Amending FSA Plan Documents

[Guest benefitsdude6]

Does the plan document governing a health FSA (with more than 50 participants) have to be amended if all claims are sent to a third party administrator?

I realize that other HIPAA requirements would need to be met (entering into business associate agreements, adopting policies and procedures, etc.), but if the plan sponsor never receives (nor will it ever recieve) PHI, would a plan amendment be nessesary?

[Guest BenefitsLawyer]

I think the sponsor of a self-funded health plan (such as an FSA) always needs to be able to have access to PHI in a TPA's hands (even if it doesn't use that access on an everyday basis), and therefore should include the HIPAA amendment in the plan document. ERISA fiduciary duty includes an obligation to choose and monitor plan service providers prudently--I have a hard time convincing myself that a plan sponsor can properly monitor an FSA TPA if the sponsor cannot have access to PHI.

[KJohnson]

Check you appeals langauge. My guess is that if there is an appeal, the PHI is coming back to the plan sponsor in some form to determin the appeal.

Also, at least one national TPA is taking the position that they are not a business associates with the plan, but rather are an agent/subcontractor of the employer who is administering the plan. Therefore they insist that they are not BA's per se, but agents of the employer under section 164.504(f)(2)(B), which says:

"The plan documents of the group health plan must be amended to incorporate provisions to:

...

(B) Ensure that any agents, including a subcontractor, to whom it provides protected health information received from the group health plan agree to the same restrictions and conditions that apply to the plan sponsor with respect to such information."

Thus if the information is coming to an "agent" of the employer it is treated as coming to the employer and you must have an amendment. This TPA is providing "BA-like" "agent" agreements for the plan sponsor.