The Department of Labor (DOL) has published 16 FAQs regarding health reform provisions. Question #1 is related to how a carrier will determine grandfathered status for a group health plan whose employer contributions have decreased more than 5 percent since March 23, 2010. If the carrier has not been informed of the decrease, the carrier is not responsible for taking that factor into consideration when determining the plan's grandfather status. A plan will lose its grandfathered status when the carrier learns of the employer's greater than 5 percent decrease in employer contributions or when one of the other changes outlined in the regulations occurs. Question #11 announces that the Adverse Benefit Determination Model Notice has been revised to reflect the fact that urgent requests must be processed in an expedited manner. Question #14 clarifies that a group health plan may still condition eligibility on residence, financial support, or other dependency factors for dependents other than children (ex. a grandchild or niece).

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Under the Patient Protection and Affordable Care Act (PPACA), health insurers and plans are required to implement an external review process for adverse benefit determinations. The majority of states already have such a process in place under state law for insured group plans. Plans that are insured in states that do not have an existing external review law will need to follow the interim rules explained in the guidance issued by the Department of Health and Human Services (HHS) on Sept. 8, 2010. The rules are effective for such plans until plan years beginning on or after July 1, 2011. The guidance includes the following requirements:

• An insured must file a request for external review with the federal Office of Personnel Management (OPM) within four months after receipt of the final internal adverse benefit determination.
• Internal adverse benefit determinations must include a Privacy Act Statement and an explanation of the external review process.
• A written explanation of the final external review determination must be provided in writing within 45 days of the review request. Expedited reviews must be completed within 72 hours and urgent care reviews must be completed within 24 hours.

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HHS has issued guidance that explains how health reform has changed the opt-out election for various group health plan mandates that are available to self-funded, nonfederal governmental plans following the enactment of PPACA. Importantly, sponsors of self-funded, nonfederal governmental plans can no longer opt out of the HIPAA portability requirements, including:

• Limitations on pre-existing condition exclusions
• Special enrollment requirements
• Prohibitions against health status discrimination (other than genetic information protections)

Interestingly, because the opt-out election is not within the scope of health reform's grandfathering provision, even grandfathered plans will be unable to opt out of these requirements. However, the opt-out election remains available for the other group health plan mandates including:

• Benefits for newborns and mothers
• Parity in mental health and substance use disorder benefits
• Coverage for reconstructive surgery following mastectomies
• Michelle's Law

For non-collectively bargained plans, the change is effective for plan years beginning on or after Sept. 23, 2010. Special rules apply for plans maintained pursuant to collective bargaining agreements. The guidance also includes a transition rule under which HHS will not take enforcement action with respect to elections opting out of the HIPAA portability requirements for plan years beginning before Apr. 1, 2011. The guidance also contains several helpful examples.

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The DOL announced in Technical Release 2010-02 an enforcement grace period for the following requirements applicable to internal claims and appeals:

• The 24-hour time frame for making urgent care claim notifications
• The obligation to provide notices in a culturally and linguistically appropriate manner
• The broader content and specificity requirements for notices to claimants
• The rule requiring strict adherence to all the requirements of the interim final regulations

This announcement is an acknowledgement that more time is needed to change plan or policy procedures and to modify computer systems in order to come into compliance.

Therefore, the DOL, HHS and Internal Revenue Service (IRS) will not take any enforcement action against a group health plan that is working in good faith to implement those additional standards with respect to internal claims and appeals but does not yet have them in place until July 1, 2011. A plan that is taking good faith steps to comply should not report excise tax liability on Form 8928 with respect to a failure to meet the standards subject to the grace period.

Click here to view Technical Release 2010-02.

The IRS has updated its website with a description of certain tax provisions that will take effect this year and in coming years with regard to health reform. The website includes the requirement that employers report the value of the health benefits they provide employees on each worker's annual Form W-2 beginning in tax year 2011. According to the IRS, the new W-2 reporting requirement is intended to help employees become better-informed consumers by showing them the value of their health care benefits, and is for informational purposes only. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income and it is not taxable. There are also links to information on the small business health care tax credit, health coverage for older children, the Medicare Part D coverage gap "donut hole" rebate, and additional requirements for tax-exempt hospitals.

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On Sept. 20, 2010 the IRS released Notice 2010-63, to be published in Internal Revenue Bulletin 2010-41, Oct. 12, 2010. This bulletin provides background information on the statutory provisions of Public Health Service Act (PHS Act) section 2716 which prohibits discrimination in favor of highly compensated individuals in insured group health plans. It has been reviewed and approved by the DOL, HHS and the Department of the Treasury and provides information on taxes, remedies, and penalties that generally apply for an insured plan failing to comply. If an insured group health plan fails to comply, the plan is subject to a civil action to compel it to provide nondiscriminatory benefits and the plan or plan sponsor is subject to an excise tax or civil money penalty of $100 per day per individual discriminated against. Finally, the Notice invites comments to be considered in the development of future guidance.

