Employee Retirement Income Security Act Archives

Employee Retirement Income Security Act

The Case for the Welfare Plan Fiduciary Committee

by Alden Bianchi, Jacob Mattinson and Sarah Raaii | Oct 22, 2024 | Employee Benefits, Fiduciary and Investment Issues, Health and Welfare Plans

Employee Retirement Income Security Act class action lawsuits filed earlier this year against the group health plans of two large US employers underscore the importance of implementing formal welfare benefit plan governance structures that include fiduciary committees comparable to the governance structures employer sponsors of retirement plans routinely adopt.

This recent article, published by the Society for Human Resource Management, offers plan sponsors a list of practical action items to consider to help protect themselves from risks related to the fiduciary governance of their health and welfare plans.

Access the article.

The Case for the Welfare Plan Fiduciary Committee

by Alden Bianchi, Jacob Mattinson and Sarah Raaii | Aug 13, 2024 | Employee Benefits, Health and Welfare Plans

Recent lawsuits filed against the group health plans of two large US employers underscore the importance of implementing formal welfare benefit plan governance structures that include fiduciary committees comparable to the governance structures employer sponsors of retirement plans routinely adopt. Establishing such committees can help employers reduce litigation risk and ensure compliance with Employee Retirement Income Security Act fiduciary standards.

Read more here.

From ERISA to CAA: How Have Employers’ Fiduciary Responsibilities Changed Over Time?

by Sarah Raaii and Alden Bianchi | Jul 23, 2024 | Employee Benefits, Health and Welfare Plans

Health plan fiduciary issues have taken on increased urgency following a new wave of Employee Retirement Income Security Act class action lawsuits filed by plaintiffs’ firms. Sarah Raaii and Alden Bianchi recently joined the Moving to Value Alliance, a healthcare nonprofit, for a podcast episode focused on how group health plan sponsors and third-party service providers to group health plans can comply with the new fiduciary requirements enacted under the Consolidated Appropriations Act of 2021 (CAA). They also discussed what health plan fiduciaries can do to ensure they fulfill their responsibilities to beneficiaries.

Access the podcast episode here.

It’s the Plan Assets, Stupid: Why Group Medical Stop-Loss Captives and Level-Funded Plans Don’t Mix

by Alden Bianchi | Jun 27, 2024 | Employee Benefits, Health and Welfare Plans

A question in response to last week’s post on self-funding of employer group health plans assumed that stop-loss coverage under a level-funded plan could be provided under a group captive medical captive. However, it cannot (at least not without first obtaining a prohibited transaction exemption from the US Department of Labor (DOL)). While group medical stop-loss coverage can be structured to avoid the Employee Retirement Income Security Act (ERISA) prohibited transaction rules by scrupulously avoiding contact with ERISA plan assets in the plan’s stop-loss layer, it is not possible to prevent such contact in level-funded products.

The early years of group captives saw no shortage of handwringing over fundamental compliance issues. For example: Are group captives multiple employer welfare arrangements (MEWAs) (and should they be regulated as such)? To what extent are states free to constrain or restrain their operation? And which state insurance licensing laws apply?

For the most part, these and other compliance-related questions have been answered, if not completely, then at least substantially so. There is now broad agreement that the group medical stop-loss captive rests on a sound legal and regulatory foundation, which we explained at length in our Special Report. When properly structured, they are not MEWAs; states are free to regulate the stop-loss policy, and the fronting carrier must be licensed in each state in which the captive operates (i.e., where plan participants reside). Critical to their operation, however, is that the group medical stop-loss captive itself does not traffic in plan assets. This means that participant contributions, which are always plan assets, must never be applied to the purchase of stop-loss coverage.

The treatment of stop loss premiums, and their status as plan assets, are set out in two DOL Advisory Opinions:

Advisory Opinion 92-02

A stop-loss insurance policy purchased by an employer sponsoring a self-insured welfare benefit plan to which employees did not contribute is not an asset of the plan if certain conditions are satisfied. These conditions include that the insurance proceeds from the policies are payable only to the plan sponsor, which is the named insured under the policy, and no representations are made that the policy will be used to pay benefits.

Advisory Opinion 2015-02A

Where a stop-loss policy is purchased by a plan that includes participant contributions, the stop-loss policy would not be a plan asset if the facts surrounding the purchase of the stop-loss policy satisfies Advisory Opinion 92-02 and if the employer puts in place an accounting system that ensures that the payment of premiums for the stop-loss policy includes no employee contributions. Also, the stop-loss policy must reimburse the plan sponsor only if the plan sponsor pays claims under the plans from its own assets so that the plan sponsor will never receive any reimbursement from the insurer for claim amounts paid with participant contributions.

In the above-cited Special Report, we provided the following example of how an employer might comply where, as is typically the case, the [...]

