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IRS Transition Relief for State Contraception Laws Creating HSA Eligibility Issues

Recently, several states expanded their contraceptive coverage mandates under the applicable state’s insurance laws to require medical insurance policies to cover certain male contraceptive services (e.g., vasectomies) on a first dollar basis before an insured has met the policy’s annual deductible. This is problematic for an insured medical plan that is intended to qualify as a high deductible health plan (“HDHP”). An HDHP enables participants to make or receive contributions to a health savings account (“HSA”). Unless an exception applies (such as coverage for preventive services, disease management, or wellness services), a medical plan that provides benefits before an individual has met the annual deductible cannot qualify as an HDHP. The IRS recently released Notice 2018-12, which provides that male contraceptive coverage will not qualify for an exception from this rule as a preventive service or under another exception. The IRS has granted temporary transition relief for the HSA eligibility… Continue Reading

IRS Reduces HSA Family Coverage Contribution Limit for 2018, Effective Immediately

On March 5, 2018, the IRS issued Revenue Procedure 2018-18 (“Rev. Proc. 2018-18”), which, among other things, reduced by $50 the maximum annual contribution that an employee who has elected family coverage under the employer’s high deductible health plan (“HDHP”) could make to his or her health savings account (“HSA”) for 2018. Under the Internal Revenue Code, the applicable limits for HSAs are adjusted annually for any cost-of-living adjustments (“COLA”). Prior to the recent enactment of the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”), COLAs were based on the Consumer Price Index (“CPI”). The Tax Act changed the basis of COLAs to instead use the Chained Consumer Price Index for All Urban Consumers (“C-CPI-U”). The HSA family coverage contribution limit that was previously announced by the IRS for 2018 was $6,900, which reflected a CPI-based COLA. The revised limit, pursuant to Rev. Proc. 2018-18 and reflecting the… Continue Reading

Settlement of HIPAA Privacy and Security Rule Violations Costs Covered Entities $3.5 Million

HHS recently entered into a $3.5 million settlement agreement with a health care provider (the “Provider”) on behalf of five entities under its common ownership and control for violations of the HIPAA privacy and security rules. Each of the five entities constituted a “covered entity” under HIPAA. In 2013, the Provider filed five breach reports with HHS, each of which pertained to a separate incident that implicated the “electronic protected health information” (“EPHI“) of one of those covered entities. HHS’s subsequent investigation of the breaches revealed a number of violations of the HIPAA privacy and security rules, including that certain of the covered entities: Failed to conduct an accurate and thorough risk analysis of potential risks and vulnerabilities to the confidentiality, integrity, and availability of EPHI; Provided unauthorized access to EPHI for a purpose not permitted by the HIPAA privacy rules; Failed to implement policies and procedures to address security… Continue Reading

U.S. Supreme Court Rules Lifetime Retiree Health Benefits Cannot be Inferred from CBA

In the case of CNH Industrial N.V. v. Reese, an employer and certain retirees disputed whether an expired collective bargaining agreement (“CBA”) covering union employees created a vested right to lifetime retiree health benefits. The retirees had successfully argued at the U.S. Court of Appeals for the Sixth Circuit that the duration of their retiree health benefits was ambiguous because the CBA was silent on that issue, which enabled the Sixth Circuit to consider other extrinsic evidence to support its finding that retiree health benefits were vested for life. The Supreme Court, however, disagreed, reasoning that (i) silence alone regarding the duration of retiree health benefits did not make the CBA ambiguous in that regard and (ii) ambiguity required the terms of the CBA to reasonably support an interpretation that retiree health benefits were intended to be vested for life before any extrinsic evidence could be applied. Consequently, the Supreme… Continue Reading

Deferred Effective Date of “Cadillac Tax” on High Cost Employer-Sponsored Health Coverage

In addition to maintaining the funding of the federal government through February 8, 2018, the recently enacted continuing resolution, H.R. 195, entitled the “Federal Register Printing Savings Act of 2017”, deferred by two additional years the date on which the excise tax on high cost employer-sponsored health coverage under the Affordable Care Act, the so-called “Cadillac Tax”, becomes effective. The effective date of the Cadillac Tax had previously been postponed until taxable years beginning after December 31, 2019 (see our prior blog post regarding that postponement). Under H.R. 195, the Cadillac Tax will now go into effect for taxable years beginning after December 31, 2021 (i.e., for calendar year health plans, January 1, 2022). View the text of H.R. 195.