Click here to view IRS Information Letter 2010-63.

Employers and federal contractors must file their EEO-1 "Employer Information Report" by the annual deadline of Sept. 30. Employers with 100 or more employees and federal contractors with 50 or more employees and contracts of $50,000 or more must file annual EEO-1 reports to show they are in compliance with anti-discrimination laws. The Office of Federal Contract Compliance Programs uses the report to track federal contractors' compliance with Executive Order No. 11,246. The federal Equal Employment Opportunity Commission (EEOC) uses the EEO-1 report to track employer compliance with Title VII of the Civil Rights Act of 1964.

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On Sept. 10, 2010, the Congressional Research Service issued a report summarizing the impact of several federal laws on employer sponsored wellness programs. An employer wishing to implement a wellness program in which employees must satisfy a certain health condition, must satisfy the five criteria under HIPAA's nondiscrimination rules. The Americans with Disabilities Act (ADA) prohibits employers from denying group health plan eligibility to employees who do not participate in a wellness program. If a wellness program establishes a health standard that is more difficult for older employees or employees of protected classes to achieve, this may be a violation under the Age Discrimination in Employment Act (ADEA) or Title VII. The study is not considered official legal guidance, but may be a useful guide for employers assessing their wellness programs for federal compliance.

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Title I of the Genetic Information Nondiscrimination Act of 2008 (GINA) includes provisions that generally prohibit group health plans and health insurance issuers from discriminating based on genetic information. The DOL's Employee Benefits Security Administration (EBSA) has updated its website with FAQs regarding GINA. GINA expands the genetic information nondiscrimination protections included in Title I of HIPAA. Under GINA, group health plans and health insurance issuers cannot base premiums for a plan or a group of similarly situated individuals on genetic information. GINA generally prohibits plans and issuers from requesting or requiring an individual to undergo genetic tests, and prohibits a plan from collecting genetic information (including family medical history) prior to or in connection with enrollment, or for underwriting purposes.

GINA applies generally to group health plans. Unlike the provisions under Title I of HIPAA, there is no exception for very small health plans with less than two participants who are current employees. The regulations implementing the provisions of GINA are applicable for plan years beginning on or after Dec. 7, 2009. Therefore, for calendar year plans the statute and regulations apply as of Jan. 1, 2010.

Click here to view the GINA FAQs.

The Joint Committee on Employee Benefits of the American Bar Association has reported on its May 6, 2010 Q&A session with EEOC staff members. The report includes informal, nonbinding remarks regarding several benefit-related items. Of interest are two topics.

The first is concerning health plan exclusions. EEOC staff pointed to existing guidance on employer-provided health plans which state that health plan exclusions are not disability-based if it applies to "a multitude of dissimilar conditions and affects individuals with and without disabilities." For example, the staff observed that exclusions for bariatric surgery would require a more complex analysis. A determination would have to be made whether all or substantially all of the individuals having the procedure were individuals with disabilities in order to decide whether the exclusion created a disability-based distinction. The staff also noted that a broad-based exclusion on cochlear implants might be problematic since most individuals requiring that surgery would likely be considered individuals with disabilities under the Americans with Disabilities Act Amendments Act (ADAAA).

The second, concerning HRAs, addressed that the EEOC does not have a formal position as to when an HRA would be considered voluntary for ADA purposes. This is relevant when individuals do not receive coverage or only receive catastrophic coverage because they failed to complete a health questionnaire. The staff did mention two informal discussion letters indicating that employers may not condition receipt of health benefits on completion of an HRA.

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The U.S. Department of Homeland Security (DHS) published this final rule on July 22, 2010. It amends DHS regulations to provide that employers and recruiters or referrers for a fee who are required to complete and retain the Form I-9, Employment Eligibility Verification, may sign this form electronically and retain this form in an electronic format. DHS stated that this rule does not alter the requirement that the employer must physically examine any documentation provided by the employee in the presence of the employee prior to completing the I-9 Form.

This final rule makes minor changes to an interim final rule (2006) including clarifying that employers:

• Must complete a Form I-9 within three business days rather than calendar days.
• May use paper, electronic systems, or a combination of the two.
• May change electronic storage systems as long as the systems meet the performance requirements of the regulations.
• Do not need to retain audit trails for each time a Form I-9 is viewed electronically, but only when the Form I-9 is created, completed, updated, modified, altered or corrected.
• May provide or transmit a confirmation of a Form I-9 transaction but are not required to do so unless the employee requests a copy.

