On April 15, 2011, HHS's Centers for Medicare and Medicaid Services (CMS) issued final regulations relating to the Medicare Part D program. In addition to implementing changes required by PPACA, the regulations clarify various Medicare Part D program participation requirements, strengthen Part D beneficiary protections, and make other technical changes. The regulations include provisions relating to coordination of benefits, enrollment and eligibility provisions, the annual coordinated election period, disenrollment from Part D coverage, and other key definitions under Medicare Part D.

The regulations are specifically relevant to Part D plan sponsors, but also affect employers since group health plans must cooperate with Part D plans and enrollees in order to coordinate benefits. Generally, under the Medicare Secondary Payer rules, Part D coverage will be secondary to group health plan coverage for active employees. So that Part D plans may determine whether their coverage is primary or secondary, individuals who enroll in Part D must provide the Part D plan with information about any other prescription drug coverage they have, including group health plan coverage. CMS requires that most group health plans offering prescription drug coverage to Part D eligible individuals must disclose to those individuals and to CMS whether the plan's coverage is creditable or non-creditable. Coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of defined standard Part D coverage. In other words, if the plan's coverage is at least as good as standard Medicare prescription drug coverage, then the coverage is creditable.

Importantly, PPACA amended the Social Security Act to move the Medicare Part D annual enrollment period to Oct. 15 through Dec. 7. This change is effective for the 2012 Part D enrollment, which will occur in the fall of 2011. As a result, references to the Nov. 15 through Dec. 31 annual enrollment period in the notices of creditable or non-creditable coverage are no longer accurate. Presumably, employers will now need to update the notices of creditable or non-creditable coverage and most likely plan sponsors will need to provide these notices by Oct. 15, 2011, a month earlier than previously required. Please note that CMS has not yet issued revised model forms or other guidance, but plan sponsors should watch for future revisions and update existing notices in the interim.

In connection with the creditable coverage requirement, on April 4, 2011, CMS issued an announcement relating to Medicare Part D benefit parameters for 2012. In the announcement, CMS released the following parameters for the defined standard Medicare Part D prescription drug benefit, which will assist plan sponsors in determining whether their plan's prescription drug coverage is creditable for 2012:

• Deductible: $320 (a $10 increase from 2011)
• Initial coverage limit: $2,930 (a $90 increase from 2011)
• Out-of-pocket threshold: $4,700 (a $150 increase from 2011)
• Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are not eligible for the coverage gap discount program: $6,657.50 (a $210 increase from 2011)
• Estimated total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are eligible for the coverage gap discount program: $6,730.39 (a $246.67 increase from 2011)
• Minimum co-payments under the catastrophic coverage portion of the benefit
• $2.60 for generic/preferred multi-source drugs (a 10-cent increase from 2011)
• $6.50 for all other drugs (a 20-cent increase from 2011)

Final Medicare Part D Regulations
CMS Medicare Part D Benefit Parameter Announcement

On April 14, 2011, the U.S. Citizenship and Immigration Services (USCIS) announced a final rule that adopts, without change, an interim rule to improve the integrity of the Form I-9 process.  Employers must complete Form I-9 for all newly hired employees to verify their identity and authorization to work in the United States.  The main changes made by the interim rule and adopted by the final rule include prohibiting employers from accepting expired documents for completion of Form I-9 and updating the Lists of Acceptable Documents.   

Employers may continue to use the current version of Form I-9 (Rev. 08/07/2009) or the previous version (Rev. 02/02/2009).  The final rule will be effective on May 16, 2011. 

 

Final Rule 

USCIS News Release 

USCIS Questions and Answers 

Link to Form I-9 and Updated I-9 Handbook for Employers  

In Seff v. Broward County, No. 10-cv-61537 (S.D. Fla. Apr. 11, 2011), current and former employees alleged that the county's wellness program, which imposed a $20 per-pay-period penalty on employees who refused to complete a confidential health risk assessment and a blood test for glucose and cholesterol levels, violated the American with Disabilities Act (ADA) prohibition on employee medical examinations and inquiries that are not job-related. The court ruled that the wellness program was permissible under an ADA exception for "the terms of a bona fide benefit plan that are based on underwriting risks, clarifying risks, or administering such risks" when those terms are neither inconsistent with state law nor a subterfuge for evading the ADA.