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Lessons from Ryan S. v. UnitedHealth Group for the 2023 MHPAEA Proposed Rule

by Alden Bianchi | Apr 18, 2024 | Employee Benefits, Health and Welfare Plans, Mental Health Parity and Addiction Equity Act

A recently decided US Court of Appeals for the Ninth Circuit case, Ryan S. v. UnitedHealth Group, Inc., offers some useful insights on the enforcement by private litigants of the Mental Health Parity and Addiction Equity Act (MHPAEA). Like other similar cases, the case invites questions about the impact of potential changes under the proposed regulations issued under MHPAEA last year. Despite that the issues at this stage are procedural, the case nevertheless offers some useful insights, which this post explores.

Our previous MHPAEA content is available here.

According to the complaint, the group health plan under which Ryan S. was covered was administered by UnitedHealthcare. The plan covered outpatient, out-of-network mental health and substance use disorder (MH/SUD) benefits at 70% of covered charges and at 100% once the out-of-pocket maximum was met.

Ryan S. completed two different outpatient, out-of-network substance use disorder programs, coverage for which was denied on multiple occasion and for disparate reasons. As the complaint explains, the denials resulted from UnitedHealthcare’s use of an algorithm that assessed patients’ progress and referred cases for additional review. This additional layer of review was not applied to outpatient, out-of-network medical/surgical (M/S) claims. Ryan S. alleges that UnitedHealthcare applied a more stringent review process to benefits claims for outpatient, out-of-network MH/SUD treatment than to otherwise comparable M/S treatment. The complaint states this disparity in applicable review standards violates:

MHPAEA
The Employee Retirement Income Security Act (ERISA) fiduciary rules
The failure to follow the terms of the plan as required by ERISA

The Disposition of the Plaintiffs’ Claims

The district court had dismissed all the claims. The Ninth Circuit reversed on MHPAEA and ERISA fiduciary claims but let stand the district court’s dismissal of the claim related to plan terms.

MHPAEA requires that any limitations on “mental health or substance use disorder benefits” in an ERISA plan be “no more restrictive than the predominant treatment limitations applied to substantially all [covered] medical and surgical benefits.” Thus, said the court, to succeed, a plaintiff must show an ERISA plan that offers both M/S and MH/SUD benefits imposed a more restrictive limitation on MH/SUD treatment than limitations on treatment for M/S issues. The court then identified three situations in which such a violation might occur:

Facial exclusion cases: A plaintiff can allege that a plan contains an exclusion that is discriminatory on its face.
“As-applied” cases: A plaintiff can allege that a plan contains a facially neutral term that is discriminatorily applied to MH/SUD treatment.
Internal process cases: A plaintiff can allege that a plan administrator applies an improper internal process that results in the exclusion of an MH/SUD treatment.

In the court’s view, the complaint raises internal process claims. As such, violations cannot be discerned with reference to the plan document. The court therefore saw no reason to disturb the district court’s dismissal of the claim relating to plan terms.

With respect to the MHPAEA and ERISA fiduciary claims, [...]

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McDermott Submits Amicus Brief to the US Supreme Court in United Behavioral Health

by Charlie Seidell | Jan 23, 2024 | Employee Benefits, Health and Welfare Plans

On January 2, 2024, McDermott filed an amicus curiae brief on behalf of the ERISA Industry Committee (ERIC) and the United States Chamber of Commerce (Chamber) in United Behavioral Health v. David K., No. 23-586, in the US Supreme Court. The case presents two questions of broad public importance concerning the requirements under the Employee Retirement Income Security Act (ERISA) for denials of health benefits. But underlying the two questions is an even more fundamental Administrative Procedure Act (APA) issue: May a court, at the invitation of an agency in an amicus brief, effectively amend regulations by judicial fiat, providing the agency with an end run around the APA’s notice-and-comment rulemaking procedures?

The answer to that question should be an obvious no. But that is precisely what happened in the court of appeals in this case. After the plaintiffs filed their response brief, the US Department of Labor (DOL) filed an amicus brief urging a radically new interpretation of regulations the agency had promulgated to implement ERISA’s procedural protections. In essence, the DOL argued that its disability- and health-benefit regulations should be read to contain the same procedural requirements, despite clear regulatory language specifying that some requirements only apply in one context and not the other. The US Court of Appeals for the Tenth Circuit adopted the DOL’s position, decreeing a new regulatory requirement for health-benefit denials that the DOL, in dual 2015 and 2016 rulemakings, expressly considered and chose to adopt only for disability-benefit denials and not for health-benefit denials.

If not corrected by the Supreme Court, the decision will stand as an invitation to agencies to file amicus briefs in the courts of appeals, advocating for substantial changes to their regulations without the bother (or transparency) of APA rulemaking. When so much lawmaking today is undertaken by unaccountable federal bureaucrats, that is a deeply troubling prospect. ERIC and the Chamber supported the petition, explaining the legal and practical issues with the approach the DOL and Tenth Circuit mutually took. Agency interpretations that defy clear regulatory text are entitled to no deference because they are invalid (especially after the Court’s decision in Kisor v. Wilkie). Ignoring this basic proposition of administrative law undercuts the core values served by the APA, including transparency and accountability. Most directly, however, an agency’s decision to seek backdoor revisions to its rules through interpretations announced in litigation deprive the agency of the benefit of public comment that can provide critical data and analysis to inform the agency’s policymaking. Had the DOL engaged in notice and comment, as it should have done, commenters would have presented key distinctions between the disability- and health-benefit contexts; without that information, the DOL’s decision was not fully informed.