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In Young v. Verizon's Bell Atlantic Cash Balance Plan, 2010 WL 3122795 (7th Cir. 2010), the Seventh Circuit held that ERISA may authorize equitable reformation of an ERISA plan document to correct a drafting error (or a scrivener's error) when "objective, convincing evidence" demonstrates that the error does not reflect the participants' reasonable expectations. The court reasoned that "clear, precise, [and] convincing" proof is required to establish a scrivener's error and that such a high standard may deter plan sponsors from pursuing reformation "simply because [plan language] has proven unfavorable.

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The Fifth Circuit, in Thibault v. BellSouth Telcoms., Inc., 2010 U.S. App. LEXIS 15267 (5th Cir. 2010), addressed the independent contractor classification under the Fair Labor Standards Act (FLSA). The court affirmed the lower court's ruling that a "splicer," a person who installs, cuts, repairs, and tests various high voltage cables, was properly classified as an independent contractor under the FLSA. The court indicated that the case arose from BellSouth's attempt to rebuild its telecommunications grid following Hurricane Katrina. According to the court, to complete this project BellSouth contracted out some of the work. In analyzing the "economic realities" of the arrangement between the plaintiff splicer, Thibault, and the contracting entities, the court noted that: 1) the relationship did not have a high degree of permanence because Thibault intended to return home; 2) Thibault was subject to limited supervision; 3) Thibault had advanced splicing skills and initiative; and 4) Thibault had a high degree of investment in the tools necessary to be a splicer and controlled his profit or loss by managing his expenses. In addition, in reaching its decision, the court noted that Thibault was a sophisticated business person with an independent business who was not financially dependent on the splicing work. Although this is a favorable outcome for employers located in the Fifth Circuit (Texas, Louisiana, and Mississippi), it is important to note that the independent contractor in this case had advanced skill, sophistication, and autonomy, which are all elements in showing that an independent contractor relationship exists.

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Recently enacted California legislation (SB 227 and AB 1887) provides for the administration and funding of a federal high-risk pool that will cover individuals in California who, among other matters, have been rejected for coverage by at least one private health plan. On June 29, 2010, qualified individuals were able to begin to apply for the high-risk pool. The Managed Risk Medical Insurance Board will administer the high-risk pool, called the Major Risk Medical Insurance Program.

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Click here for additional program information.

HB 5497 is effective Oct. 1, 2010. Employers with three or more employees must grant leave to employees who are victims of family violence. This domestic violence bill states an employer shall not deprive an employee of employment, penalize or threaten or otherwise coerce an employee with respect to employment if the employee must appear in civil court as the victim of family violence.

If an employer violates this bill and discharges, penalizes, threatens or otherwise coerces an employee, the employee has one hundred eighty days (previously 90 days) from the occurrence to bring a civil action for damages and for an order requiring the employee's reinstatement or otherwise rescinding such action. If the employee prevails, the employee shall be allowed a reasonable attorney's fee to be fixed by the court.

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Effective Oct. 30, 2010, SB 306 goes into effect. Currently, when the governor restricts vehicles from the State's roadways due to unsafe conditions, a criminal sanction is the only available penalty for drivers who are caught by law enforcement on the roads. This legislation would create a three-tiered driving restriction system for future storms or other emergencies. The third tier is an all-out driving ban except for essential personnel, such as first responders and snowplow operators.

Additionally, the bill provides that an employer may not terminate, reprimand or in any way discipline an employee for failing or refusing to report to work during a Level 3 Driving Ban. During a Level 2 Driving Restriction, an employer who requires an employee, who has not been pre-designated as essential personnel, to report to work shall be liable for the expenses incurred as a result of any emergency response to remove the employee, a passenger and/or the motor vehicle that becomes inoperable on the State's roadways.

In Hoffman v. Carefirst of Fort Wayne Inc. d/b/a Advanced Healthcare, No. 1:09-cv-00251 (N.D. Ind. 2010), the court held that under amendments to the ADAAA that took effect Jan. 1, 2009, an employee who has cancer is considered "disabled" even if the cancer is in remission at the time of the alleged adverse employment action. The court stated that "the ADAAA very clearly provides that 'an impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.'" The court also noted that the purpose and language of the ADAAA, as well as interpretive regulations issued by the EEOC, support the conclusion that cancer is a covered "disability" regardless of whether it is active or inactive. Significantly, the court rejected the employer's argument that to recover his claims the employee needed to show that the cancer, although in remission, substantially limited him in a major life activity at the actual time of the alleged adverse employment action.

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Gov. Deval Patrick recently signed an economic development bill that contains a significant amendment to the Massachusetts personnel records law. The new law (Chapter 240 of the Acts of 2010, section 148) states that an employer shall notify an employee within 10 days of the employer placing in the employee's personnel record any information to the extent that the information is used or has been used or may be used to negatively affect the employee's qualification for employment, promotion, transfer, additional compensation or disciplinary action.

