The Intersection of the Affordable Care Act and ERISA: Health Care Reform and New Claims and Defenses in Workforce Realignment

Transcription

1 The Intersection of the Affordable Care Act and ERISA: Health Care Reform and New Claims and Defenses in Workforce Realignment Presented by Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

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3 Patrick C. Haynes, Jr. Today s speaker As Crawford Advisors GC and Vice President Compliance, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics. Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A. Admitted to Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia 3

4 Mapping Out Our Topics 1. ER Mandates 2. Court Cases Roundup Including: NFIB v. Sebelius, Burwell v. Hobby Lobby Stores, Inc., Halbig v. Burwell, King v. Burwell 3. The Good & Bad ER-Mandate Strategies 4. Workforce realignments 5. The return of ERISA 510, 29 U.S.C ACA Whistleblower Protection 7. Benefit Claims Procedures 8. Conclusions & Takeaways 4

5 Cases NFIB v. Sebelius, 132 S. Ct (2012) Burwell v. Hobby Lobby Stores, Inc., 2014, (U.S. June 30, 2014) Halbig v. Burwell, 2014 WL (D.C. Cir. July 22, 2014) King v. Burwell, 759 F.3d 358, 2014 WL (4th Cir. July 22, 2014) (formerly King v. Sebelius) 5

6 The Issues that lead to the Cases..... Tax Subsidies General Constitutional Challenge Contraceptive Mandate vs Freedom of Religion 6

7 The Tax Subsidy Issue The Patient Protection and Affordable Care Act of 2010, also known as PPACA, ACA, The Affordable Care Act and sometimes ObamaCare, offers subsidies to qualified taxpayers who purchase insurance through an Exchange established by the State. Confounding expectations, 36 states failed or refused to establish Exchanges, leaving two-thirds of the nation with Exchanges established by the federal government. PPACA contains no provisions either deeming federal Exchanges to be established by the State or otherwise authorizing subsidies in federal Exchanges. The Internal Revenue Service has nevertheless been issuing those subsidies through federal Exchanges since January 1, Under PPACA, those subsidies trigger taxes against ERs and individuals under the law s ER and individual mandates. If the subsidies the IRS is issuing in those 36 states are illegal, then the IRS is also illegally subjecting more than 57 million individuals and ERs to illegal taxes. 7

8 NFIB v. Sebelius, 132 S. Ct (2012) The Cases Individual mandate as Congress efforts to regulate commerce REJECTED as Unconstitutional Individual mandate as Congress efforts to tax its Citizens UPHELD as Constitutional 8

9 The Cases NFIB v. Sebelius, 132 S. Ct (2012) The Four (4) dissenting Justices rejected the mandate entirely. 9

10 The Cases (NFIB v Sebelius continued) USSC 26 states challenged the law s required Medicaid expansion 7-2 Ruling: Unconstitutional as written 10

11 The Cases ACA requires nongrandfathered plans to provide preventive services for women without any cost sharing. This includes contraceptives and so-called abortive drugs like Plan B, Ella, etc. Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751, WL , 2014 U.S. LEXIS 4505 (U.S. June 30, 2014) Landmark decision by the United States Supreme Court Allows closely held for-profit corporations to be exempt from a law its owners religiously object First time that the court has recognized a for-profit corporation's claim of religious belief - limited to closely held corporations. The decision is an interpretation of the RFRA (Religious Freedom Restoration Act) and doesn t address whether such corporations are protected by the free-exercise of religion clause (First Amendment). Court's struck down the contraceptive mandate, a regulation adopted by the US Department of Health and Human Services (HHS) under the Affordable Care Act (ACA) requiring employers to cover certain contraceptives for their female employees. 11

12 The Cases Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751, WL , 2014 U.S. LEXIS 4505 (U.S. June 30, 2014) Hobby Lobby actually covered 14 out of 18 contraceptives, including birth-control pills with estrogen and progestin, mini-pills, contraceptive patches, rings & injections. They drew the line at abortive drugs and devices like Plan-B, Ella, and copper IUDs. Contraceptive mandate clearly imposes a substantial burden on the owner s beliefs and the company s exercise of religion. Government did not show that applying ACA s contraceptive mandate was the least burdensome way to avoid interfering with religious convictions The plan and TPA, the insurer or the government could provide the contraceptives at issue Could use the accommodation provided for religiousoriented not-for-profit corporations (which is also under challenge) where they certify their objections 12

