Common Pitfalls and Best Practices in Health and Welfare Benefit Plans

Common Pitfalls and Best Practices in Health and Welfare Benefit Plans
Brydon M. DeWitt

Overview ACA Compliance: Employer Payment Plans ACA Compliance: ESRP Penalty Assessments Disability Claims Procedures COBRA Compliance Issues Wellness Program Compliance Cafeteria Plans HIPAA Health Information Privacy

Employer Payment Plans
Employer reimbursement of employees’ individual market health insurance costs Health Reimbursement Arrangements Health Flexible Spending Arrangements Employer Payment Plans are Group Health Plans Subject to ACA Market Reforms No annual limits Coverage of preventive services $100 per day, per affected participant penalty

Health Reimbursement Arrangements Must be Integrated With a Group Health Plan Integration Method: Minimum Value Not Required Employer offers a group health plan (other than the HRA) HRA participant is enrolled in a group health plan HRA only available to employees enrolled in non-HRA group coverage HRA is limited to reimbursement of co-payments, co-insurance, deductibles, premiums and non-essential health benefit medical care Employees may permanently opt-out of the HRA at least annually

Health Reimbursement Arrangements Must be Integrated With a Group Health Plan Integration Method: Minimum Value Required Employer offers group health plan that provides minimum value Employee enrolled in a group health plan that provides minimum value HRA only available to employees actually enrolled in group health coverage offering minimum value Employees may permanently opt-out of the HRA at least annually.

Flexible Spending Accounts Comply if: Employer offers group health plan coverage FSA eligibility provisions must be consistent with group health plan Maximum benefit payable to a participant does not exceed two times the participant’s salary reduction election for the FSA for the year (or, if greater, $500 plus the amount of the participant’s salary reduction election)

Employee Assistance Programs Cannot provide significant benefits in the nature of medical care or treatment

Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) QSEHRA Requirements Must be funded by an eligible employer Must be offered on the same terms to all eligible employees May not permit salary reduction contributions Must provide for payment (or reimbursement) of medical care of the employee or family members Maximum annual payments (for 2018) $5,050 for an employee $10,250 if QSEHRA provides reimbursments for family members

Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) Eligible Employers Fewer than 50 full-time employees (including full-time equivalents) Does not offer a group health plan to any of its employees Must be offered to all eligible employees QSEHRA may exclude: Employees who have not completed 90 days of service Employees under age 25 as of the beginning of the plan year Part-time or seasonal employees Collectively bargained employees Nonresident aliens who receive no US-source income

Qualified Small Employer Health Reimbursement Arrangements (QSEHRA) Written Notice Requirement At least 90 days before beginning of each year $50 per employee (up to $2,500 total) penalty for failure to provide notice Content Amount of the benefit That employee must provide the notice to any ACA marketplace if applying for the premium tax credit That employee may be liable for the ACA individual mandate penalty of he or she does not have coverage

ESRP Penalty Assessments
Employer Shared Responsibility “Applicable Large Employer” will owe an “assessable payment” if: It Does Not offer Minimum Essential Coverage OR It Offers Minimum Essential Coverage, but the coverage does not provide “minimum value” or is “unaffordable” AND A Full-Time Employee Receives Coverage Assistance Through an Exchange

Applicable Large Employer Employed on average at least 50 “full-time employees,” including full-time equivalent employees (“FTEs”), during the preceding calendar year Divide sum of the total of full-time employees and FTEs for each month in the preceding year by 12 If the result if 50 or more, the employer is an “Applicable Large Employer”

Applicable Large Employer Determined on a Controlled Group Basis Controlled group treated as one “employer” All employees of a controlled group of entities counted Code section 414(b) or (c) controlled group Code section 414(m) affiliated service group

Applicable Large Employer Parent-Subsidiary Controlled Group Example Company P Owns 100% of the stock of Companies S and T Company P has 3 full-time employees Company S has 40 full-time employees Company T has 60 full-time employees P-S-T Group has 103 full-time employees All three companies are “applicable large employers”

Applicable Large Employer Brother-Sister Controlled Group Five or fewer common owners Common owners must own at least 80% of each business Combined identical ownership must be more than 50 percent

