MAY 2019 COMPLIANCE UPDATE
NEW DRUG TV ADVERTISING RULES COMING
Beginning in July, the Trump administration is requiring drug manufacturers, when they advertise on television, to list the cost of the drugs covered by Medicare or Medicaid, if the drug’s monthly cost is more than $35.
Plan sponsors should expect that the plan participants may start to question how the costs of drugs impact them. For example, they may start asking questions about the plan’s formulary, etc. and how the plan sponsor should respond to those inquiries.
DEATH & TAXES – THE ONLY CERTAINTIES
People say death and taxes are the only things you cannot avoid. This article talks about setting up a bereavement policy.
I have not seen a lot of articles on this topic, so I thought I would add it to this newsletter. It lists things to consider if or when you elect to set up such a program.
INDEPENDENT CONTRACTOR OR EMPLOYEES
This is the age-old question – “Is she an independent contractor or is she an employee?” This has been a hot topic for some time and the government continues to focus in on this issue.
Just because you label someone as an independent contractor does not make it so and the stakes can be high for misclassification. For example, the employer mandate penalty applies if the large employer does not offer health coverage to 95% of the employees. So, if you have a large number of individuals you classify as an independent contractor but really are employees, you could fall below that 95% number by failing to offer those people health coverage.
FITBIT & OTHERS NOT SUBJECT TO HIPAA
As we become more health conscious and technology increases, more people are keeping track of their health through wearable devices like FitBit and various apps.
The government takes the position that devices and apps are not subject to HIPAA. What this means is that the HIPAA safeties of protected health information or PHI, do not apply to those devices and apps.
ASSOCIATION HEALTH PLANS OR AHP SUFFER A SETBACK
President Trump’s continued attack on the Affordable Care Act has taken on several different forms and one of the more publicized is association health plans. The Department of Labor issued regulations that expanded the ability of small employers and owners to band together to buy health coverage. However, a Federal Court said the government’s rules went too far and the Court’s decision invalidated several key parts of those rules.
However, the government is not giving up. To that end, the Department of Labor has issued a statement saying it will not enforce the rules with respect to those employers that joined an association health plan prior to the Court’s decision.
Health care has been one of the main agenda items for the Trump administration and it is likely to become a major issue in the 2020 elections.
SELLING INSURANCE ACROSS STATE LINES– SOUNDS GOOD– BUT
Another proposal by the Trump administration is to allow carriers to sell policies across state lines. For example, a carrier in Utah would be allowed to sell policies in Ohio.
Although this sounds good in theory, health insurance is really a localized commodity. The large carriers in state have negotiated steep discounts because of the volume of their insured. Out-of-state carriers will not have the volume and, as a result, not get the same provider discounts. And because of this, the out-of-state carriers will have to charge higher premiums.
HOW LONG DO I HAVE TO KEEP THIS STUFF?
I get this question a lot – “How long should I keep my records?” The very short answer is at least eight years under ERISA.
This pretty long article talks about retaining plan records. Now that it is relatively easy to convert paper documents and store them in electronic format, you may want to keep them even longer.
KNOCK-KNOCK—WHOSE THERE? – GOVERNMENT AUDITOR!!
Yikes – no one wants to be audited by the government for any reason, but it happens. There are a number of ways you can be selected to be audited.
This article talks about what can trigger an audit and how to respond if you do get audited. The real key is to cooperate with the auditor and, in most cases, things will go smoothly if you are prepared.
VOLUNTARY PLANS AND ERISA EXEMPTION
ERISA covers both retirement and welfare benefit plans. A welfare benefit plan provides health, life, disability, etc. However, voluntary plans are exempt from ERISA and the carriers are developing more and more products that the carriers say fall under this ERISA exemption.
Unfortunately, the rules are somewhat vague. Also, having the program covered under ERISA may have some advantages. For example, ERISA preempts state law claims such as money for emotional distress.
2% SHAREHOLDERS, PARTNERS, AND HEALTH BENEFITS
There are several ways an employer can be structured from a business standpoint. A relatively popular option for smaller business is an S-Corporation.
The IRS recently issued guidance on the tax treatment of medical benefits provided to 2% shareholders in an S-Corporation.
This following article talks about the ins and outs of providing benefits to partners in a partnership. A full discussion of those rules is beyond these two articles.
The rules are really complex, and the formation of the entity most often turns on the tax treatment. Therefore, it is important to consult with lawyers, accountants and tax professional when deciding on how to move forward with setting up a new company or revamping an existing business. There is nothing new here, but I thought I would include it in the newsletter.
WORK SITE CLINIC—GROUP HEALTH PLAN OR NOT
More employers are looking to work site clinics as a way to help reduce the employers’ health care spend.
How the clinic is set up, services it provides, and those eligible to receive the service can determine whether or not the clinic is considered a group health plan. If, in fact, the health clinic is considered a health plan it will be subject to ERISA.