13 The Cases Thoughts..Impact... If ERs can claim a religious exemption because they object to (certain types of) birth control, then why not object to transfusions, transplants or even stem cell therapies? Burwell v. Hobby Lobby Stores, Inc. why so important? Why is a workaround necessary? Based on the IRS definition of a closely-held corporation (50% of the value of outstanding stock is owned by 5 or fewer individuals during the last half of the tax year, and is not a personal service corporation) this could apply to 90% or more of all businesses, which employ 52% of the American workforce. The Hobby-Lobby-Work-Around would permit female EEs to obtain birth control from their insurer or TPA (directly) at no cost to the women or to their employer (plan sponsor). 13

14 The Cases Halbig v. Burwell, 2014 WL (D.C. Cir. July 22, 2014) (formerly Halbig v. Sebelius). Halbig v. Burwell was decided by the District of Columbia Circuit. The Halbig court heard very similar arguments as Fourth Circuit decided on King. But - the court in Halbig ruled that the provisions in the ACA limiting tax credits to only state exchanges were clear and that the IRS Rule was impermissible under the ACA. Decision may have far-reaching consequences as only 14 states had state-established Exchanges. Remaining 36 states with Exchanges established by the federal government may be forbidden from providing insurance that is subsidized with tax credits to low/middle income Americans. 14

15 The Cases King v. Burwell, 759 F.3d 358, 2014 WL (4 th Cir. July 22, 2014) (formerly King v. Sebelius) Fourth Circuit Court of Appeals issued a contrary ruling within hours - unanimously affirming the district court s decision in King. Statute was susceptible to multiple interpretations Congressional intent was unclear. But, IRS rule in consideration of the goals of the ACA, was permissible. The U.S. Supreme Court scheduled oral arguments for March 4, Pres. Obama s Solicitor General Donald Verrilli, Jr. will be arguing the case. You may recall that even Mother Jones (a quite liberal magazine/blog) concluded that Verrilli makes the worst Supreme Court argument of all time. While Verrilli s argument eventually won the 5-4 decision, his nerves, water breaks, coughing spells, etc. didn t display confidence in the Government's argument 15

16 What does all of this mean? Will this lead to more cases or more decisions? 16

17 Key Topics Potential Impact of Premium Tax Credit Cases May 2012, the IRS issues final ruling to implement ACA s premium tax credit provision. ACA authorizes service to grant tax credits to individuals who purchase insurance on either state or federal exchanges. However, Plaintiffs argue ACA authorizes tax credits only through state exchanges. Can the IRS final rule authorize tax credits through the federal exchange as well? 17

18 Key Topics Potential Impact of Premium Tax Credit Cases Halbig v. Burwell/Sebelius, 2014 First court to decide issue Plaintiff Premium tax credits should not be available when enrolling for coverage in states with Federally- Facilitated Exchanges (FFEs) Court found plaintiffs interpretation too narrow Held that where a state does not actually establish an Exchange, the federal government can create an Exchange established by the State on behalf of that State 18

19 Key Topics Potential Impact of Premium Tax Credit Halbig v. Burwell Decision reversed by the Circuit Court, 2-1. Concluded the ACA unambiguously restricts the premium tax credit subsidy to those purchasing insurance on Exchanges established by the State. Government sought/obtained an En Banc (full panel review) from the full D.C. Circuit Court of Appeals. Activity there is on hold - pending the outcome of the King case before the USSC. 19

20 Key Topics Potential Impact of Premium Tax Credit King v. Burwell/Sebelius District court granted motion to dismiss relying on the same reasoning as the lower court in Halbig. Court also concluded that if statute was ambiguous, the IRS rule was reasonable and due deference was appropriate under Chevron*. Chevron USA, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). 20