Federal Courts Enjoin Religious and Moral Exemptions under ACA’s Contraceptive Coverage Mandate

In December 2017, two federal district courts granted nationwide preliminary injunctions from enforcement of the interim final rules providing for religious and moral exemptions from the contraceptive coverage mandate under the ACA issued in October 2017 by the U.S. Departments of Health and Human Services, Labor, and the Treasury (collectively, the “Departments”). Please see our earlier discussion of these exemptions. Both federal courts held that the Departments impermissibly bypassed the notice and comment rulemaking requirements of the Administrative Procedures Act and that the plaintiffs, consisting of six states, sufficiently demonstrated they would be harmed without an injunction. The timing of these injunctions is a cause for concern for any plan sponsors who have already acted in reliance on the interim final rules. The U.S. Department of Justice has indicated it disagrees with these rulings and may appeal. View Commonwealth of Pennsylvania v. Trump. View State of California v. Health and… Continue Reading

DOL Proposed Regulations Make Association Health Plans a More Viable Option for Some Employers

The DOL recently issued proposed regulations which broaden the criteria under ERISA for determining when a group of employers may join together as a single employer to sponsor a single group health plan under ERISA, in the form of an “association health plan” (“AHP”). Joining an AHP could be a more viable option for many small employers. Various federal and state laws affecting employer-sponsored health coverage, including the Affordable Care Act (the “ACA”), impose requirements that differ based on whether employer-sponsored health coverage is insured or self-funded and, if insured, whether it is offered in the “small group” or “large group” insurance market. The status of coverage as either small or large group coverage generally depends on how many employees the employer has and affects the employer’s compliance obligations under the ACA and other laws. Under current DOL guidance, a group of small employers that want to associate in order… Continue Reading

EEOC Wellness Regulations Vacated Beginning in 2019

We previously reported that the U.S. District Court for the District of Columbia required the EEOC to reconsider its wellness regulations under the Americans with Disabilities Act (the “ADA”) and the Genetic Information Non-Discrimination Act (“GINA”). The court recently granted a motion filed by the American Association of Retired Persons (“AARP”) to amend that judgment and vacate the permitted 30 percent incentive level under the applicable ADA and GINA regulations, effective as of January 1, 2019. Generally, the ADA and GINA regulations permitted wellness programs to provide incentives of up to 30 percent of the cost of coverage under an employer group health plan without such programs being considered “involuntary.” Employers should be aware that new guidance regarding permitted incentives under the ADA and GINA may be issued later this year to be effective as of January 1, 2019. View AARP v. U.S. Equal Employment Opportunity Commission.

Extension of Due Dates for 2017 Individual Statements under Affordable Care Act Information Reporting

In Notice 2018-06, the IRS extended the due date, from January 31, 2018 to March 2, 2018, for employers (including applicable large employers), insurers, and other providers of “minimum essential coverage” in 2017 (“Reporting Entities”) to furnish statements to individuals on IRS Forms 1095-B and 1095-C, pursuant to the Affordable Care Act’s information reporting requirements (the “ACA Reporting Requirements”). The notice also extends the IRS’s transition relief from penalties that the Reporting Entities would otherwise incur for incorrect or incomplete information reported on their 2017 information statements to individuals or returns filed with the IRS. To obtain this transition relief, a Reporting Entity must show that it made a good faith effort to comply with the ACA Reporting Requirements in furnishing statements to individuals and filing its IRS returns. Notably, the notice does not extend the due date under the ACA Reporting Requirements for Reporting Entities to file their 2017… Continue Reading

Fifth Circuit Reverses High-Dollar Damages Award to Out-of-Network Surgery Center

In Connecticut General Life Insurance Company v. Humble Surgical Hospital, L.L.C., the U.S. Court of Appeals for the Fifth Circuit, whose jurisdiction includes Texas, reversed a district court’s award to Humble Surgical Hospital, LLC, an out-of-network medical provider (“Humble”), of (i) over $11 million based on underpaid medical benefit claims administered by Cigna under ERISA-governed group health plans and private insurance policies, and (ii) over $2 million in penalties based on Cigna’s failure to comply with ERISA’s plan documentation disclosure requirements. (See our prior newsletter article regarding the district court’s decision in this case, including a discussion of background facts.) The Fifth Circuit found that the district court failed to apply ERISA’s required “abuse of discretion” analysis to Cigna’s decisions regarding benefit claims for Humble’s services, which decisions were based on exclusionary language in the plan documents and insurance policies. The Fifth Circuit stated that other courts had upheld Cigna’s… Continue Reading

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