Webinar: Are You in Compliance?
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Webinar: Are You in Compliance?
Wednesday, June 20, 2012
Introduction by
Bill Kaiser
Area President
Presentations by
Amanda Bartoshesky
Area Vice President, Regional Compliance
Michael Eaton
Vice President/Sales, ERISA Pros
PPACA: What Happens After the
Supreme Court Rules?
June 20, 2012
Agenda
• Supreme Court on PPACA
–Background
–Possible outcomes
–What would employers need to do?
• Selected current compliance topics
• ERISA Basics
4
Lawsuits and Issues Implicated
• 26: lawsuits filed in U.S. District Courts
• Six: Appellate Court decisions
• Two: Cases accepted by U.S. Supreme Court
5
Which Lawsuits and Issues Are Implicated?
• Whether the legal challenge to the individual mandate must
wait until 2014;
• Whether the individual mandate is constitutional;
• Whether the Medicaid expansion constitutional; and
• Whether any provision(s) (and which) found unconstitutional
can be severed from the rest of the law.
6
Severability
Any portion of the statute being deemed unenforceable
does not affect the validity of the rest of the statute.
Every provision in this Act and every application of the provisions
In this Act are severable from each other as a matter of law. If any
application of any provision in this Act to any person or group of
persons or circumstances is found by a court to be invalid, the
remainder of this Act and the application of the Act’s provisions to all other
persons and circumstances may not be affected. All constitutionally valid
applications of this Act shall be severed from any applications that a court finds
to be invalid, leaving the valid applications in force, because it is the
legislature’s intent and priority that the valid applications be allowed to stand
alone. Even if a reviewing court finds a provision of this Act invalid in a large or
substantial fraction of relevant cases, the remaining valid applications shall be
severed and allowed to remain in force.**
**Insulating State Legislation From Constitutional Challenge, Jonathan F. Mitchell
(http://www.ncsl.org/documents/lsss/Insulating_Worksheets.pdf)
7
Possible Ruling #1: No Decision Until After 2014
• The Anti-Injunction Act (AIA) bars courts from
striking down a tax law before the law takes
effect
• Hinges on whether Court determines that
individual mandate violation consequence is
tax or a penalty
• Would mean deferring a ruling on
constitutionality of individual mandate until
2015 when first payment would become due
for those without health coverage.
• Medicaid expansion is not subject to the AIA;
would not be delayed under this kind of ruling.
8
Possible Ruling #1: No Decision Until After 2014
What employers need to do:
• Continue complying with PPACA requirements already in
effect (e.g. adult dependent children, W-2 reporting)
• take steps to comply with additional requirements such as
the requirement to provide a uniform Summary of Benefits
and Coverage (SBC) as they become effective.
9
Possible Ruling #2: Individual Mandate & Medicaid
Expansion are Constitutional
• Medicaid expansion is not “coercive” and is constitutional
• Individual mandate is constitutional
• PPACA continues to be the law
10
Possible Ruling #2: Individual Mandate &
Medicaid Expansion are Constitutional
What employers need to do:
• Keep complying with near and mid-term requirements
• Watch carefully for new guidance on upcoming requirements
• Prepare for 2014
11
Possible Ruling #3: Individual Mandate and/or Medicaid
Expansion Unconstitutional but Severable
• Individual mandate and/or Medicaid expansion is
unconstitutional
• Other provisions of the law can function independently of
unconstitutional provision
• Congress could have reasonably enacted the law without the
unconstitutional provision.
• Remaining portions of PPACA continue to be in effect.
• Administration arguments
– Only the guaranteed insurability and community rating requirements
(applicable to insurance companies) are severable
– All other remaining provisions of PPACA can stand alone.
12
Possible Ruling #3: Individual Mandate and/or Medicaid
Expansion Unconstitutional but Severable
What employers need to do:
• Keep complying with near and mid-term requirements
• Watch carefully for new guidance on upcoming requirements
13
Possible Ruling #4: Individual Mandate and/or Medicaid
Expansion Unconstitutional and Not Severable
• Unconstitutional provision(s) cannot be severed from the rest
of PPACA.
