Health & Welfare Plans Newsletter

August 2, 2016

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[Guidance Overview]

ACA Mid-Year Checkup: Count Your Contingent Workers
"[C]atalogue and assess your existing and planned staffing arrangements ... by looking closely at the following: [1] Independent contractors performing work that is long term or fundamental to your business could be deemed your employees.... [2] Examine your employee census for 'temporary employees,' and review your medical plans to determine whether they are or should be covered.... [3] [Review any Professional Employment Organization (PEO)] contract to insure that the PEO offers minimum affordable coverage to each full-time member of your staff and that you are charged an appropriate, additional fee for each employee who elects coverage.... [4] The IRS generally takes the view that employees of temporary staffing agencies are employed by the agency and not the client company."  Jackson Lewis P.C.

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[Guidance Overview]

Minimum Essential Coverage Reporting and 'No Wrong Door' Coordination
"The proposed rule [1] clarifies that reporting of minimum essential coverage is not required if an individual is covered by more than one MEC plan or program provided by the same reporting entity.... [2] provides that reporting is not required for MEC if the MEC is only available if a covered individual is also covered by other MEC for which reporting is required.... [3] clarifies that the initial solicitation [of a covered individual's TIN] must be made at the time the reporting entity receives a substantially complete application for coverage ... from or on behalf of an individual not already provided coverage."  Health Affairs

[Guidance Overview]

IRS Addresses HRA Coverage, TINs, and ACA Information Reporting
"The proposed regulations are intended to improve upon reporting rules for supplemental forms of [minimum essential coverage (MEC)] that had proven confusing.... The supplemental coverage rules may impact how HRA coverage is reported ... The IRS provided an additional rule to ensure that the first and second annual TIN solicitation rules are met regarding individuals who are already enrolled in coverage.... The proposed regulations would narrow an exception under existing regulations by requiring insurers of catastrophic plans to report this coverage on Form 1095-B."  Practical Law Company

[Guidance Overview]

Do IRS Rules Put Employer Healthcare Opt-Out Provisions at Risk? (PDF)
"A conditional (eligible) opt-out payment would not be factored into the cost of self-only coverage when determining the affordability of health coverage ... A conditional opt-out arrangement requires the employer to obtain proof that an employee has other coverage for him- or herself and all other individuals for whom the employee reasonably expects to claim a personal exemption during the taxable year in which the opt-out applies.... An employee that fails to provide the proper proof of alternative coverage would not qualify to receive the opt-out payment under a conditional opt-out arrangement."  Cherry Bekaert Benefits Consulting, LLC

[Guidance Overview]

New HIPAA Guidance Requires Ransomware Attacks to Be Reported
"Most notable in the HHS's guidance is the clarification of whether a ransomware attack is considered a HIPAA breach and thus requires notification of the incident to them.... When electronic protected health information (ePHI) is encrypted as a result of a ransomware attack, a breach has indeed occurred. In being encrypted by the ransomware, the attackers have taken possession and control of the information, which constitutes 'disclosure' in violation of the HIPAA Privacy Rule. While the intent of a ransomware attack is not necessarily to steal the data but instead to hold it for ransom, by taking possession of it, they are still creating a breach."  WithumSmith+Brown, PC

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[Guidance Overview]

Christmas in July for Wellness Apps and Devices
"The Food and Drug Administration (FDA) [announced] that it does not plan to require pre-market review for low-risk 'general wellness products,' such as wearable fitness monitors, pedometers and sleep trackers.... To be considered a 'low-risk' general wellness product, devices must: [1] Not be invasive (penetrating or piercing the skin or mucous membranes); [2] Not be implanted; or [3] Not involve an intervention or technology that may pose risk to the safety of users or other persons if specific regulatory controls are not applied."  Faegre Baker Daniels LLP

[Guidance Overview]

FDA Issues Final Guidance for General Wellness Devices
"The final document describes FDA's policy of enforcement discretion for devices that are intended for 'general wellness' uses and are 'low risk' ... [T]his guidance document ... provides clarity and certainty that many such products, including wearable fitness trackers, weight loss apps, exercise equipment, and sleep management technologies, will be exempt from FDA oversight. However, changes made in the final version may adversely affect some consumer-oriented testing services and products that require blood samples."  Morgan Lewis

Struggling to Stabilize: 3Rs Litigation and the Future of the ACA Exchanges
"Insurers have so far filed at least six lawsuits ... to recover money due under the risk corridor program. Although Congress has not fully funded the program, the insurers argue that the federal government has promised to make those payments.... A struggling co-op, Evergreen of Maryland, recently filed suit to challenge HHS' implementation of the risk adjustment program ... The Iowa Insurance Commissioner, in its role as receiver for the estate of a failed co-op, has sued HHS in an Iowa federal court to block it from recovering on its loans to the co-op before other creditors are paid back."  Health Affairs

