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Inaccurate Leave of Absence Provisions May Lead to Stop Loss Carrier Denial of Claims

For employees on a leave of absence (?Ç£LOA?Ç¥) or a furlough, employers often extend group health plan coverage during the LOA or furlough for a prescribed time period. With regard to group health plans that are considered to be ?Ç£self-insured,?Ç¥ generally, the employer?ÇÖs reinsurer, or stop loss carrier, is only required to cover claims (above the policy?ÇÖs self-insured retention level) incurred for a covered person based on the written terms of the plan. In other words, the policy underwrites the coverage that is provided under the plan document. If extended coverage during a LOA or furlough is not expressly set out in the plan document, a stop loss carrier could seek to deny claims incurred during that period. It is thus recommended that employers with self-insured plans review their health plan documents to ensure consistency with administrative practices regarding coverage during LOAs and furloughs and coordinate as necessary with the… Continue Reading

Extending Health Plan Coverage for Furloughed Employees

Due to the COVID-19 pandemic, many employers have placed a portion of their workforces into a furloughed status. Some employers want to keep furloughed employees covered under the employer?ÇÖs group health plan. For a self-funded plan, many stop-loss insurers have approved keeping furloughed employees covered under the plan in covered employment status (as opposed to offering COBRA coverage) for up to six months. In addition, many insurance companies have offered similar coverage extensions under fully-insured, group health plans. As the pandemic continues, some employers want to continue covering furloughed employees beyond the original six-month period. Before providing extended coverage for furloughed employees, it is critical that the employer first obtain written approval from the stop loss carrier for any self-funded benefits, as well as from the insurer for any fully-insured benefits, before granting such an extension, in addition to timely amending the affected plans and communicating such amendments to participants.

Have You Notified Participants of Extended Deadlines?

As noted in our prior post here, the U.S. Departments of Labor and Treasury recently issued a notice requiring all employee health and welfare benefit plans to disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency (or other announced date) when determining the deadline to request HIPAA special enrollment, elect COBRA coverage, make a COBRA premium payment, notify the plan of a COBRA qualifying event or determination of a disability, file a benefit claim or appeal, or request an external review of a benefit claim denial. Although the notice did not address whether plan participants needed to be notified of these extended deadlines, plan administrators should be aware that they likely have a fiduciary duty to accurately convey this information to participants. For example, a COBRA election notice that states a deadline to elect or make premium payments without mentioning… Continue Reading

California Stop-Loss Minimum Attachment Point Law Effective January 1, 2014

A new California law imposes individual and aggregate attachment point requirements on stop-loss policies issued to small employers (50 employees or less; 100 employees or less beginning in 2016).?á The individual attachment point must be at least $35,000 ($40,000 beginning in 2016).?á The aggregate attachment point must be at least the greater of (1) $5,000 times the number of group members, (2) 120 percent of expected claims, or (3) $35,000 ($40,000 beginning in 2016).?á The new law can be found here.

Sixth Circuit Holds Stop-Loss Insurer Not Liable for Medical Expenses Incurred During Short-Term Disability Leave

Following a period of FMLA leave, an employee was placed by her employer on an approved short-term disability leave of absence (LOA), and she continued to be covered under her employer?ÇÖs group health plan for an additional six months.?á When her 6-month LOA expired, the employee was terminated and offered COBRA coverage.?á In the lawsuit between the employer and its stop-loss carrier over medical expenses incurred by the employee during her LOA, the U.S. Court of Appeals for the Sixth Circuit affirmed the federal district court?ÇÖs decision. ?áThe Sixth Circuit ruled that under the plain language of the plan, the employee was ineligible for coverage after her FMLA leave ended except through COBRA continuation coverage, which she was not offered until her LOA expired.?á As a result, the stop-loss carrier was not liable for claims incurred during the LOA. This problem could have been avoided if the plan and its… Continue Reading

Texas Supreme Court Holds Sale of Stop-Loss Insurance is Subject to State Insurance Code Regulation

In a recent decision, the Texas Supreme Court held that an insurer?ÇÖs sale of stop-loss insurance to a self-funded group health plan is subject to taxes and other regulatory requirements under the Texas State Insurance Code (?Ç£Code?Ç¥). The court of appeals previously held that the employer?ÇÖs self-funded group health plan was an insurer under the Code and thus the plan?ÇÖs purchase of stop-loss insurance was reinsurance that was beyond the regulatory scope of the Texas Department of Insurance. The insurer argued that stop-loss insurance fell within the Code?ÇÖs exception for reinsurance, but the Supreme Court reversed the decision of the court of appeals and found that stop-loss insurance sold to the self-funded employee health plan is not reinsurance, but rather direct insurance subject to regulation under the Code. Texas Dept. of Insurance v. American National Insurance Co., No. 10-0374 (Tex. May 18, 2012).

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