• Whole law is stricken
14
Possible Ruling #4: Individual Mandate and/or Medicaid
Expansion Unconstitutional and Not Severable
Greatest impact on employer group health plans
• PPACA provisions already taken effect no longer required
• Employers not required to continue efforts on near-term
provisions (e.g. W-2 reporting; SBC)
• Employers may be able to “undo” some of the provisions
already in effect
– Must amend plan
– Carriers may keep some/all in place for insured plans
15
Possible Ruling #4: Individual Mandate and/or Medicaid
Expansion Unconstitutional and Not Severable
Considerations potentially limiting an employer’s options and
the timing of reversion to pre-PPACA plans:
• Delay in federal agency guidance
• State law
• Insurance company decisions/agreements
• CBA amendment
• Employee relations
• Plan disclosure rules
• Practical considerations
16
Example of Considerations in Possible Ruling #4:
UnitedHealthcare Decision
UHC, Aetna, Humana decision to keep:
• Preventive with no cost sharing (including contraception, but
would allow employers to opt out more easily than under
PPACA)
• Age 26
• Appeals
• Lifetime limits
• Rescission
WellPoint
• Second largest insurer behind UHC (runs Blues in 14 states)
• Will announce its plans after the Supreme Court's ruling
17
Other Recent Compliance Issues: Same Sex
Unions
•
•
•
•
38 states prohibit same-sex marriage (including DE, IL)
Same sex marriage states: MA, CT, IA, VT, NH, NY, DC
Civil union states: DE, HI, IL, NJ, RI
November referenda
– Maine
– Maryland
– Washington State
18
Other Recent Compliance Issues:
New IRS COBRA Audit Guidelines
What questions will auditors will ask?
• How many QEs occurred over specified time period?
• What COBRA elections were made by QBs over the time
period?
• What premiums are paid by QBs?
• How QBs are notified of COBRA rights?
• How plan administrator is notified when a QE occurs?
19
Other Recent Compliance Issues:
New IRS COBRA Audit Guidelines
What documentation will auditors require?
• Plan document for the group health plan;
• COBRA procedures manual;
• Standard form letters sent to QBs;
• Internal audit procedures for
continuation coverage;
• Details of any past/pending lawsuits
for failing to appropriately provide COBRA.
20
Other Recent Compliance Issues: MHPAEA
• MHPAEA requires group health plans that provide mental
health benefits to provide benefits equivalent to
medical/surgical
• New DOL FAQs; watch site tools/resources updates
• Clarifications on topics such as
– Using a separate managed behavioral health organization for UR
– Nonquantitative treatment limitations
– Plans exempt from the MHPAEA requirements?
21
ERISA
22
ERISA Plans – Who are the Players?
•
•
•
•
•
•
•
Plan administrator
Named Fiduciary
Health plan
Plan sponsor
Participants and Beneficiaries
Insurance Companies
Third-Party Administrators
23
ERISA - Overview
• Federal labor law establishing standards for employee
benefit plans; includes
–
–
–
–
Fiduciary rules
Reporting and disclosure
Claims review
Preemption
• Origins in pension world
24
ERISA - What is a Fiduciary?
An ERISA fiduciary is an individual or an entity responsible
for managing an employee benefit plan and its
assets.
May be:
• An internal administrative committee or human resources
Department
• An outside professional (third party service provider)
– Plan sponsor (employer, union) still retain fiduciary liability
25
ERISA Fiduciary Rules: DO!
Fiduciaries must:
• Act solely in the interests of participants and beneficiaries
• Make decisions with the exclusive purpose of providing plan
benefits
• Use the care, skill, and diligence that a prudent person in that
situation would
• Act in accordance with the plan document
• Diversify the plan's investments to minimize the risk of large
losses (mostly for pension)
26
ERISA Fiduciary Rules: DO NOT!