ERIC and the Chamber are frequent amici in cases concerning ERISA and the APA’s interpretation and requirements. While the Supreme Court grants only a tiny fraction of the petitions it receives each term, the amici are hopeful that this brief will help focus the Court’s attention on this [...]

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Parsing MHPAEA Claims Under the Proposed Rule: E.W. v. Health Net Life Insurance Company

by Alden Bianchi | Dec 28, 2023 | Employee Benefits, Mental Health Parity and Addiction Equity Act

In a series of recent posts, we have examined a sampling of comments submitted in response to proposed regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA). The proposed regulations were issued earlier this year by the US Departments of Labor, Health and Human Services and the Treasury (the Departments). Our previous MHPAEA content is available here.

This post considers a MHPAEA-related case decided by the US Court of Appeals for the Tenth Circuit, E.W. v. Health Net Life Insurance Company (available here). The case is notable because it represents the first US court of appeals to establish the elements required to state a claim under the current 2013 MHPAEA final regulations; it also provides us with an opportunity to consider how things might differ if the proposed regulation is adopted as a final rule.

Health Net involved a claim against Health Net Insurance Company and Health Net of Arizona, Inc. (collectively, Health Net) by the parents of a minor (I.W.). I.W. was admitted to a subacute care facility (an adolescent mental health residential treatment center), but her stay was cut short because it was determined that her treatment was no longer medically necessary. The determination of medical necessity was based on the application of the McKesson InterQual Behavioral Health 2016.3 Child and Adolescent Psychiatry Criteria (the InterQual Criteria).

At trial, the plaintiffs claimed that Health Net violated the MHPAEA by imposing medical necessity criteria for mental health benefits that were more stringent than those for medical/surgical benefits. The district court did not agree. On appeal, the Tenth Circuit reversed the MHPAEA claim based on the 2013 MHPAEA final regulations. (There was also an Employee Retirement Income Security Act-related claim, the dismissal of which by the district court was affirmed by the Tenth Circuit.) The Tenth Circuit held the medical necessity criteria applied by the plan to medical/surgical benefits in a subacute setting was less stringent than analogous, intermediate-level metal health benefits. In its holding, the court fashioned the following test under which, to state a claim under the MHPAEA, a plaintiff must:

Plausibly allege that the relevant group health plan is subject to the MHPAEA;
Identify a specific treatment limitation on mental health or substance use disorder benefits covered by the plan;
Identify medical or surgical care covered by the plan that is analogous to the mental health or substance use disorder care for which the plaintiffs seek benefits; and
Plausibly allege a disparity between the treatment limitation on mental health or substance use disorder benefits as compared to the limitations that defendants would apply to the medical or surgical analog.

Item (1) was not in dispute; the relevant group health plan was clearly subject to the MHPAEA. The court instead focused on, and dealt exhaustively with, each of the other three items:

Identify a specific treatment limitation on mental health or substance use disorder benefits covered by the plan.

The plaintiffs alleged [...]

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New York Proposes Regulations Expanding State’s Ability to Regulate PBMs

by Gregory Mitchell, Grayson I. Dimick and Benjamin Glass | Oct 3, 2023 | Employee Benefits, Health and Welfare Plans

The New York State Department of Financial Services recently announced the publication of proposed regulations that would increase the state’s oversight of pharmacy benefit managers (PBMs). If enacted, the proposed regulations would create significant requirements for PBMs and would require prompt compliance by January 1, 2024. Comments on the proposed regulations are due October 16, 2023.

Read more here.

Takeaways from a Recent COBRA Notice Class Action Settlement

by J. Christian Nemeth, Alden Bianchi and Joseph Wasserkrug | Sep 12, 2023 | Employee Benefits, Health and Welfare Plans

There has been a flurry of class action lawsuits and settlements relating to the deficiency of required election notices under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The notices provide employees and their beneficiaries who participate in an employer’s group health plan with the option to elect to continue their coverage following a COBRA qualifying event. A recent class action lawsuit illustrates the stakes and provides some valuable lessons.

Read more here.

Tenth Circuit Reaffirms Preemption of State Pharmacy Network Regulations

by Andrew Liazos, Michael B. Kimberly and Sarah P. Hogarth | Aug 23, 2023 | Employee Benefits, Health and Welfare Plans

The US Court of Appeals for the Tenth Circuit recently held in Pharmaceutical Care Management Association v. Mulready (PCMA) that the Employee Retirement Income Security Act (ERISA) and Medicare Part D preempted several provisions of Oklahoma law regulating pharmacy benefit managers and pharmacy networks. Left unchallenged, these provisions threaten the ability of employers and Medicare Advantage organizations to design uniform nationwide health plans. The Tenth Circuit’s decision in favor of PCMA overturned a lower court decision that caused great concern about the ability of states to indirectly dictate the design of plans governed by ERISA and Medicare Part D.

Read more here.

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