HORAN Compliance Updates: Federal Requirements for Health Plan Sponsors

Prepared for HORAN by Robert W. Quirk, Issues & Answers, Inc.

July 2009

Overview: The principal Federal law governing employer sponsored health plans is ERISA [Employee Retirement Income Security Act]. Most other laws affecting group health coverage are actually amendments to ERISA, including COBRA, HIPAA, WHCRA and CHIPRA.

ERISA requires that employer sponsored health plans provide specific information to covered individuals. In many instances, it specifies the content of the information and sometimes the method of its delivery. Most often these required communications are referred to as Notices or Disclosures.

The Table below represents 12 of the most common notices and disclosures required of a health plan or health plan sponsor by Federal law. This list is not intended to cover all notices or documents required of a health plan or plan sponsor. The Table identifies:

The notice or document required.
The form for delivering each notice.
The timing for delivery.
Any model of the notice that is available from the Department of Labor [DOL].
Who must provide the notice.

Further information concerning the applicable parts of ERISA that require notices or disclosures can be found on the HORAN Compliance Information CD, in Recent HORAN Compliance Alerts or on the Department of Labor website: http://www.dol.gov/ebsa/.

Who Must Comply?
ERISA regulates the plan, not the employer who sponsors the plan. The employer, however, has ultimate responsibility for the plan because the employer establishes and maintains the plan for the welfare of its employees. Therefore, if the group health plan is subject to ERISA, then the employer/sponsor has the responsibility for ensuring that its plan complies.

Methods of Notice Delivery

Most Prudent Method of Notice Delivery

Always Written - Never Verbal
Addressed by Name to Employee "& Spouse/Family"
Always First Class Mail to Last Known Address

Generally, Federal regulators permit any of the several methods for delivering required notices to plan participants: by hand, by U.S. mail, posting in a common area [limited to specific notices] or electronically. In recent decisions, Federal courts have confirmed their strong preference for delivery of a notice to a plan beneficiary by U.S. mail. Furthermore, a recent decision by the US District Court in New York stated: the notice "does not require actual receipt of notification by the plan participant; to the contrary, only a good faith attempt to notify is required." [Ramos v. SEIU Local 74 Welfare Fund.]

A problem may arise with delivery by hand for plans that cover employee family members. ERISA requires that notices be provided to all plan participants, and on occasion, covered employees who receive hand delivered notices fail to give them to their spouse. Courts and regulators do, however, allow a parent to receive a notice on behalf of a dependant. Mailing to the last known address and addressing the envelope to the employee by name "& Spouse/Family" appears to satisfy the courts.

Please note: When distributing COBRA notices, the courts and most experts agree that only one relatively safe method exists: USPS mail to the beneficiary's last known address. A notice should never be verbal nor should it be handed to the employee.

Two mail options are recognized by the courts as evidence of good faith: first class and certified. Each has its merits and drawbacks:

Certified Mail creates a record from the USPS that a notice was sent. However, if no one is present when delivery is attempted, the letter could be returned by the USPS marked "Undelivered." [See: Degruise v. Sprint Corporation, 5th Circuit, 2002] In such a case, the employer could lose the shield of a "good faith effort." Some experts recommend sending a notice by certified mail without a return receipt requested.

First Class Mail requires additional evidence to prove that a notice was sent. It should be backed up at least with a post office "certificate of mailing" [Smith v. AT&T Broadband Network Solutions, Inc., 2002, N.D. US Dist.] or policies and procedures that document both a consistent notice method and record keeping.

Electronic Delivery
Although Federal regulators allow employers and plans to provide notices or required documents electronically [e.g., by email or posting on a company intranet], they have established stringent conditions and standards for such practice. Employers, plan sponsors and plan administrators who want to use electronic delivery need to meet the following standards:

Limit the electronic delivery to two groups of individuals: 1. Plan participants who work with and have direct access to the employer's electronic information system, either on the job site, at home, or through portable devices. 2. Plan participants and beneficiaries who have formally consented to receive such documents electronically outside the workplace. [Specific items of information must be provided to people before consent can be obtained]
Have a means of delivery that is acceptable to DOL. The term "acceptable" involves ready access to a computer in the workplace, or use of a CD or other recording media, or a password protected website. Additional requirements apply to each of these methods.
Take appropriate measures to ensure actual receipt. These include: return-receipt or undeliverable electronic mail features, or conducting periodic surveys.
Notify the participants and beneficiaries of the significance of the document being transmitted electronically.
Ensure that the electronic system itself meets certain security standards.
Many sponsors and administrators who have used electronic delivery have found it more burdensome and costly under these requirements than providing a paper document.