The law already required any employer receiving a written request from an employee to provide the employee with an opportunity to review his personnel record within five business days of such request. However, the new law now limits employees to two such reviews of their personnel records in any given calendar year. Significantly, though, a review triggered by an employer's notice that it has placed negative information in the personnel record does not count as one of the two annual reviews. The law is effective immediately and made retroactive to Aug. 1, 2010.

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The Nebraska Department of Insurance issued Bulletin CB-123, with the purpose of informing all health insurers and covered insureds that since Nebraska does not have an external review process in place, insured plans in Nebraska will need to follow the new requirements under federal law. External review is the process where an insured individual may appeal a claim denial or other adverse benefit decision to an Independent Review Organization that is not affiliated with the insurer. Specifically, the federal OPM is assuming the responsibility of the external review process, and if necessary, any expedited reviews beginning Sept. 23, 2010. The bulletin provides contact information, an e-mail address, and links to the federal regulations.

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Bulletin CB-122 was issued as information directed towards health insurers issuing policies in Nebraska as they comply with the requirements of PPACA. However, the bulletin is helpful to producers and employers in Nebraska as it clarifies that the Nebraska Department of Insurance considers the term "plan year" to be "anything new or renewed on or after Sept. 23, 2010." The bulletin also clarifies that in the case of issues that still need to be resolved by federal regulation or subsequent interpretation, insurers are asked to comply with the PPACA requirements "to the best of their ability" and file amendments as clarification becomes available.

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Bulletin No. 10-21 was issued as information directed towards health insurers issuing policies in New Jersey as they comply with the requirements of PPACA. However, the bulletin is helpful to producers and employers in New Jersey as it clarifies several areas under state law that overlap with new federal requirements. Specifically, the bulletin describes the interaction between the PPACA extension to dependents to age 26 and continuation under New Jersey Dependent until 31 (DU31). The bulletin clarifies that an individual who meets the requirements of the PPACA is covered as a dependent rather than as a DU31 under New Jersey law. An individual who does not meet the requirements of the PPACA, but does meet the requirements of DU31, should be afforded DU31 continuation.

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As of Nov. 1, 2010, Senate Bill 1814, which amends Oklahoma's anti-discrimination law, goes into effect. The amendment broadens the current definition of sex discrimination to include discrimination based on pregnancy, childbirth, or related medical conditions.

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On July 1, 2010, the Vital Statistics Office of the Commonwealth of Puerto Rico began issuing new, more secure certified copies of birth certificates to U.S. citizens born in Puerto Rico because of a new Puerto Rico birth certificate law. After Sept. 30, 2010, all certified copies of birth certificates issued prior to July 1, 2010, will become invalid. This new law does not affect the U.S. citizenship status of individuals born in Puerto Rico. It only affects the validity of certified copies of Puerto Rico birth certificates.

How will this law impact the Employment Eligibility Verification (Form I-9) process? For new employees, all certified copies of Puerto Rico birth certificates are acceptable for Form I-9 purposes through Sept. 30, 2010. Beginning Oct. 1, 2010, only certified copies of Puerto Rico birth certificates issued on or after July 1, 2010, are acceptable for Form I-9 purposes. Beginning Oct. 1, 2010, if an employee presents for List C a birth certificate issued by the Vital Statistics Office of the Commonwealth of Puerto Rico, the employer must look at the date the certified copy of the birth certificate was issued to ensure that it is still valid.

Employers must NOT re-verify the employment eligibility of existing employees who presented a certified copy of a Puerto Rico birth certificate for Form I-9 purposes and whose employment eligibility was verified on Form I-9 prior to Oct. 1, 2010.

Employers awarded a federal contract that contains the Federal Acquisition Regulation (FAR) E-Verify clause have special Form I-9 rules for the verification of existing employees.

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On Sept. 10, 2010, the Texas Department of Insurance issued an announcement that Healthy Texas, a statewide private/public partnership established by the 81st Texas Legislature to enable uninsured small business owners to offer affordable health insurance to their employees and families, has signed contracts with two new insurers to be participating health plans. Once enrollment begins, interested employers will apply directly to one of these participating plans.

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Bulletin 9-3-2010, from Sean Dilweg, Commissioner of Insurance, is directed towards insurers complying with PPACA. The bulletin provides information that will be of relevance to employers and clarifies that whichever component of state and federal law is most favorable to Wisconsin consumers will prevail. The bulletin provides clarification as to grandfathered health plans, dependent coverage of children to age 26, patient protections, preexisting condition exclusions, annual limits and rescissions. The bulletin also addresses the new internal claims and appeals and external review, and specifies that Wisconsin does have existing external review laws which do not contain more consumer friendly provisions. Thus, the bulletin confirms that Wisconsin laws for internal and external review will be amended to conform to federal law.

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