21 Key Topics Potential Impact of Premium Tax Credit King v. Burwell/Sebelius Fourth Circuit Court of Appeals issued a contrary ruling, unanimously affirming the district court s decision in King. Found that Chevron deference applied. The statute was susceptible to interpretations and Congressional intent was unclear. But, the IRS construction of the rule, was permissible under PPACA. The U.S. Supreme Court scheduled oral arguments for March 4, Administration admits there is no backup plan. Sect y HHS, Sylvia M. Burwell, letter to Congress, 02/24/

22 Key Topics Potential Effects of Premium Tax Credit While disagreements in the lower Courts may remain, if the Supreme Court s ruling requires/limits subsidies to state exchanges only, employers operating in states with federal exchanges may be exempt from the pay-or-pay penalties These cases have the potential to disrupt distribution of subsidies to individuals obtaining coverage from Federally-Facilitated Exchanges (FFEs), as well as imposition of penalties under the Employer Mandate. 22

23 Key Topics Possible Future ACA Litigation Issues Avoidance of employer pay-or play mandate may result in ERISA Section 510 and ACA whistleblower claims. Using state exchanges for retirees may have similar consequences. Unintended loss of grandfathered status may result in Plan-wide failure to provide minimum essential coverage. Increase in permitted wellness incentives to 30% may result in additional usage and litigation regarding these plans. 23

24 Key Topics ERISA s Provisions and ACA Coverage Mandates ACA amended Public Health Services Act and ERISA ACA s mandates apply to individual and group health plans. Section 715 resides in Title I, Part 7 of ERISA: plan participants can enforce their rights to ACA benefits via ERISA s remedial provisions. 24

25 The Employer Mandate & Employer Penalties Employers must offer health insurance that is affordable and provides minimum value to their full-time employees and their children up to age 26 or be subject to penalties. This is known as the employer mandate. It applies to employers with 50 or more full-time employees or full-time equivalents and will be phased in during 2015 and 2016 based on employer size. Employees who work 30 or more hours per week are considered full-time. This chart shows how the employer mandate will be phased in based on employer size. Employer Size 2015 Plan Year 2016 Plan Year and Beyond 1-49 full-time employees Does not apply Does not apply full-time employees* Does not apply Employer must offer coverage to 95% of full-time employees and dependents to age or more full-time employees Employer must offer coverage to 70% of full-time employees and dependents to age 26 Employer must offer coverage to 95% of full-time employees and dependents to age 26 * For 2015, these employers will need to certify that they are not reducing the size of their workforce to stay below 100 employees. 25

26 The Employer Mandate & Employer Penalties Q: What are the coverage requirements and penalties? A: Employers subject to the employer mandate are required to offer coverage that provides minimum value and is affordable. The chart below explains these requirements and the penalties that apply if they are not met. Do you offer coverage? Yes Does the plan provide minimum value? (60% of total allowed costs) Yes Is the coverage affordable? (less than or equal to 9.5% of income) Yes No Penalty No No No $2,000 per FTE (minus first 30)* Applies if one full-time employee receives federal premium subsidy for Marketplace coverage. Lesser of: $3,000 per FTE that is receiving a subsidy or $2,000 per FTE (minus first 30)* * For plan years beginning in 2015, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016 and beyond, employers can exclude 30 employees from the penalty calculation. See questions 38 & 39, IRS FAQs. 26

27 The Employer Mandate & Employer Penalties Q: How do I determine if my plan provides minimum value? A: A plan provides minimum value if it pays at least 60% of the cost of covered services (considering deductibles, copays and coinsurance). HHS has developed a minimum value calculator that can be used to determine if a plan provides minimum value. The minimum value calculator is available at Q: How is affordable coverage determined? A: Coverage is considered affordable if employee contributions for coverage at the employee-only tier do not exceed 9.5% of an employee s household income. There are three safe-harbor methods for determining affordability: 9.5% of an employee s W-2 wages (not reduced for salary reductions under a 401(k) plan or cafeteria plan) 9.5% of an employee s monthly wages (hourly rate x 130 hours per month) 9.5% of the Federal Poverty Level (FPL) for a single individual 27