Fiduciaries may not:
• Use plan assets in his or her own
interest (self-dealing)
• Act on behalf of a party whose
interests are adverse to those of the
plan or its participants/beneficiaries
(conflict of interest)
• Get personal consideration from
any party dealing with the plan in
connection with a transaction
involving plan assets (anti-kickback)
27
ERISA – Reporting and Disclosure
• Reporting
– Form 5500 and Summary Annual Report
• Disclosure
– Summary Plan Description
– Summary of Material Modifications
28
ERISA – Plan Document
• Most basic rule: plan benefits must be provided according to
the terms of a written plan document
• An ERISA plan can exist (sometimes inadvertently created)
without a written document
– plan would simply be out of compliance with the written document
requirement)
• Following plan document terms in eligibility and claims
decisions is extremely important for fiduciary responsibilities
and claims review
29
ERISA - Violations of Fiduciary Rules
• No fixed dollar penalties
• Lawsuits by participants or beneficiaries
• Enforcement actions by the DOL or other government
authorities
• Criminal sanctions
30
ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTS
Wrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)
990 Hammond Drive, Suite 800, Atlanta, Ga., 30328
toll free: 866-488-6582, local 678-443-4003
www.erisapros.com
Who is ERISA Pros?
ERISA Pros, LLC is an industry-leading professional services firm
specializing in developing Welfare Benefit Plans for employers
through partnerships with benefits brokers.
We are a full solution firm offering two levels of consultative
services and a web-based product called Wrap-Tightsm to create
Wrap Plan Documents and Summary Plan Descriptions.
Its founder, Bernard V. Kearse, is an ERISA attorney with over
thirty years of experience and oversees the company’s day-to-day
operations.
The
Employee Retirement
Income Security Act
of 1974
A Political
History
What is ERISA?
A Federal Law to protect individuals covered by welfare benefit plans. It
requires employers of all sizes to provide participants with plan information
including important plan features through written plan descriptions. It also
establishes fiduciary responsibilities for those who manage the plan.
Who Governs ERISA?
ERISA is governed by the U.S Department of Labor and
enforced by the Employee Benefits Security Administration
(EBSA).
The EBSA is responsible for ensuring the integrity and
compliance of the private employee benefit plan system in
the United States.
What Documents are Required?
A Plan Document for Each Welfare Benefit:
Plan
 Operating Conditions & Administration of the Plan
 Legal Language of Benefits drafted by Lawyer
 Client Makes Available for Participant or DOL
An SPD – Summary Plan Description per Plan:
SPD
SPD
 Main Document for Explaining Plan Rights
 Language Supposed to be in Laymen's Terms
 Formatted to be Easier to Read & Understand
Who is Required to Comply?
 Plan & SPD
 Form 5500
Almost every employer regardless of size is required to
provide a written Plan Document and Summary Plan
Description (SPD) for each plan
All employers with 100 plan participants for each plan
are required to file Form 5500 and provide a Summary
Annual Report or (SAR).
* Governmental and Church Plans are exempt from ERISA; however, they are subject to certain
disclosure laws, including claims procedures under PPACA.
Most Employers are Not In Compliance, Why?
 Lack of Awareness in the Market
 Carrier Certificates not Complaint
 A Very Complex Area of the Law
 Limited Previous Enforcement
Compliance is “Not An Option” — It’s the Law!
Why is Compliance So Important Now?
 Increased Enforcement by EBSA
 EFAST2 – Form 5500 Reporting
 Healthcare Reform Disclosures
 New Penalties under PPACA
 Heightened Participant Expectations
The Government is making it easier than ever to File Complaints
Carrier Documents Do Not Comply!
