A recent Eighth Circuit decision regarding “cross-plan offsetting” serves as an important reminder of how ERISA’s fiduciary duties impact both employers and fiduciaries who handle claims.
The case involved the common practice of cross-plan offsetting, which occurs when a claims administrator resolves an overpayment to a provider by refusing to pay that provider for a future claim (or reducing the amount paid for that future claim)—even if the latter claim was made by a participant in an unrelated plan. Cross-plan offsetting allows claims administrators to quickly recover overpaid benefits without the time and expense associated with one-off recovery actions against providers. Defendant UnitedHealth Group (UnitedHealth) initially applied this practice among its in-network providers, but then expanded cross-plan offsetting to non-network providers beginning in 2007. This practice was challenged by two out-of-network doctors in the case at issue, Peterson v. UnitedHealth Group, Inc.
On January 14, 2019, US District Judge Wendy Beetlestone in the US District Court for the Eastern District of Pennsylvania issued a nationwide preliminary injunction blocking the Trump administration’s carveouts to the Affordable Care Act’s (ACA) contraceptive coverage mandate. One day prior, US District Judge Haywood Gilliam in the US District Court for the Northern District of California issued a more limited injunction blocking the same carve outs from taking effect in 13 states plus the District of Columbia.
On October 6, 2017, the Trump administration issued rules that are the subject of these two decisions. The rules would have allowed employers to raise religious and moral objections to avoid the ACA’s requirement that contraceptive coverage be provided without cost sharing under their group health plans. Under the ACA, certain contraceptive products and services are included in the list of preventive services that must be covered by most group health plans without cost sharing. The available exemptions to this rule were limited.
Judge Beetlestone reasoned that the loss of contraceptive coverage would have resulted in “significant” and “proprietary harm” to the states by causing increased use of state-funded contraceptive services, along with increased costs associated with unintended pregnancies. Without the preliminary injunction, the Trump administration’s rules would have gone into effect on January 14, 2019. The preliminary injunction does not permanently block the rules, but rather it stops the rules from going into effect while legal challenges are being pursued. Judge Beetlestone indicated that she is likely to invalidate the rules, stating that the US Departments of Health and Human Services, Labor and Treasury exceeded the scope of their authority under the ACA by issuing the carve outs.
Charnae Supplee, a law clerk in the Firm’s Washington, DC office, also contributed to this post.
The US District Court for the District of Columbia recently held that the Centers for Medicare and Medicaid Services (CMS) exceeded its authority by reducing Medicare payment rates for 340B drugs, but, because of the budget-neutral nature of the cuts, the court left implementation details of its order temporarily unresolved to avoid disrupting administration of the Medicare Hospital Outpatient Prospective Payment System. It remains to be seen what remedies the court will ultimately order and whether CMS will appeal the decision.
What to expect in 2019 and how to prepare now. Join McDermott lawyers Judith Wethall, Ted Becker and Rick Pearl for an interactive discussion regarding ERISA litigation trends.
Join our lively 45-minute discussion while we tackle the following items:
Plaintiffs’ law firm’s solicitations
Health & Welfare Fee Litigation
Defined-Benefit Plan Litigation – Actuarial Equivalence lawsuits and greater concern about discretionary decisions
Stock-Drop Cases – The Jander decision: Relaxing the Dudenhoeffer standard and the potential impact of a stock market decline
401k/403b – Fee/investment update
ESOP transactions – New DOL and plaintiffs’ counsel’s theories
Friday, January 11, 2019 10:00 – 10:45 am PST 11:00 – 11:45 am MST 12:00 – 12:45 pm CST 1:00 – 1:45 pm EST
Late in the afternoon on Friday, December 14, Federal US District Judge Reed O’Connor struck down the Affordable Care Act (ACA) in its entirety, a feat that was, for the past few years, unsuccessfully attempted by the Republican-led Congress. O’Connor reasoned that if the individual mandate is no longer valid, the entire ACA must also be scrapped, because the rest of the ACA is “inseverable” from the individual mandate. The opinion is likely to be appealed, and the final decision may ultimately lay with the US Supreme Court. Despite the ruling, Centers for Medicare & Medicaid (CMS) has stated that the exchanges remain open and 2018 and 2019 coverage will not be impacted.
Sponsors and fiduciaries of health and welfare plans should be aware of a recently filed class-action lawsuit against alleged fiduciaries of a health plan. It challenges health-plan fiduciary oversight and reasonableness of fees similar to actions against fiduciaries of defined-contribution retirement plans. The action highlights the importance of establishing and documenting prudent fiduciary processes for making decisions on behalf of health and welfare plans.
Join us Friday, December 7 for our monthly Fridays With Benefits webinar. New proposed rules make the HRA an interesting option for employers beginning in 2020. Join McDermott lawyers for an interactive discussion regarding the “Integrated HRA” the “Excepted Benefit HRA” and the medical plan design opportunities they present.
Join our lively 45-minute discussion while we tackle the following items:
Can we really get out of the medical coverage game?
How does the Integrated HRA work?
What are the next steps?
Friday, December 7, 2018 10:00 – 10:45 am PDT 11:00 – 11:45 am MDT 12:00 – 12:45 pm CDT 1:00 – 1:45 pm EDT
Yesterday, the IRS released Notice 2018-94. This notice extends the due date for furnishing to individuals the 2018 Form 1095-B, Health Coverage, and the 2018 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage from January 31, 2019 to March 4, 2019. Note that the 1095-C reporting to the IRS has not been extended. The deadline for filing to the IRS is February 28, 2019 (if not filing electronically) or April 1, 2019, if filing electronically. This notice also extends good-faith transition relief from reporting penalties for 2018.
Any employer who has six or more employees in Massachusetts in any calendar month after November 2017 is required to complete a Health Insurance Responsibility Disclosure (HIRD) form by November 30, 2018. The HIRD form is used by MassHealth to collect information about employer-sponsored insurance offerings. The Massachusetts Department of Revenue recently published a set of FAQs stating that the HIRD form:
Is filed by an employer through the employer’s MassTaxConnect web portal (the employer clicks the “File health insurance responsibility disclosure” link to access the form);
May be filed by an employer’s third-party payroll provider on the employer’s behalf, though it is the employer’s responsibility to make sure the form is timely filed;
Will not be used to impose fines or penalties related to the employer’s insurance offerings;
Must be filed annually by November 30 in future years; and
Does not require employees to complete a separate form. Employers may recall that a prior version of the HIRD form which was discontinued in 2014 required both the employer and the employee to complete forms.
The FAQs do not specifically establish a penalty for failing to meet the annual November 30 deadline. There is also a possibility that a court could determine that the Employee Retirement Income Security Act of 1974 preempts the HIRD requirement, meaning that employers would no longer be required to file the form if the requirement were challenged in court. However, we recommend employers submit the HIRD form by the fast-approaching deadline on November 30, 2018.
Yesterday, November 15, 2018, the Internal Revenue Service (IRS) increased the annual maximum salary reduction limit for contributions to a health flexible spending account to $2,700. The 2019 contribution limit was published in Rev. Proc. 2018-57. The 2018 contribution limit was $2,650, resulting in an increase of $50 for 2019. An employer may use the increased limit for both health flexible spending accounts and limited purposed health flexible spending accounts that it maintains for its employees.
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