpretations are constantly evolving. Employers should regularly examine their wellness programs for compliance with the ADA, the Affordable Care Act (ACA) and with any other applicable laws.
December 14, 2015
What Federal Contractors Need to Know About the Commingling of SCA Assets
The Service Contract Act (SCA) enforcement process has changed over the past few years with the addition of more than 1,000 Department of Labor (DOL) investigators. Attention is now given to details of the Code of Federal Regulations (CFR) and other related acts that may have been overlooked in the past.
Commingling of SCA employee fringe dollar assets with those of non-SCA employee benefit dollar assets is one example of the DOL paying particular interest to a process that has been in place for years. There is no prohibition against SCA and non-SCA funds residing in the same account. The problem for the contractor is in enforcement rather than regulations. The DOL enforces the code under the premise that the contractor must be able to prove that each employee received the full benefit of the Health &Welfare (H&W) dollars each individual earned and that none of those H&W dollars in any way were used to reduce the contractor’s cost to provide benefits to non-SCA employees. The CFR does state that:
1. Unfunded self-insured plans paid from general assets of the contractor are typically not allowed. (29 CFR § 4.171)
2. Contributions must be paid irrevocably to a third party or trustee. (29 CFR § 4.171)
3. The trust must be set up in such a way that the contractor will not be able to divert the funds to its own use or benefit. (29 CFR § 4.171)
Obviously, if the SCA funds are deposited into an account out of which SCA and non-SCA benefits are paid, and the contractor is not reconciling claims attributable to the separate SCA and non-SCA classes, the contractor cannot be sure that they are in compliance on a per employee basis, or that none of the SCA funds were used to offset non-SCA costs, including non-SCA claims. If any SCA funds were used to offset non-SCA costs, that would benefit the contractor, and by definition, would violate No. 3 above. If the contractor cannot prove, either to itself or to the DOL, that it is in compliance with the above, it will be assumed that the contractor is not. (29 CFR §§ 4.179 and 4.185). Simply put, the contractor bears the burden of proving compliance with the regulations.
Proper recordkeeping is paramount in SCA compliance. Records that adequately segregate not only SCA and non-SCA employees on the same contract but also which SCA employees worked on which SCA contract, for how long, and when also become extremely important. The DOL presumes all employees working in the establishment, department, or division where such covered SCA work is performed have worked on or in connection with the contract during the period of performance unless the contractor can show otherwise. Since the burden of proof is on the contractor, it is the contractor’s responsibility to keep adequate records.
References: 29 CFR § 4.171(b)(1), 29 CFR § 4.171(a)(4), 29 CFR § 4.179, 29 CFR § 4.185
This article was written by Jim Stevenson, President of Stevenson Contract Advisors (SCA Solutions). SCA Solutions provides strategic solutions for domestic and international service companies. He can be reached at firstname.lastname@example.org.
December 2, 2015
OCR Levies Second-Biggest Health Insurance Portability and Accountability Act (HIPAA) Fine Ever
The Department of Health and Human Services' Office for Civil Rights (OCR) has announced that an insurance company based in Puerto Rico will pay the second-largest HIPAA settlement in the history of enforcement of the law. Triple-S Management Corporation agreed to pay $3.5 million and implement a rigorous HIPAA compliance program after an OCR investigation found multiple HIPAA violations. The settlement amount is close to the largest HIPAA fine ever assessed by OCR, when New York Presbyterian Hospital and Columbia University were fined $4.8 million in 2014 following a PHI breach.
The resolution agreement explains the HIPAA violations and the actions Triple-S must take going forward. Triple-S failed to put business associate agreements in place with outside vendors, failed to protect paper and electronic PHI, failed to conduct a risk analysis regarding electronic PHI, and failed to ensure that the minimum necessary amount of PHI was disclosed to carry about business operations. These failures led to multiple breaches of PHI, including an incident where former Triple-S employees working for a competitor were able to access Triple-S's database because Triple-S never terminated the employees' access, an incident in which a former employee burned PHI onto a CD and gave the PHI to a competitor, and multiple incidents in which a business associate breached PHI by printing PHI on the outside of paper mailings sent to members. The required HIPAA compliance program must include risk analysis, policies and procedures, and HIPAA training for all employees and business associates.
Covered entities should ensure that all business associates are covered by appropriate legal agreements and that business associates are working in compliance with HIPAA. OCR has indicated that HIPAA audits of both covered entities and business associates are coming in 2016.
November 11, 2015
Modernizing Payment Processing Methods in the Health Care Industry
Today’s health care environment has grown increasingly complex due to compliance requirements that were introduced as part of the Affordable Care Act (ACA). Among other initiatives, the ACA included an industry mandate for the development and use of a HIPAA-compliant Electronic Funds Transfer (EFT) standard for electronic claims payments. The law also increased transparency by implementing Medical Loss Ratio (MLR) requirements that limit a health plan’s ability to pass increased administrative costs on to plan participants.