Noting that the program was administered and paid for by the plan's insurer and described in the plan handout, the U.S. District Court for the Southern District of Florida determined that the program was a term of the county's group health plan. The court focused on whether the program was designed to develop and administer the county's benefit plans in accordance with accepted principles of risk management, and concluded that the plan satisfied this benchmark since it used the de-identified data it received to classify and assess risks in order to develop economically sound benefit plans.

Importantly, the court did not address whether the county wellness program was "voluntary" under EEOC standards. Applicable regulations define a voluntary wellness program as one that neither requires employees to participate nor penalizes employees for non-participation. The EEOC has informally suggested that a wellness program may not be voluntary if the program includes a mandatory health risk assessment or a punitive trigger. Thus, whether such a wellness program constitutes a voluntary wellness program remains an undecided issue.

This case is significant because it has been unclear whether wellness programs and health risk assessments that otherwise comply with the HIPAA wellness rules would be permitted under the ADA. The EEOC, which administers the ADA, has not issued formal guidance, and this is the first judicial decision on the issue. Stay tuned for developments.

Seff v. Broward County

In Bidwell v. Univ. Med. Ctr., Inc., 2011 WL 995944 (W.D. Ky. 2011), a retirement plan sponsor defeated fiduciary breach claims by showing that it followed proper procedures for implementing a qualified default investment alternative (QDIA). As background, IRS regulations released in 2007 establish certain investment options that plan fiduciaries may choose to limit their liability when establishing a default investment for participants who fail to give investment instructions. Before the regulations were issued, however, the plan's default investment option was a stable value fund. Because the 2007 QDIA regulations did not include a stable value fund as a permissible default investment, the plan sponsor changed the default option to a QDIA-compliant fund by giving notice to the plan participants and then reinvesting the stable value account balances into the QDIA-compliant fund. The notice stated that unless participants made an election to keep their stable value fund investments, all account balances would be reinvested. Two participants, who did not make a new election and whose stable value funds were reinvested, suffered significant losses as a result of the reinvestment. Claiming they never received the notice, the two participants sued the plan sponsor for fiduciary breach.

The court agreed with the plan sponsor's argument that it had the discretion to change the participant's investments in the face of their silence and that its notice procedure compiled with the DOL's requirements. The court rejected the participants' argument that the reinvestment conflicted with the SPD, which stated that an affirmative investment election controls until a new election is made, reasoning that the plan granted the plan sponsor sufficient discretion to alter plan investments when the participants failed to respond to the QDIA notice. The court held that the plan sponsor made a reasonable interpretation of the plan's documents in light of the QDIA regulations and acted only after first attempting to contact the participants by sending a notice in accordance with ERISA's requirements.

For employer and plan sponsors, this case highlights the significance of following procedures in defending ERISA fiduciary breach claims. The court found that the plan's procedures in providing a proper QDIA notice overcame the individual participants' claims, despite the negative consequences for the participants.

Bidwell v. Univ. Med. Ctr., Inc

On April 27, 2011, HB 2556 was signed into law. The new law allows small employers (between 2 and 50 employees) to claim an Arizona tax credit for providing a qualified health insurance plan for employees who are Arizona residents. Specifically, the new law provides that the tax credit will be available to employers through Dec. 31, 2014, provided that they pay at least $360 during the year for health insurance premiums or as contributions to a Health Savings Account (HSA) for every employee enrolled in the health plan. By amendment, the new law also requires that the amount of any deduction that is claimed in computing federal adjusted gross income for health insurance premiums or contributions to an HSA for which the Arizona tax credit is claimed must be added to Arizona adjusted gross income. 

HB 2556 

Source: Littler Mendelson     

On April 26, 2011, the governor signed SB 1365 into law. This legislation, known as the "Protect Arizona Employees' Paychecks from Politics Act", prohibits employers from deducting wages to make a payment for political purposes unless the employee has provided written or electronic authorization. Further, such an authorization will expire unless it is made annually. Arizona defines "political purposes" as "supporting or opposing any candidate for public office, political party, referendum, initiative, political issue advocacy, political action committee or other similar group." If an employer knowingly deducts payments for political purposes without the employee's consent, the employer could be fined at least $10,000 for each violation. This legislation is effective Oct. 1, 2011.

SB 1365     

On April 18, 2011, the governor signed into law SB 1363. This legislation prohibits employers from withholding an employee's wages past the date specified in the employee's written revocation of authorization for withholding. There are two exceptions to the prohibition in which the employer may continue to withhold past the specified authorization revocation date: 1) to resolve a debt or obligation to the employer; and 2) to obey a court order requiring continued withholding.     