Full-Time Employees Who Must be Offered Coverage Month to Month Must determine which part-time employees in current month will become full time employees in the next month Look-Back Measurement Method Safe Harbor Ongoing Employees Standard Measurement Period 3 to 12 months as elected by employer Stability Period At least 6 months, but no shorter than the standard measurement period Length may differ based on employee category (salaried, hourly, location, collectively bargained) Average of 30 hours per week during Standard Measurement Period -- deemed to be Full-Time employee during the Stability Period

Penalties Monthly Penalties: A. No Coverage Offered $167 X Full-Time Employees in Excess of 30 B. Inadequate Coverage Offered $250 x Full-Time Employees receiving coverage assistance through an exchange

IRS Penalty Assessments Letter 226J

IRS Penalty Assessments

ESRP Penalty Assessment
If the employer agrees with the assessment Sign and return Form 14764 Check box: “I consent to the assessment and collection of the proposed assessment of the ESRP in the amount of $______” Mail or pay electronically the payment If the employer disagrees with the assessment Check box: “I disagree with part or all of the proposed assessment of the ESRP” Include Signed statement explaining why the employer disagrees Revised Form if the employer believes there are errors Supporting documentation Return by the Deadline

New Disability Claims Procedures
Effective date delayed from January 1, 2018 to April 1, 2018 Claims Subject to the Regulations Any ERISA plan benefit that: is conditioned on the claimant being disabled; and plan administrator must determine whether the claimant is disabled. Disability plans 401(k) plans Nonqualified deferred compensation plans Regulations do not apply if the determination is made by another plan or a third party A long-term disability plan Social Security Administration

New Disability Claims Procedures (Cont’d)
Requirements Claims adjudicated in a manner that ensures the independence and impartiality of the decision-maker Hiring, promotion, compensation, termination may not be based on likelihood of claims denial Notices must be written in a linguistically appropriate manner Claimants must be informed of right to access their file Denial notices must include a full discussion of the claim including Standards applied in making the decision Why the views of healthcare and vocational professionals or the Social Security Administration were not followed Claimants must be allowed to present evidence and testimony Appeal determinations may not be based on new evidence or rationales unless the claimant is given an opportunity to respond Coverage rescissions treated as claims denials Denial, reduction or termination of a benefit or failure to pay benefit

New Disability Claims Procedures (Cont’d)
Next Steps Review plans to determine if they are subject to the new regulations Revise summary plan descriptions and amend plan documents Update disability claim denial letters Confirm that third party administrators will comply

COBRA Compliance Plans Subject to COBRA
Sponsored by private sector employers unless The employer employed fewer than 20 employees on typical business days in the prior calendar year Fewer than 20 employees on at least 50% of its typical business days Part-time employees count as a fraction: number of hours worked / number of hours for full time employment Employer determined on a controlled group basis

COBRA Compliance Plans Subject to COBRA
Plans that provide medical care Health Dental Vision Some EAPs Drug or alcohol treatment programs Health clinics

COBRA Compliance Plans Subject to COBRA Excluded Plans
Health Savings Accounts Disability Life Insurance Long Term Care Accidental Health and Dismemberment

COBRA Compliance Qualified Beneficiaries
Individual who, on the day before a qualifying event, was covered under a group health plan as: an employee, a spouse of an employee, or a dependent child of an employee

COBRA Compliance Qualifying Events
One of the following events that causes a qualified beneficiary to lose coverage (even if loss of coverage is not immediate) Death of a covered employee Termination of covered employee’s employment (unless due to gross misconduct) Divorce or legal separation of covered employee and spouse Covered employee becoming enrolled in Medicare Dependent child ceasing to be a dependent child under the plan Title 11 bankruptcy proceeding regarding an employer from whose employment a covered employee retired at any time

COBRA Compliance Notices
Initial or General Notice (provide within 90 days of eligibility) Qualifying Event Notice (30 Days) Election Notice (14 Days) Notice of Unavailability of COBRA Coverage (14 days after notice from the individual) Notice of Early Termination of COBRA Coverage (as soon as practicable) Notice of Insufficient Premium Payment

COBRA Compliance Common Mistakes Failure to provide notices
Failure to Provide Notices Can Result in Significant Penalties Need to show a procedure exists for issuing notices Inaccurate Notices Can Result in Significant Liabilities Notice sent to spouse and dependents? What if the spouse and dependents live at a different address? Severed Employee offered subsidized coverage under a self-insured plan Code Section 105(h) violation Benefits become taxable