Master Contract Defines Employer Relationship:
 Grace Period and Due Date
 Contestability Clause
 Total Premiums to be Paid
MASTER
CONTRACT
Certificates Defines Employee Relationship:
 Terms and Conditions of Coverage
 Explains Co-Pays and Deductibles
 Identifies Covered & Excluded Items
Pertains to Insured Plans!
CERTIFICATE
OF
INSURANCE
There are over 30 Possible Disclosures Required:
 Employer Plan Sponsor’s TAX ID #
 Plan Administrator’s Name & Address
 Plan Number for 5500, e.g., 501, 502
 Agent for Service of Legal Process
 Plan Eligibility, Effective Dates
 Contribution / Funding of Plan
 Insurance Company Refund (MLR)
 Right to Amend Statement
 Claims Procedures (PPACA)
 Independent Contractors
 Additional PPACA Notices
Important Disclosures Provided in ERISA Documents
Refund
Distribution
Insurance Company Refund: With respect to any insurance company refunds received by
the Employer that are subject to the Medical Loss Ratio provisions of the Affordable Care
Act, refunds/rebates must be returned to enrollees consistent with the provisions of the
Affordable Care Act. The allocation of insurance refunds that are not participant
contributions and are not "Plan assets," are to be used, allocated, distributed among one
or more of the Employer(s) as the Controlling Employer in its sole discretion determines
appropriate. …
Benefit: Maximizes Percentage of Refund for the Employer
Add or Delete
Benefits
Right to Amend: The Controlling Employer reserves the right to amend the Plan and any
Component Benefit Plan from time to time, including amendments that are retroactive in
effect to the extent permitted by law. With respect to any Component Benefit Plan funded
through a trust, an amendment may not change the duties and liabilities of the Trustee
without the consent of the Trustee and, in all events, shall notify the Trustee of any
amendment of the applicable Component Benefit Plan within a reasonable period of time.
Benefit: Employer Controls Plan and Contributions
Important Disclosures Provided in ERISA Documents
Claims
Procedures
Claims Procedures: Review under the Affordable Care Act is required for any adverse
benefit determination (including a final internal adverse benefit determination) by the
Plan or issuer that involves medical judgment (including, but not limited to, those
based on the Plan's or issuer's requirements for medical necessity, appropriateness,
health care setting, level of care, or effectiveness of a covered benefit; or its
determination that a treatment is experimental or investigational) as determined by
the external reviewer and for any rescission of coverage (whether or not the rescission
has any effect on any particular benefit at that time).
Benefit: Assures Language is Compliant with PPACA
Independent
Contractors
Employee: means an individual that the Employer classifies as a common-law
employee and who is on the Employer's W-2 payroll, but does not include the
following: (a) any leased employee (including but not limited to those individuals
defined as leased employees in Code § 414(n)) or an individual classified by the
Employer as a contract worker, independent contractor, temporary employee, or
casual employee for the period during which such individual is so classified, whether
or not any such individual is on the Employer's W-2 payroll or is determined by the IRS
or others to be a common-law employee of the Employer; ...
Benefit: Protection Against Claims of Independent Contractors
What Welfare Plans are Subject to ERISA?
Most Common:
Other Plans:
Medical, HMO, PPO
Severance Pay
Dental Care
Employee Assistance
Vision Plans
Business Travel
Prescription Drug
Wellness Programs
Health FSAs
Pre-paid Legal
Life Insurance
Retiree Medical
Disability Insurance
Voluntary Benefits
When are Benefits Subject to ERISA?
When an Employer Endorses a Plan by:
 Selecting the Insurer, Negotiating Terms, Assisting with Claims
 Linking Coverage to Employment or Recommending the Plan
When an Wellness Plan Includes:
 Medical Care, Risk Assessment or Onsite Clinic
 Biometric Screening, Smoking Cessation or Flu Shots
Benefits Fall Under Safe Harbor Provisions:
 Funded through Insurance and are Completely Voluntary
 No Employer Contribution or Endorsement
The DOL Allows Employers to Use a Wrap Document
Wraps
Benefits:
Around
 Establishes One Welfare Benefit Plan
 Layers all ERISA Notices Around Certificates
 Provides Health Care Reform Language
 Discloses Eligibility Requirements
 Allows One Form 5500 Filing
What Should be Delivered to Participants?