SB 1363

On April 1, 2011, HB 1915 was signed into law, creating Act 1042. The purpose of the Act is to require health insurance plans to provide coverage for gastric pacemakers. As a result, a health benefit plan that is issued for delivery, renewed, or otherwise contracted for in the state of Arkansas must provide coverage for gastric pacemakers. However, eligible charges and limits or exclusions from coverage may be based either on medical necessity or the plan's coverage criteria. A plan may also require prior authorization in the same manner as any other covered benefit and may impose copayments, deductibles, or coinsurance amounts that have parity with other benefits under the plan.     

Act 1042 

On April 1, 2011, HB 2137 was signed into law, creating Act 1054. The purpose of the Act is to amend the requirements for rescission of life and health insurance policies. The law amended the Arkansas Insurance Code to reflect that statements made during negotiations for life or accident and health insurance policies are considered representations and not warranties. As a result, unless the misrepresentation is considered fraudulent or material, recovery under the policy or contract may be limited with regard to omissions, concealment of facts, or incorrect statements. 

Act 1054

On April 4, 2011, SB 839 was signed into law, creating Act 1155. The purpose of the Act is to protect patients by ensuring that prior authorization procedures do not intrude on the relationship between a physician and a patient or put cost savings ahead of optimal patient care. The Act creates a new subsection within the insurance statutes of the state relating to prior authorization, the definitions associated with such, as well as the procedures to be followed when an adverse prior authorization determination has been received. 

Act 1155

On April 4, 2011, SB 213 was signed into law, creating Act 1119. The purpose of the Act is to make changes to existing regulation of coverage of in vitro fertilization procedures. Existing state law requires all accident and health insurance companies doing business in the state to include in vitro fertilization as a covered expense. The Act expanded the requirement to now include procedures as well as services, including those performed at state health departments. The services or procedures must now conform to the guidelines and minimum standards of the American College of Obstetricians and Gynecologists for in vitro fertilization clinics or the American Society for Reproductive Medicine for programs of in vitro fertilization. 

Act 1119

On May 2, 2011, the Hawaii governor signed into law HB 546. The new law prohibits discrimination in employment on the basis of gender identity or expression. Gender identity or expression includes a person's actual or perceived gender, as well as a person's gender identity and gender-related self-image, appearance or expression, regardless of whether such gender identity is different from that traditionally associated with the person's sex at birth. According to HB 546, employers may not base hiring, compensation, termination, or other employment-related decisions on the basis of gender identity. 

HB 546      

On April 25, 2011, the governor signed into law SB 1273. The new law provides that an accident and health or sickness insurer must comply with applicable federal law. Specifically, the new law gives the Insurance Commissioner the authority to enforce the consumer protections and market reforms relating to insurance as set forth in PPACA. 

SB 1273

On April 12, 2011, the Maryland governor signed into law HB 87, the Job Applicant Fairness Act. The new law prohibits employers from using an applicant's or employee's credit report or credit history in employment-related decisions, including denying employment, discharging an employee, and determining compensation, terms, conditions or privileges of employment. There are some exceptions to the new prohibitions, including an exception for employers that are required to perform credit checks under state or federal law. Certain financial institutions that accept federally-insured deposits and entities that are registered as investment advisors with the U.S. Securities and Exchange Commission are also exempt from the law. Lastly, the law does not apply to employers who have a substantially job-related bona fide business purpose for seeking the credit information. Positions for which an employer has a bona fide business purpose for obtaining an employee's credit report include those in which the employee is in a managerial role, has access to personal information of a customer, employee, or employer, has fiduciary responsibility to the employer, or has access to trade secrets or other confidential business information.    In addition, under HB 87 employers that willfully or negligently violate the credit history information discrimination prohibitions may be fined up to $500 for a first violation and up to $2,500 for each subsequent violation. Thus, employers should update plan documents to reflect these new requirements before the law becomes effective on Oct. 1, 2011.     

HB 87

On April 4, 2011, the Massachusetts Division of Insurance (DOI) issued Bulletin B-2011-07, instructing insurance companies and producers offering policies in Massachusetts that certificates of insurance and evidence of coverage forms and binders are intended to summarize insurance policies, including liability limits, in lieu of providing the actual policies to insureds or third parties as proof of coverage. This bulletin advises insurers and their producers that certificates of insurance are not the proper method by which to amend a policy, that amending such certificates of insurance can create an errors and omissions exposure, and that this activity may violate the Massachusetts insurance laws.