28 Key Topics How are ERs responding to Employer Mandate? Workforce Realignment ERs may reduce EE s hours below 30/week Requiring different shifts, E.g. 25 hours/wk or 37 hours/wk Experimenting with reorganization Potential Litigation ERISA 510 Discrimination, interfering with benefits Whistleblower action under ACA ADEA and Title VII 28

29 ACA Whistleblower Protections Key Topics ACA prohibits adverse action against EEs who: Receive a premium tax credit or subsidy Provide information to the ER or the federal or state government regarding a violation relating to Title I of the ACA Testifies in a proceeding about such violation Assists or participates in such a proceeding Objecting to perform any activity the EE believes to be a violation 29

30 ACA Whistleblower Protections Key Topics Standards of Proof (Burden Shifting) Claimant: must show proof that protected activity was contributing factor to adverse action Defense: ER avoids liability only IF it proves that same action would have resulted in the absence of the EE s protected conduct Procedure Administrative Process: OSHA within 180 days Federal Court: 90 days after OSHA or no decision within 210 day of claim 30

31 ACA Whistleblower Protections Key Topics Remedies include: Reinstatement Back pay Special damages (including emotional distress) Attorneys fees Whistleblower protections are in addition to any other rights under federal or state law or under a CBA (Collective Bargaining Agreement) Whistleblower protections cannot be waived 31

32 Key Topics Interference Claims & Retaliation Claims Perez v. Brain (U.S. District Court, Central District of CA, Case No. CV ) DOL filed a lawsuit on behalf of a former EE, who was allegedly fired for cooperating with an ongoing DOL investigation. When the trustees (appointed pursuant to several collective bargaining agreements) learned the EE had been cooperating with the DOL, they conspired to terminate the EE by having a service provider take over the department she worked in, with guarantee that the provider would hire all of the current EEs except the EE that cooperated with the DOL. 32

33 Key Topics Interference Claims & Retaliation Claims Perez v. Brain The lawsuit alleges the violations of ERISA s fiduciary duties and violation of ERISA Section 510 In addition to seeking the EE s reinstatement with the service provided, the DOL seeks: Lost Wages (plus interest) Removal of several fiduciaries Mandatory ERISA training for all effected EEs and trustees 33

34 Key Topics What about Retiree-Only Plans? ACA generally does not apply to retiree-only plans Cover fewer than 2 active EEs What if ER spins off a retiree-only plan? ERISA 502 (a)(1)(b): claims to recover benefits due ERISA 502 (a)(3): enjoin any act or practice which violates ERISA or the terms of the plan or to obtain other appropriate equitable relief. LMRA 301 (a): enforcement of CBA terms Disclosure claims? ERISA Section 510 on class basis? 34

35 Key Topics Exchanges and Retiree Medical Exit Strategy Surveys show ACA is a catalyst to employers exiting sponsorship of retiree medical plans Have/Will ERs use the exchanges as a soft landing for retirees who will lose ER-sponsored coverage? Risks are similar to the retiree medical spin-off. Is moving retirees to exchanges a reasonable change? 35

36 Key Topics Claims for Mandated Benefits (health plans) Mandates for grandfathered and non-grandfathered plans For a complete, 10- year timeline on a single page, click here. 36

37 Key Topics Claims for Mandated Benefits and Additional Mandates for Non- Grandfathered Plans Additional mandates for non-grandfathered plans only: Limits on deductibles and out-of-pocket maximums Nondiscrimination for insured plans determined under IRC 105(h) still delayed Internal and external appeal process rules Coverage of in-network preventive services with no cost-sharing Special rules on choosing primary care provider No prior authorization for OB/GYN visits Coverage of out-of-network emergency services using in-network costsharing, no prior authorization requirement Coverage of routine treatments for those in clinical trials 37

38 Key Topics Claims for Mandated Benefits - Risks for Maintaining Grandfathered Status Is Plan Really Grandfathered? No substantial modifications, including: Coverage for particular conditions Costs (deductibles, copayments, OOP limits) ER contributions Annual dollar limits on coverage Document and provide proof of grandfathered status in written plan documents and in ERISA reporting and disclosure requests. 38