Around
The Wrap SPD with the Certificates of Coverage
How Do You Distribute ERISA Documents?
Create two Email Distribution Lists for:
 Employees with Work-Related (“Computer Access Employees”)
 All Other Participants (“Non-Computer Access Participants”)
Place a link on Employer’s Home Page:
 Retain Proof of Posting Documents for period of Time
 Requiring Username and Password is Recommended
Paper Distribution is Required if no Consent:
 First or Second Class Mail with up-to-date Mailing List
 By Hand through Method likely to Assure Receipt
Timeline for Notice and Filing of ERISA Documents
Plan
Year
 Time
 Wrap SPD
 Updated SPD
 Form 5500
 SAR
 SMM
3
4
7
9
 Months
Rene
wal
Employers are Required to Provide a SPD within 90 days of Enrollment
An SPD must be Furnished within 120 days the Plan is Established
Must be Filed Electronically within 7 months of the Plan Year
Distributed to Plan Participants within 9 months of the Plan Year
30 days upon Request, 60 days upon Reduction, 210 days at the End
The Legal Process – Compliant vs. Non-Compliant
Non-Compliant:
Compliant:
Tried in State Court
Tried in Federal Court
Right to Jury Trial
Deferential Review
Punitive Damages
Proof of Disclosure
De Novo Review
Documents Control
 ERISA Documents Favor and Protect the Employer
ERISA Filing Acceptance System - EFAST 2
New Mandatory Filing Requirement for Form 5500
 Automated Auditing Capability
 Primary Enforcement Tool
 Previous History Filing Reports
Source-
Treasury’s Employee Plans Compliance Unit Begins 5500 Non-Filer Project
 Sending Letters to Plan Sponsors with No Record of 5500
 Asking to File Return or Explain Why They Did Not File
 Failure to File results in IRS Delinquency Notice
 Could Impose Penalty of $25 a Day up to $15,000
 DOL May Impose Penalties for Same 5500 of up to $1,100
*Source: IRS’s Employee Plans News, October 12, 2011
Employee Benefit Security Administration Performance and Enforcement
Fiscal Year 2010:
 Impacted by COBRA Implementation and PPACA
 Participant Assistance Received Over 376,000 inquiries
 Benefit Recoveries Contributed $164M to Over $1B
 Implemented the New Sample Investigation Program (SIP)
 Participant Assistance Received Over 233,000 inquiries
Fiscal Year 2011:
 Benefit Recoveries Contributed $478M to Over $1B
Employee Benefit Security Administration Stepping Up Enforcement
 Budget Requests 1,089 Full-Time Employees (FTE)
 179 FTEs to Participant Assistance and Enforcement
 Conduct over 3,800 Civil and Criminal Investigations
 Achieve in excess of $1,000,000,000 in Total Results
 Report Results of SIP to Measure Overall Compliance
Health and Human Services Estimates MLR Rebates from 2011 – 2013
 23% of Large & 30% of Small Groups will Receive Refund
 Insurer to Provide Notice Explaining Rebate and Calculation
 HHS Considering Notice Even if No Rebate is Payable
 Rebates must be provided by August 1st of Following Year
 Refund Distribution to Participants
In Conclusion: Benefits of Being in Compliance
 Protects both Parties with Clear Communication of Benefits
 Eliminates Potential Penalties from DOL / EBSA Audits
 Brings All Plans into Compliance with Required Notices
 Reduces the Risk of Participant Lawsuits Against Employer
 Gives Employer Control with “Right to Amend” Statement
ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTS
Wrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)
990 Hammond Drive, Suite 800, Atlanta, Ga., 30328
toll free: 866-488-6562, local 678-443-4003
www.erisapros.com