An insurer or insurance producer who issues a certificate of insurance that attempts to amend, extend, or otherwise alter the insurance policy or otherwise intentionally misrepresents the terms of an actual or proposed insurance policy may be in violation of multiple insurance statutes. Therefore, insurers and producers may not execute or otherwise issue a certificate of insurance that includes any statements or language that purport to amend, extend, or alter coverage or indicate that a certificate holder has a right to notice of cancellation, nonrenewal, or any similar notice not specifically contained in the underlying policy. This prohibition also applies to all other documents such as a formal opinion or other document issued or signed by an insurer or an insurance producer.

Bulletin B-2011-07

Bulletin B-2010-15 was issued by the DOI to highlight new provisions related to coverage of Autism Spectrum Disorder (ASD). It requires fully insured health plans issued or renewed by health insurance carriers to provide benefits for the diagnosis and treatment of ASD on a nondiscriminatory basis to all residents of Massachusetts and to all insureds having a principal place of employment in Massachusetts. The bulletin defines 'autism services providers' and addresses the credentialing of those providers. This is effective for policies issued on or after Jan. 1, 2011.

Bulletin B-2010-15

On March 30, 2011, the DOI issued Bulletin B-2011-06 instructing insurers of the limit on increases to group premium rates for renewing small groups. While directed towards insurers, this bulletin may be of interest to producers and employers because an insurer cannot increase a group base premium rate by more than 15 percent. The bulletin provides instructions for performing this calculation, and clarifies that this provision does not apply to newly enrolling groups, only renewing groups. This provision is effective April 1, 2011.

Bulletin B-2011-06

On March 22, 2011, Governor Rick Snyder signed SB 20, creating Public Act 10 of 2011. This new law bars the Michigan Occupational Safety and Health Administration from promulgating a rule or establishing a standard regarding workplace ergonomics which is more stringent than any issued by the federal Occupational Safety and Health Administration. The new law does not apply to the adoption by reference of a federal workplace ergonomics rule and is effective March 24, 2011.     

Public Act 10 of 2011, SB 20   

Source: Littler Mendelson

The State Senate's non-binding Resolution 27 urges the state Attorney General to either file his own lawsuit or join an existing lawsuit challenging the constitutionality of PPACA. Also, the Resolution urges the state Attorney General to defend the validity of Missouri's Proposition C, approved in 2010, which protects Missourians from being penalized for refusing to purchase private health insurance, and protects their right to offer or accept direct payment for health care.   

Resolution 27   

Source: Littler Mendelson

As previously reported in our April 12, 2011, edition of Compliance Corner, the New York Wage Theft Prevention Act became effective on April 9, 2011, and increases employers' obligations regarding notice and recordkeeping of wage information, and penalties for nonpayment and underpayment of wages under the New York Labor Law. The New York Department of Labor (NYDOL) Commissioner has prepared templates that employers may use to satisfy the notice and acknowledgement requirement of the Act. The templates are available in English, Spanish, Chinese and Korean, and the Commissioner anticipates creating templates in Creole, Polish and Russian. If a template is not available in the primary language identified by the employee, the employer may satisfy the notice and acknowledgement requirement by providing the English template to the employee. The templates, along with instructions, guidelines, and frequently asked questions regarding the Act may be accessed at the NYDOL website on Wage and Hour Law, linked below. 

NYDOL Website

On June 30, 2010, the North Carolina state legislature passed SB 897, which amended state law to conform to the federal Internal Revenue Code (IRC) in effect on May 1, 2010. Then, on March 17, 2011, the legislature passed HB 124, which further updated state law to conform to the federal IRC in effect on Jan. 1, 2011. As a result of these two bills, the value of health coverage provided to a dependent child through the end of the year in which the adult child turns age 26 is now excluded for North Carolina state income tax purposes.

SB 897
HB 124

On April 13, 2011, Philadelphia Mayor Michael Nutter signed Bill No. 110111-A, the Fair Criminal Screening Standards Ordinance, which establishes limits and requirements for the screening of criminal records by certain Philadelphia employers. The new ordinance will affect the application and screening processes of many employers. Specifically, the new law precludes city agencies and private employers employing 10 or more persons within the City of Philadelphia from inquiring or requiring information regarding criminal convictions before and during the application and initial interview process, and from inquiring about an individual's arrests that did not result in a conviction (unless such inquiry is required or permitted by another law). The new ordinance also provides guidelines that employers must follow when making inquiries into an individual's criminal background after an initial interview or when otherwise permitted by law. The new law will become effective on July 12, 2011.   