As a result, payments per life administered are decreasing, and health care claims payers like Boon Administrative Services, Inc. face mounting pressure to find innovative solutions that are compliant while reducing payment distribution expenses. To meet these requirements, Boon Administrative Services teamed up with Emdeon to offer multiple payment and remittance advice options to providers.
By some estimates, transitioning current health care payment methods from paper to electronic processes might save as much as $11 billion and 2.5 billion pieces of paper each year. Meanwhile, billing and administrative costs account for about 10-12 percent of a physician practice’s annual revenue. In contrast, the U.S. retail sector spends only about two percent of annual revenue on payment processing. Modernizing payment processing methods in the health care industry would lead to huge gains in efficiency.
In October 2015, Boon Administrative Services began making claims payments to providers using the Healthcare EFT Standard designated by the U.S. Department of Health and Human Services. Payments made via EFT are similar to other direct deposit operations (like paycheck deposits) and are a safe alternative to paper checks. Providers like EFT payments because of the following additional benefits:
- Reduction of the amount of paper in the office
- Time savings and avoidance of the hassle associated with frequent staff trips to the bank to deposit checks
- Greater security due to elimination of the risk of paper checks being lost or stolen
- Faster access to funds (most banks credit direct deposits faster than paper checks)
- Easier reconciliation of payments with bank statements
- Less risk of fraud
Another option that Boon Administrative Services is using to deliver claims payments electronically is Virtual Credit Card (VCC) technology. VCC payments leverage a provider’s existing credit card network to deliver claims payments even faster than EFT payments. The majority of health care providers today accept credit card transactions from patients, so utilizing the credit card networks to pay providers through a business-to-business credit transaction is relatively simple.
The most exciting part about VCC claims payments is the potential to remove the hurdle of provider enrollment, which encumbers EFT payments. Neither registration nor enrollment with the payer is required, so the provider does not have to take any action to begin receiving VCC payments.
Meanwhile, Boon Administrative Services receives a rebate based on VCC transaction volume, channeling revenue back to the company and offsetting provider payment distribution expenses. VCC transactions also benefit providers by:
- Simple electronic payment acceptance for providers since neither registration nor enrollment with the payer is required
- Elimination of the cost and hassle of processing paper checks
- Elimination of the risk of checks being lost or stolen
- Easy initial implementation through a process most providers are already familiar with
- Economical payment processing–merchant fees are comparable to or lower than fees already incurred by providers that accept credit card payments
- Immediate processing of transactions, increasing cash flow
Doctors and hospitals throughout the country are increasingly requesting that claims payments be made electronically. Boon Administrative Services’ partnership with Emdeon has produced comprehensive, compliant and innovative claims payment solutions that promote a positive and mutually beneficial payer-provider relationship.
This guest post was written by John Jenkins, Director of Licensing & Compliance at The Boon Group. He can be reached at email@example.com.
October 29, 2015
New ACA FAQ Clarifies Coverage Requirements for Lactation, Obesity and More
The Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury have released the twenty-ninth FAQ regarding the Affordable Care Act (ACA). These FAQs are released periodically to answer questions from stakeholders regarding ACA implementation.
FAQ XXIX addresses coverage of preventive services, including lactation services, obesity treatment, colonoscopies, and BRCA genetic testing, as well as wellness program regulations and mental health treatment under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
The FAQ states that lactation counseling should be covered by health insurance plans subject to ACA coverage rules, and that lactation counseling and supplies should be easily accessible to pregnant and breastfeeding women. Lactation counseling should be covered when provided by any health care provider acting within the scope of his or her license, and coverage of such counseling (and of breastfeeding equipment or rental) should be available for the entire duration of breastfeeding. Additionally, lactation counseling providers must be listed on a plan’s list of in-network providers. If there are no providers in-network who can provide lactation counseling, the plan must pay an out-of-network provider at in-network rates for the service, as previously stated in FAQ XII (http://www.dol.gov/ebsa/faqs/faq-aca12.html).
Regarding obesity, the FAQ says that health insurance plans cannot exclude coverage for all weight management services. Obesity screening for adults must be covered without cost-sharing, although plans can use medical management techniques like providing a limited number of weight management counseling sessions or specifying the setting in which services must take place to be covered (for example, covering outpatient treatment only). The U.S. Preventive Services Task Force (USPSTF) recommends (http://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/obesity-in-adults-screening-and-management) that in addition to screening adults for obesity, providers should offer or refer patients to intensive, multicomponent behavioral interventions. The USPSTF notes that plans should cover between 12 and 26 group or individual intervention sessions per year, including activities like exercising, setting weight loss goals, and learning about diet and nutrition.
Colonoscopies have been the subject of several ACA FAQs. This FAQ addresses pre-procedure specialist consultations. If a consultation with a specialist prior to a preventive colonoscopy is medically appropriate, the health insurance plan must cover the consultation without cost-sharing. Additionally, pathology exams on polyp biopsies taken during a preventive colonoscopy must be covered without cost-sharing. The colonoscopy guidance is applicable to plans with plan years beginning on or after 12/22/2015.