Documentation

Courts and regulators do not accept an employer's word that a notice was provided to a beneficiary. Therefore, an employer or health plan should:

Set up a written notice delivery policy.
Train/inform those who send out the notices about the policy.
Keep records for each mailed notice. An employer or plan sponsor does not need to keep a copy of the actual document that it mailed. It should, however, keep a record to the addressee[s]' information, the date and method of delivery, and identify the specific notice or document sent.

Suggested Actions for Employers

1. A self funded plan should check with its plan administrator or TPA to ensure that all notices listed below as the responsibility of the "group all plan" are being issued. If not, it should direct the plan administrator to provide the necessary notice[s].

2. A fully insured plan should confirm with its insurance carrier that all notices listed below as the responsibility of the "group all plan" are being issued by the carrier. If the carrier does not and will not, then the employer should provide the needed notice[s].

3. Set up or review written procedures for notice production and delivery.

4. Train/inform staff about the procedures.

5. Provide any notices that are required.

6. Document the notice production and delivery.

Table Of Notices & Disclosures
Information Required	Delivery Format	Timing	Available Model	Who Must Comply		Governing Law or Section
Plan Documents: An insurance company's or self funded plan's policy or certificate and booklet.	Document	� At enrollment in plan � After substantive change or an amendment called Summary of Material Modification � Every 5 years � Upon request	Fully Insured: Obtain from Health Insurance Carrier		All group health plans	ERISA
Summary Plan Description [SPD] or Wrap Document	Document	� At enrollment in plan � After substantive change or an amendment called Summary of Material Modification � Every 5 years � Upon request	SPD: no DOL model available Wrap document: contained in HORAN Compliance Information CD		All group health plans	ERISA
General Notice of Preexisting Conditions	Notice	After the group health plan determines that a condition pre-exists coverage and that prior coverage does not fully offset the exclusion period.	Link 1 See page 86 of PDF file opened by the above link		Any group health plan that has an exclusion for preexisting conditions	HIPAA
Individual Notice of Preexisting Conditions	Notice	Upon end of employment	Model not available from DOL. However, DOL does provide guidelines for the notice at: Link 2 See page 87 of PDF file opened by the above link for guidelines		Any group health plan that has an exclusion for a preexisting condition	HIPAA
Evidence Of Coverage Under A Group Health Plan	Certificate/ Form	� Upon Enrollment � Initially to all participants after model issued by DOL; then at enrollment	Certificate of Creditable Coverage, aka Certificate of Group Health Coverage Link 3		All group health plans	HIPAA
Special Enrollment Rights: Dependent Medicaid/CHIP	Notice	� Upon Enrollment � Initially to all participants after model issued by DOL; then at enrollment	Dependent: Link 4, see page 88 of PDF file Medicare/ CHIP: Model Due from Department of Labor February 2010		All group health plans	HIPAA CHIPRA of 2009
Mastectomy & Breast Reconstruction	Notice	Both: At Enrollment Annually	Enrollment: Link 5, see page 91 of PDF file Annual: Link 6f, see page 92 of PDF file		Any group health plan that covers mastectomies	Women's Health and Cancer Rights Act [WHCRA]
Hospital Stays Related to Childbirth	Statement in SPD or Plan Document if Wrap is used	Same timing as SPD or Wrap Document; see above	New language starting 01/01/09 Link 7 Search in document for: Statement of Rights. Copy the title and 3 paragraphs		Employer, if in the SPD Carrier if in the Plan Document	Newborns' and Mothers' Health Protection Act
COBRA Continuation of Health Coverage	Notice	Both: � At Enrollment � Upon "Qualifying Event"	1. Initial General Notice: Link 8 2. Election or Qualifying Event Notice [Use after 12/31/09]: Link 9		Employers with 20 or more full time equivalent employee in prior year	COBRA
COBRA Premium Subsidy	Notice	Upon "Qualifying Event"	Applicable only until 12/31/09: Model Notices are contained on the HORAN Compliance Information CD		COBRA employer [see above]	ARRA of 2009 [Stimulus Bill]
Civilian Job Rights of persons who called to serve or have served in the Armed Forces, Reserves, National Guard or other "uniformed services"	Poster May also be provided by: handing out or mailing notice or distributing by electronic mail	Immediately	Link 10		All employers	USERRA [Uniformed Services Employment and Reemployment Rights Act]
Coverage During Medical Leave From College	Must describe the requirements of this law in any notice relating to certification or verification of student status	Effective plan year that starts on or after October 9, 2009	No model available from DOL. For a copy of the law, please go to: Link 11		All group health plans	Michelle's Law