CROSS PLAN OFFSETTING SPARKS LAWSUIT
A common practice with insurance companies is to offset the over-payment under one employer’s plan with the underpayment under a different employer’s plan. For example, the Acme Insurance Company provides group health plans to the ABC Company and the XYZ Company. An employee under the ABC Company goes to the 123 Hospital and incurs a claim. The Acme Insurance Company overpays the 123 Hospital $ 5,000 for that employee. Now say an employee from the XYZ Company goes to the same hospital (i.e. the 123 Hospital), the Acme Insurance Company may try to take the $ 5000 over-payment from the ABC Company employee to reduce the amount paid for the XYZ Company employee.
There is a lawsuit questioning this practice on the grounds that it violates ERISA. What happens under this scenario is that the assets of one plan (i.e. the ABC Company health plan) is being used to pay benefits for someone covered under another plan (i.e. the XYZ Company health plan) and this may be considered violating the exclusive benefit rule under ERISA.
SUMMER INTERNS AND THE ACA
Now that summer is upon us many employers hire summer interns for a limited period. One of the requirements under the ACA – the Affordable Care Act, is that large employers offer coverage to at least 95% of the full-time employees.
Therefore, it is critical employers properly characterize the summer interns with an eye towards the ACA. That is, if the summer interns are considered full time employees, failure to offer them coverage could result in the employer failing to meet the 95% threshold. This article talks about that issue.
The American Bar Association holds a couple major events during the year and shares notes from those meetings with the general public.
These are the notes from the benefits committee from the latest ABA meeting held in February of this year.
EMPLOYERS’ RESPONSE TO STUDENT DEBT
Work is hard enough and it is even more taxing when the employees have personal issues they are dealing with. Having a lot of debt can weigh on anyone’s mind.
The cost of education is rising, and many new employees are saddled with large student loans. Therefore, some employers are finding a way to help reduce that burden.
WHO’S ON FIRST AFTER THE DUST SETTLES
A lot of times we get asked COBRA questions after there has been a merger or acquisition. The COBRA rules spell out the COBRA obligations under certain circumstances.
However, I want to stress two points. First, there were lawyers involved in the transaction. So, because of the second point, you need to ask those lawyers. The second point is that the buy-sell agreement can spell out the COBRA obligations. So, the COBRA rules spell out general guidelines, but the buy – sell agreement can change those general guidelines. Therefore, the starting and ending point with respect to the COBRA obligations should be with the lawyers that handled the transaction.
GOVERNMENT CONTINUES TO ASSESS ACA EMPLOYER MANDATE PENALTY
Health care reform requires large employer to offer quality, affordable health coverage to full time employees or be subject to a potential penalty which can be extremely large. The IRS continues sending out letters listing the potential penalty amount.
If you receive the IRS notice (i.e. Letter 226-J) you need to respond in a timely manner. Do not ignore the letter. On the first page, it will list a response date and you should reply on or before that date. We suggest you send the response by Certified Mail so you can demonstrate you responded in a timely manner.
COORDINATION OF BENEFITS AND THE BIRTHDAY RULE
Anytime a couple is expecting a new baby, they should take the time to understand how coverage under their plan(s) will work, particularly Coordination of Benefits provisions since this can cause unexpected results.
If the expectant parents are each covered under their own employer’s group health plans, and those plans are fully insured in Ohio, then under Ohio law, group health insurance is required to cover the newborn child from the moment of birth for at least the first 31 days. Therefore, the newborn will have coverage under both of its parents’ plans. Each plans’ Coordination of Benefits provisions will determine which plan pays primary and which is considered secondary during just those first 31 days of life. Thereafter beyond those first days, coverage under whichever plan the child is added to during Special Enrollment, will apply.
Using the example above, the parents might think that they have control over whose plan will cover the baby during the first 31 days of life, however they should remember that technically both father and mother’s group health plans will cover the baby just during the first 31 days of life since each parent has group health plan coverage subject to the Ohio law. Where the Birthday Rule applies, the parent with the birthday earlier in the calendar year is the one that will be primary. Mother’s birthday is in November and the father’s birthday is in June, then the father’s plan will be primary to provide coverage for the baby during the first 31 days of life. Thereafter the baby will be covered by whichever plan the parents add the baby to during Special Enrollment. If the child is added to both parent’s plan after the first 31 days, then the Coordination of Benefits will continue to apply.
DISCLAIMER: THE MCGOHAN BRABENDER COMPLIANCE NEWSLETTER IS COMPILED BY PAUL ROUTH OF FOLKERTH + ROUTH, ATTORNEYS AT LAW. IT IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED AS A SUBSTITUTE FOR LEGAL ADVICE. THIS NEWSLETTER DOES NOT CREATE A CLIENT RELATIONSHIP WITH MCGOHAN BRABENDER OR FOLKERTH + ROUTH