COBRA Compliance Common Mistakes
Severed employee not removed from coverage or offered COBRA Failure to provide sufficient coverage Qualified beneficiary is entitled to the same coverage offered to similarly situated active employees

COBRA Compliance Common Mistakes FMLA Leave
Taking FMLA Leave is not a COBRA qualifying event Not returning to work after FMLA leave is a qualifying event if the employee was covered by a group health plan the day before the first day of FMLA leave Employee need not continue health coverage during FMLA leave to be eligible for COBRA

COBRA Compliance Common Mistakes Recordkeeping
Need to be able to show that notices were provided and whether COBRA was elected if challenged by a claimant IRS Internal Audit Guidelines instruct field agents to examine the following: Employer’s COBRA coverage procedures manual COBRA notices Internal COBRA audit procedures Documents regarding any COBRA disputes List of all individuals affected by a COBRA qualifying event List all individuals covered by the employer’s group health plan Personnel records

COBRA Compliance COBRA Enforcement Penalties
Internal Revenue Code Excise Tax $100 per day ($200 per family) per individual Maximum of the lesser of $500,000 or 10% of the aggregate amount paid or incurred by the employer during the preceding taxable year for group health plans ERISA Penalties Up to $110 per day for notice failures

Wellness Program Regulations
Americans with Disabilities Act (ADA) Genetic Information Nondiscrimination Act (GINA)

Americans with Disabilities Act (ADA) Three Primary Requirements Prohibits discrimination based on a disability Requires employers to reasonably accommodate disabled individuals Limits an employer’s ability to ask disability-related questions

Wellness Programs Compliance with the ADA Participation must be voluntary Health information must be kept confidential Health information may not be used to limit health coverage availability or adversely impact employment decisions

Voluntary Participation Under the ADA EEOC held that programs were not voluntary where Health plan participation conditioned on HRA participation Level of health plan coverage conditioned on HRA participation Monetary incentive provided for wellness program participation (depending on size of reward) Seff v. Broward County (11th Circuit, 2012) Broward County’s plan required employees to take a biometric screening or be charged an additional $20 for monthly health insurance premiums 11th Circuit: The wellness program fell under the ADA’s exception for “bona fide benefit plans”

EEOC ADA Regulations Proposed Regulations issued on April 16, 2015 Final Regulations issued on May 17, 2016 Apply to all wellness programs that include disability-related inquiries or medical examinations Offered only to employees enrolled in a health plan Offered to all employees regardless of health plan enrollment Offered by employers that do not sponsor health plans Effective as of the first day of the first plan year beginning on or after January 1, 2017

EEOC ADA Regulations Employee Health Program Must be reasonably designed to promote health or prevent disease Reasonable chance of improving health or preventing disease Collected information must actually be used to design a program that addresses at least some of the conditions identified To alert employees of health conditions Use of aggregate data to design health programs aimed at certain conditions Not reasonably designed if Exists to shift costs from the employer to employees Exists to give employer an estimate of future health costs No follow up information or advice provided to employees or using aggregate information to design programs Requires overly burdensome time for participants Requires unreasonably intrusive procedures Places significant costs on employees Determination based on facts and circumstances

EEOC ADA Regulations Programs that ask for disability or medical information must be voluntary Does not require participation Does not condition coverage on participation No adverse employment action for failure to participate Notice describing medical information to be obtained, use of the information and confidentiality restrictions Financial reward limited to 30% of cost of employee-only coverage (vacated by court order, effective January 1, 2019)

EEOC ADA Regulations Notice Requirement Describes type of medical information that will be obtained Describes restrictions on disclosures of medical information and methods that will be used to protect confidentiality

EEOC ADA Regulations Reward Limit If participation limited to health plan participants: 30% of total cost of self-only coverage (employee and employer portion) of the group health plan in which the employee is enrolled If participation is not limited to health plan participants: 30% of the lowest cost self-only coverage under a group health plan sponsored by the employer If employer does not offer a group health plan: 30% of the cost of self only coverage under the second lowest cost Silver Plan for a 40 year old non-smoker on the state or federal healthcare Exchange Different from HIPAA/ACA Limit: 30% of single (or if family members participate) family coverage. 50% for tobacco cessation.