Another preventive service, BRCA testing, must be covered without cost-sharing regardless of whether the patient has previously suffered from cancer. BRCA testing, which looks for genetic mutations that indicate increased risk of breast and gynecological cancers, must be covered without cost-sharing as long as the patient is currently symptom-free and not receiving active treatment for a related cancer.
The FAQ also lists the two methods for qualifying non-profits or closely held for-profits with self-insured plans to opt out of providing contraceptive coverage for religious reasons.
Additionally, the FAQ clarifies regulations on rewards for participation in employer wellness programs and explains patients' rights to access information regarding coverage appeals and medical necessity determinations for mental health or substance abuse treatment under MHPAEA.
The recommendations of the U.S. Preventive Services Task Force (USPSTF) are used to determine which preventive services must be covered without cost-sharing. In October, USPSTF published a new recommendation regarding blood glucose and type 2 diabetes screening. In 2008, USPSTF recommended that adults with high blood pressure over 135/80 mm Hg be screened for abnormal blood glucose levels and type 2 diabetes. The new recommendation is that all overweight adults ages 40 through 70 be offered blood glucose testing. Patients with abnormal blood glucose levels should be referred to intensive behavioral counseling interventions, which the USPSTF defines as multiple sessions of counseling about healthy eating and exercise.
In light of the new ACA FAQ and updated USPSTF recommendations, plan sponsors should make appropriate changes to plan policies and documents as needed.
October 7, 2015
HHS Proposes Rule on ACA Anti-Discrimination Provisions
On September 8, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) proposed a rule to interpret Section 1557 of the Affordable Care Act (ACA).
Section 1557, which prohibits discrimination in health care and related industries, expressly bans discrimination based on race, color, national origin, sex, age and disability.
The proposed rule would interpret Section 1557 to apply to all entities that receive federal funding from HHS—including providers who accept Medicare patients and all Marketplace plans. The rule would also apply to related entities, such as organizations that help the uninsured sign up for Marketplace plans.
The rule would apply to all portions of the entity, meaning that an insurance carrier offering plans on the Marketplace would be required to comply with the rule even with respect to insurance plans sold outside of the Marketplace. However, the proposed rule is unclear regarding its application to self-funded plans.
The proposed rule would interpret the sex discrimination provision of Section 1557 as banning discrimination based on sexual orientation and on transgender status, including blanket exclusions of gender transition-related care under a health insurance plan. The rule proposal includes a request for comment regarding sex discrimination and extension of religious exemptions to religious organizations and providers.
As proposed, the rule would also require provision of translation and interpretation assistance for non-English-speakers and for individuals with disabilities, including deaf or speech-impaired individuals.
Additionally, the proposed rule would create an enforcement mechanism by allowing individuals to take private action to collect damages if their rights under Section 1557 are violated.
The comment period is open until November 9, 2015, after which HHS will take time to finalize the rule. The rule would become effective 60 days after being finalized.
September 15, 2015
OFCCP Releases Final Rule on Federal Contractor Pay Transparency
On September 11, the Office of Federal Contract Compliance Programs (OFCCP) issued a final rule regarding Executive Order 13665. The Executive Order was signed by President Obama on April 8, 2014, and was designed to increase pay transparency among federal contractor employees and job applicants. The final rule applies to all contractors that are already covered by Executive Order 11246 (the 1965 order by President Lyndon Baines Johnson that established anti-discrimination rules for federal contactors), and will be effective for contracts entered into or modified after January 11, 2016.
The Final Rule specifically states that employees or applicants cannot be discriminated against for discussing, disclosing, or asking about compensation. Information about salary or wage levels, overtime, bonuses, commissions, paid time off, and insurance benefits would all fall under the category of "compensation."
Coming at the heels of the Lilly Ledbetter Fair Pay Act, the Executive Order was explicitly designed to try to close pay gaps due to gender and race. Employees or applicants who believe they have been discriminated against will be able to file a discrimination complaint with OFCCP.
Notably, the final rule doesn't apply to employees who have access to compensation information about other employees or applicants in order to perform essential job functions. In other words, a Human Resources employee might still be fired for disclosing information about another employee's salary without a legitimate business reason to do so.
September 3, 2015
District Court Ruling Seeks to Expand Contraceptive Mandate Exception
A new ruling out of the U.S. District Court for the District of Columbia would expand the types of organizations that can opt out of providing employees with coverage for contraceptives. The Affordable Care Act (ACA) requires that group health insurance plans cover one method of each of the 18 Food and Drug Administration-approved types of contraceptives to be considered ACA-compliant. However, the 2014 Supreme Court decision in Burwell v. Hobby Lobby established an exception to that rule by allowing non-profit and closely held for-profit companies with religious objections to apply for an exemption from providing such coverage.
Now U.S. District Judge Richard J. Leon has ruled in March For Life v. Burwell that a secular organization with non-religious conscienti