39 Key Topics ACA Litigation As to Grandfathered Status A plan may lose grandfathered status when: It eliminates all or mostly all plan benefits to diagnose or treat a particular condition It increases a percentage cost-sharing requirement Co-payments increased (above certain amount) Other costs (e.g., deductible or out-of-pocket limit), increased above a certain amount Employer contributions decrease (beyond certain amount) Plan is amended to create new annual benefit limits 39

40 Key Topics New Internal Claim Review Regulations Additional protections for claimants: Changes to rules under ERISA 503, 29 C.F.R (does not apply to grandfathered plans) Rescission of coverage is an adverse benefit determination Deference to treating doc--on whether claim is urgent Claimant allowed to review file as part of internal review Claimant allowed to submit evidence and testimony Claimant gets opportunity to respond to new evidence or rationale 40

41 External Appeals & IROs Key Topics Federal external appeals process (does not apply to grandfathered plans) Group health plans, e.g., self-funded ERISA plans, are required to provide external review processes by Independent Review Organizations ( IROs ). External review is final and binding. Will IROs be subject to ERISA s fiduciary duties? How does this affect the standard of review? 41

42 External Appeals & IROs Key Topics IRO litigation scenarios: Participant vs. IRO If IRO is a fiduciary, may face benefit claim and 502(a)(3) for equitable relief in form of surcharge If IRO is not a fiduciary, claims preempted? Plan Participant vs. IRO and Plan Administrator Combination ERISA 502(a)(1)(B) and 502(a)(3) claims, i.e., benefit claim plus failure to monitor/supervise IROs must review claims de novo, what standard of review applies to their decisions? 42

43 External Appeals & IROs Other IRO Litigation Scenarios Plan Administrator vs. IRO Key Topics If IRO is a fiduciary, may face ERISA 502(a)(2) claims for overpaying claims If IRO is not a fiduciary, may face state court breach of contract or professional negligence claims What standard of review in these cases if plan grants discretionary decision-making to IRO? 43

44 Conclusions & Takeaways 1. ER Mandates 2. Court Cases Roundup Including: NFIB v. Sebelius, Burwell v. Hobby Lobby Stores, Inc., Halbig v. Burwell, King v. Burwell 3. The Good & Bad ER-Mandate Strategies 4. Workforce realignments 5. The return of ERISA 510, 29 U.S.C ACA Whistleblower Protection 7. Benefit Claims Procedures 8. Conclusions & Takeaways 44

45 How much did you learn HRCI Attendees Must Participate everyone else is strongly encouraged to participate! Poll Questions 45

46 Poll Question 1 1. Burwell v. Hobby Lobby Stores, Inc. allows: A. Business owners with religious beliefs to not have to follow the ACA rules B. Remaining 36 states with federal exchanges to provide subsidized insurance C. Premium tax credits for only states with State run exchanges D. Closely held for-profit corporations to be exempt from a law its owners 46

47 Poll Question 2 2. Under the Whistleblower Protections the ACA prohibits adverse action against EEs who do all the following EXCEPT: A. Receive a premium tax credit or subsidy B. Testifies in a proceeding about a Plan s violation C. Signs up for MEC health plan D. Objecting to perform any activity the EE believes to be a violation 47

48 Poll Question 3 3. If the US Supreme Court rules against the Government in the King v. Burwell matter, all of the following are possible outcomes Except: A. Approx. 8 Million Americans will find their ACAcoverage to be unaffordable. B. There will be no mechanism to fine/tax Employers for failing to live up to ACA s Employer mandate. C. This will be the end to the Affordable Care Act. D. People in Washington, DC and 13 other states will see no changes to their ACA-coverages. 48

49 If you have any further questions about the conflicting court rulings or about any of the information discussed in this Webinar, please feel to contact us at Crawford Advisors, LLC Questions 200 International Circle, Suite 4500, Hunt Valley, MD Devon Square Two, 744 West Lancaster Avenue, Suite 215 Wayne, PA Via to: To Download These Slides: Questions & Requests: 49