Evolving Expectations of Consumers on the ACA Exchanges
"[E]xchange consumers are as likely to say they are satisfied (53%) with their coverage as those with employer coverage (54%).... Exchange consumers were most likely to say their premiums were too high (50%) compared with their employer-sponsored counterparts (42%). However, fewer exchange respondents said they were having difficulty paying out-of-pocket costs (70% vs 75% of employer respondents)."  American Journal of Managed Care

Aetna Withdraws Plans to Expand Insurance on ACA Exchanges
"Aetna Inc. [announced] that it no longer planned to expand its Obamacare business next year, and the U.S. health insurer announced the sale of some Medicare Advantage assets as it fights to gain antitrust regulators' approval for its takeover of Humana Inc. The company, which is losing money on the plans it sells in 15 U.S. states to individuals on exchanges created under President Barack Obama's national healthcare law, said it also was looking at whether it should continue to offer the contracts."  Daily Mail

Illinois Insurers Seek Premium Increases of Up to 45%
"The leading insurer on Illinois' exchange, Blue Cross Blue Shield, is proposing increases for 2017 ranging from 23 percent to 45 percent for individual health care plans ... The Illinois Department of Insurance has until Aug. 23 to review the proposed rates, but unlike several other states, it doesn't have the power to reject the proposed rates outright."  Chicago Sun-Times

Benefits in General

[Guidance Overview]

The Cost of ERISA Non-Compliance Just Got More Expensive
"[B]oth the [DOL] and the [IRS] have voluntary compliance programs that may mitigate any penalties. Don't wait until until the plan is audited. It's much more expensive that way.... [C]ompliance with ERISA and the other laws can be both complicated and confusing. Ultimately, compliance is the responsibility of the plan sponsor and fiduciaries and not a third party."  The Retirement Plan Blog

DOL Increases Civil Monetary Penalties (PDF)
"Most professional liability insurance policies are not designed to cover penalties.... Cutting-edge fiduciary liability insurance companies have filled that void by providing coverage for certain penalties faced by employee benefit plans.... The key questions for trustees of employee benefit plans [are] what penalty coverages do you need and how much coverage do you need."  Euclid Specialty Managers

Seventh Circuit: Doubts or Gaps in the Evidence Should Not Be Resolved in the Claimant's Favor Under De Novo Review
"Sometimes gaps in coverage can occur when, for example, a claimant alleges disability while using accrued vacation. These gaps can result in denial of a disability claim.... [The Seventh Circuit recently held:] Under de novo review, the court 'should not [resolve] doubts or gaps in the evidence in [the claimant's] favor, because she had the burden to demonstrate policy coverage.... Under ERISA, a claimant's 'reasonable expectation' of coverage requires 'actual reliance by the employee.' " [Cheney v. Standard Insurance, No. 15-1794 (7th Cir. July 27, 2016)]  Lane Powell PC

Criminal Conviction of Plan Trustee, Outside Legal Counsel Shows Risks of Retaliating Against Whistleblowers for Reporting ERISA Violations
"[Brain v. Perez] highlights the care that employee benefit plan sponsors, fiduciaries, advisors and service providers and their management must use when responding to allegations or other evidence of wrongdoing relating to an employee benefit plan ... The decision also makes clear that outside legal counsel advising an employee benefit plan or its fiduciaries in relation to the investigation or response to charges of ERISA misconduct involving an employee benefit plan must use care to avoid actions that could ... [violate] their duty of loyalty to the plan by allowing themselves to become involved in a conflict of interest when investigating or defending potential wrongdoing involving an employee benefit plan[.]"  Solutions Law Press

Spending for Social Security and Major Health Care Programs in the Long-Term Budget Outlook
"CBO projects that spending for Social Security would increase noticeably as a share of the economy -- from 4.9 percent of gross domestic product (GDP) in 2016 to 6.3 percent in 2046 -- if current laws generally remained unchanged. Spending for the major health care programs is projected to grow even faster: Net outlays for those programs would increase from 5.5 percent of GDP now to 8.9 percent in 2046."  Congressional Budget Office [CBO]

Executive Compensation and Nonqualified Plans

[Guidance Overview]

New 409A Regulations, Part 5: If it Ain't Broke, Don't Fix It (and Other Minor Changes)
"[T]he IRS has revised this permitted correction rule. First, if there is no good faith basis for saying that the arrangement violates 409A, it cannot be fixed. Second, the regulations provide a list of facts and circumstances for determining if a company has a pattern or practice of permitting impermissible changes. If they do, then they would not be able to fix a nonvested amount."  Benefits Bryan Cave

Executive Compensation in the Banking Industry
"Regulators' recently re-proposed rules under Section 956 of the Dodd Frank Act (incentive-based compensation arrangements) will undoubtedly change the structure and mix of pay for a significant number of employees at larger banks. At the same time, banks are pressured to embrace digital business models that represent new opportunities, but that also create new threats, a wider range of competitors and increased risks. With this backdrop, the industry faces increasing challenges to attract, retain and compensate talent."  Meridian Compensation Partners, LLC

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BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2016 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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