Webinar: Are You in Compliance?

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Webinar: Are You in Compliance?

Wednesday, June 20, 2012

Introduction by Bill KaiserArea President

Presentations byAmanda BartosheskyArea Vice President, Regional Compliance

Michael EatonVice President/Sales, ERISA Pros

PPACA: What Happens After the Supreme Court Rules?

June 20, 2012

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• Supreme Court on PPACA–Background–Possible outcomes–What would employers need to do?

• Selected current compliance topics• ERISA Basics

Agenda

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• 26: lawsuits filed in U.S. District Courts • Six: Appellate Court decisions• Two: Cases accepted by U.S. Supreme Court

Lawsuits and Issues Implicated

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• 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.

Which Lawsuits and Issues Are Implicated?

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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, theremainder of this Act and the application of the Act’s provisions to all otherpersons and circumstances may not be affected. All constitutionally validapplications of this Act shall be severed from any applications that a court findsto be invalid, leaving the valid applications in force, because it is thelegislature’s intent and priority that the valid applications be allowed to standalone. Even if a reviewing court finds a provision of this Act invalid in a large orsubstantial fraction of relevant cases, the remaining valid applications shall besevered and allowed to remain in force.**

**Insulating State Legislation From Constitutional Challenge, Jonathan F. Mitchell (http://www.ncsl.org/documents/lsss/Insulating_Worksheets.pdf)

Severability

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• 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.

Possible Ruling #1: No Decision Until After 2014

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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.

Possible Ruling #1: No Decision Until After 2014

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• Medicaid expansion is not “coercive” and is constitutional• Individual mandate is constitutional• PPACA continues to be the law

Possible Ruling #2: Individual Mandate & Medicaid Expansion are Constitutional

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What employers need to do: • Keep complying with near and mid-term requirements• Watch carefully for new guidance on upcoming requirements• Prepare for 2014

Possible Ruling #2: Individual Mandate & Medicaid Expansion are Constitutional

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• 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.

Possible Ruling #3: Individual Mandate and/or Medicaid Expansion Unconstitutional but Severable

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What employers need to do: • Keep complying with near and mid-term requirements• Watch carefully for new guidance on upcoming requirements

Possible Ruling #3: Individual Mandate and/or Medicaid Expansion Unconstitutional but Severable

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• Unconstitutional provision(s) cannot be severed from the rest of PPACA.

• Whole law is stricken

Possible Ruling #4: Individual Mandate and/or Medicaid Expansion Unconstitutional and Not Severable

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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

Possible Ruling #4: Individual Mandate and/or Medicaid Expansion Unconstitutional and Not Severable

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Considerations potentially limiting an employer’s options andthe 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

Possible Ruling #4: Individual Mandate and/or Medicaid Expansion Unconstitutional and Not Severable

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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• RescissionWellPoint• Second largest insurer behind UHC (runs Blues in 14 states) • Will announce its plans after the Supreme Court's ruling

Example of Considerations in Possible Ruling #4: UnitedHealthcare Decision

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• 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

Other Recent Compliance Issues: Same Sex Unions

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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?

Other Recent Compliance Issues: New IRS COBRA Audit Guidelines

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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.

Other Recent Compliance Issues: New IRS COBRA Audit Guidelines

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• 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?

Other Recent Compliance Issues: MHPAEA

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ERISA

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• Plan administrator • Named Fiduciary• Health plan• Plan sponsor• Participants and Beneficiaries• Insurance Companies • Third-Party Administrators

ERISA Plans – Who are the Players?

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• Federal labor law establishing standards for employee benefit plans; includes– Fiduciary rules– Reporting and disclosure– Claims review– Preemption

• Origins in pension world

ERISA - Overview

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An ERISA fiduciary is an individual or an entity responsiblefor 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

ERISA - What is a Fiduciary?

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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)

ERISA Fiduciary Rules: DO!

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Fiduciaries may not: • Use plan assets in his or her owninterest (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)

ERISA Fiduciary Rules: DO NOT!

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• Reporting– Form 5500 and Summary Annual Report

• Disclosure– Summary Plan Description– Summary of Material Modifications

ERISA – Reporting and Disclosure

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• 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

ERISA – Plan Document

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• No fixed dollar penalties• Lawsuits by participants or beneficiaries • Enforcement actions by the DOL or other government

authorities• Criminal sanctions

ERISA - Violations of Fiduciary Rules

990 Hammond Drive, Suite 800, Atlanta, Ga., 30328toll free: 866-488-6582, local 678-443-4003

www.erisapros.com

ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTSWrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)

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.