EEOC ADA Regulations Reward Limits Vacated by Court Order, Effective January 1, 2019 AARP challenged the limits as too high to eliminate coercion In August, 2017, U.S. District Court held that the EEOC did not provide a reasoned explanation for adopting the 30% limit and remanded the regulations to the EEOC for reconsideration Four months later, in December, 2017, the court vacated the incentive provisions effective January 1, 2019 EEOC disclosed that there would be no new regulations before August, 2018 Updated regulations would not be finalized until October, 2019 New regulations would not apply until 2021

EEOC ADA Regulations All programs must offer reasonable accommodations Examples: Sign language interpreter at nutrition class Wellness materials available in large print for those with vision impairment Alternative to drawing blood for individual with a disability that makes drawing blood dangerous Smoking Cessation Programs Not subject to EEOC 30% limit if employer merely asks employees if they use tobacco. May be 50% under ACA and HIPAA regulations Subject to EEOC 30% limit if program requires a biometric screening or medical exam to test for nicotine

EEOC GINA Regulations Genetic Information Nondiscrimination Act of 2008 Restricts employer’s collection and disclosure of employee genetic information Genetic information may not be used in employment decisions Wellness program may not offer an incentive for providing genetic information Genetic Information Information about an individual’s genetic tests and the genetic tests of an individual’s family members, Information about the manifestation of a disease or disorder in an individual’s family members (family medical history) An individual's request for, or receipt of, genetic services, or the participation in clinical research that includes genetic services by the individual or a family member of the individual “Family member” defined to include spouse

EEOC GINA Regulations Apply to all wellness programs that request genetic information (even if not related to a group health plan) Cannot provide financial incentive for employee’s genetic information Can provide limited incentive for employee’s spouse health status information (manifestation of disease or disorder), if spouse provides authorization and is informed of confidentiality protections Asking spouse if he or she uses tobacco is not a request for genetic information Inducements may not be offered for employee’s children’s health status information As under the ADA, the program must be reasonably designed to promote health or prevent disease Information must be kept confidential and held in file separate from personnel files Incentive limits are the same as the ADA limits (vacated effective January 1, 2019)

Cafeteria Plans Common Mistakes
Is there a written cafeteria plan document? Who is eligible to participate? Only employees may participate Self-employed, partners, 2% shareholders in an S Corp may not participate Are mid-year election changes consistent with the law and the plan document?

Cafeteria Plans Common Mistakes Are qualified benefits offered
Health Dental Vision AD&D Disability Group term life insurance Health and Dependent Care FSA

Cafeteria Plans Common Mistakes Are qualified benefits offered
Benefits that may not be offered Educational assistance Transportation fringe benefits Health Reimbursement Arrangements Employer-provided meals and lodging Dependent group term life insurance Long-term care insurance Individual health insurance Are nondiscrimination tests being performed Eligibility to participate test Benefits and contributions test Concentration test

HIPAA/HITECH Breach Definition of Breach
An impermissible use or disclosure under the Privacy Rule Compromises the security or privacy of the protected health information. An impermissible use or disclosure of protected health information is presumed to be a breach unless the covered entity or business associate, as applicable, demonstrates that there is a low probability that the protected health information has been compromised based on a risk assessment of at least the following factors: The nature and extent of the protected health information involved, including the types of identifiers and the likelihood of re-identification; The unauthorized person who used the protected health information or to whom the disclosure was made; Whether the protected health information was actually acquired or viewed; and The extent to which the risk to the protected health information has been mitigated.

HIPAA/HITECH Breach Notice Requirements To the individual
Within 60 days of the breach First class mail if the individual consented to receive notice electronically To the media If the breach affects more than 500 individuals Prominent media outlets Press release To the Department of Health and Human Services If 500 or more individuals affected – within 60 days Under 500 affected – annually Report form is on the HHS web site

Questions? Brydon M. DeWitt Williams Mullen 804.420.6917

Common Pitfalls and Best Practices in Health and Welfare Benefit Plans

Similar presentations

Presentation on theme: "Common Pitfalls and Best Practices in Health and Welfare Benefit Plans"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Common Pitfalls and Best Practices in Health and Welfare Benefit Plans

Similar presentations

Presentation on theme: "Common Pitfalls and Best Practices in Health and Welfare Benefit Plans"— Presentation transcript:

Similar presentations

About project

Feedback