Who is ERISA Pros?

Employee Retirement Income Security Act

The

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.

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.

Who Governs ERISA?

A Plan Document for Each Welfare Benefit:

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:

Main Document for Explaining Plan Rights

Language Supposed to be in Laymen's Terms

Formatted to be Easier to Read & Understand

SPD

Plan

SPD

What Documents are Required?

Who is Required to Comply?

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).

Plan & SPD

Form 5500

* Governmental and Church Plans are exempt from ERISA; however, they are subject to certain disclosure laws, including claims procedures under PPACA.

Lack of Awareness in the Market

Carrier Certificates not Complaint

A Very Complex Area of the Law

Limited Previous Enforcement

Most Employers are Not In Compliance, Why?

Compliance is “Not An Option” — It’s the Law!

Increased Enforcement by EBSA

EFAST2 – Form 5500 Reporting

Healthcare Reform Disclosures

New Penalties under PPACA

Heightened Participant Expectations

Why is Compliance So Important Now?

The Government is making it easier than ever to File Complaints

Carrier Documents Do Not Comply!

Pertains to Insured Plans!

Master Contract Defines Employer Relationship:

Grace Period and Due Date Contestability Clause Total Premiums to be Paid

Certificates Defines Employee Relationship:

Terms and Conditions of Coverage Explains Co-Pays and Deductibles Identifies Covered & Excluded Items

MASTER CONTRACT

CERTIFICATEOF

INSURANCE

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

There are over 30 Possible Disclosures Required:

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.

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. …

Refund Distribution

Add or Delete Benefits

Benefit: Maximizes Percentage of Refund for the Employer

Benefit: Employer Controls Plan and Contributions

Important Disclosures Provided in ERISA Documents

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

Benefit: Protection Against Claims of Independent Contractors

Claims Procedures

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; ...

Important Disclosures Provided in ERISA Documents

What Welfare Plans are Subject to ERISA?

Most Common:

Medical, HMO, PPO

Dental Care

Vision Plans

Prescription Drug

Health FSAs

Life Insurance

Disability Insurance

Other Plans:

Severance Pay

Employee Assistance

Business Travel

Wellness Programs

Pre-paid Legal

Retiree Medical

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

LIFE

DENTAL

Wraps Around

DENTAL

VISION

HEALTH

Establishes One Welfare Benefit Plan Layers all ERISA Notices Around Certificates Provides Health Care Reform Language Discloses Eligibility Requirements Allows One Form 5500 Filing

Benefits:

DENTAL

LIFE

The DOL Allows Employers to Use a Wrap Document

What Should be Delivered to Participants?

AroundVISIONHEALTH DENTAL LIFE

The Wrap SPD with the Certificates of Coverage

How Do You Distribute ERISA Documents?

Place a link on Employer’s Home Page:

Retain Proof of Posting Documents for period of Time Requiring Username and Password is Recommended

Create two Email Distribution Lists for:

Employees with Work-Related (“Computer Access Employees”) All Other Participants (“Non-Computer Access Participants”)

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

Time MonthsPlan Year

Renewal

3 4 7 9

Wrap SPD

Updated SPD

Form 5500

SAR

SMM

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

ERISA Documents Favor and Protect the Employer

Non-Compliant:

Tried in State Court Right to Jury Trial Punitive Damages De Novo Review

Compliant:

Tried in Federal Court Deferential Review Proof of Disclosure Documents Control

ERISA Filing Acceptance System - EFAST 2

New Mandatory Filing Requirement for Form 5500

Automated Auditing Capability

Primary Enforcement Tool

Previous History Filing Reports

Source-

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

IRS’s Employee Plans News, October 12, 2011

Treasury’s Employee Plans Compliance Unit Begins 5500 Non-Filer Project

*Source:

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

Benefit Recoveries Contributed $478M to Over $1B

Employee Benefit Security Administration Performance and Enforcement

Fiscal Year 2010:

Fiscal Year 2011:

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

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

Health and Human Services Estimates MLR Rebates from 2011 – 2013

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

990 Hammond Drive, Suite 800, Atlanta, Ga., 30328toll free: 866-488-6562, local 678-443-4003

www.erisapros.com

ERISA COMPLIANT HEALTH & WELFARE PLAN DOCUMENTSWrap-TightSM Plan Documents ● Summary Plan Descriptions (SPD) ● Form 5500s ● Summary of Material Modifications (SMM) ● Summary Annual Reports (SAR)