Bill No. 110111-A

On March 31, 2011, the Tennessee governor signed into law SB 519, which is effective immediately. As background, under prior law unless employers specifically posted notice restricting guns from the premise, guns are permitted in most public places. However, many employers that opted to allow handguns in the workplace found themselves facing complaints filed with Tennessee's Occupational Safety and Health Administration (TOSHA). However, SB 519 specifies that permitting handguns at work does not constitute an occupational safety and health hazard for employees in the state. Tennessee employers therefore retain the right and authority to restrict handguns as they see fit, and those employers that choose to allow legally-licensed employees to carry handguns onto workplace property will be protected from possible TOSHA complaints. 

SB 519

As part of HB 224, employers cannot require, coerce, or compel anyone to undergo or submit to subcutaneous implantation of Radio Frequency Identification (RFID) tags. Employers that implant employees in violation of the provisions can be sued by employees who are implanted. Employers may also be found to be guilty of a class A misdemeanor and fined up to $10,000, plus up to $1,000 each day until the RFID tags are removed or disabled. Employers may also be imprisoned up to one year or both fined and imprisoned. The legislation is effective May 10, 2011.     

HB 224     

On March 23, 2011, the governor signed HB 354, which amends provisions of the Insurance Code by limiting the type of abortion coverage that may be offered in a health benefit plan, on the state health insurance exchange, or on a federally mandated health insurance exchange. Additionally, the bill defines the term "permitted abortion coverage". The bill is effective on Jan. 1, 2012.     

HB 354

On April 6, 2011, the Virginia General Assembly passed HB 2434, which stated their intent to create and operate at least one health benefits exchange to be known as the "Virginia Exchange". The objective of the Virginia Exchange will be to preserve and enhance competition in the health insurance market, as well as assist qualified small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market. The legislation requires that the Virginia Exchange meet the relevant requirements of PPACA. The legislation also states that no qualified health insurance plan offered through the exchange will provide coverage for abortions unless performed for very specific reasons as outlined in the legislation. The legislation also contained a provision clarifying that nothing in the act should be construed to recognize the constitutionality of PPACA. This is of specific interest because two of the federal lawsuits concerning the constitutionality of PPACA are based in Virginia. The law is effective July 1, 2011 and will expire on July 1, 2014.     

HB 2434      

On April 6, 2011, the governor signed HB 1928, which is in direct response to requirements imposed on the states under PPACA, which requires states to adopt an external review program by July 1, 2011. This legislation revises the process for independent external reviews of a health carrier's adverse decision regarding covered health care benefits. The change in the law eliminates the minimum eligibility threshold, eliminates the $50 filing fee, and expands situations when an independent external review may be requested. The law also requires insurers to incur the full cost of every review, as well as establish an internal appeals process. The law is effective July 1, 2011 and will expire on July 1, 2014.     

HB 1928     

On April 29, 2011, the governor signed both SB 1062 and HB 2467, which are identical bills. The new law requires health insurers to provide coverage for the diagnosis of autism spectrum disorder (ASD) and treatment for ASD in individuals from age two to six, subject to an annual maximum benefit of $35,000 of coverage for applied behavior analysis. The mandate does not apply to small group policies, contracts, or plans. The laws also take into account changes expected to occur as of Jan. 1, 2014 due to PPACA, and state that any benefits mandated under this state law are not required when the plan is offered through the state's health benefit exchange mandated under PPACA. The provisions of these laws are effective July 1, 2011.      

SB 1062    

HB 2467

On April 22, 2011, the Washington legislature delivered SB 5445 for the governor's signature. SB 5445 requires the state to establish a health benefit exchange no later than Jan. 1, 2014. As background, PPACA requires states to establish or join a state or regional insurance exchange by 2014. If a state fails to do so, the federal government will set up the exchange(s) in the state. An exchange will create a marketplace for buyers of health insurance, thus giving individuals choices for health coverage. The initial target population for an exchange will be people who purchase individual plans, as well as small businesses with up to 100 employees. In the future, exchanges may be expanded to larger employers. While states are at different stages of establishing exchanges, many states have begun to enact legislation to either study and evaluate and/or establish such exchanges. The passage of this legislation signals the state of Washington's intent towards implementing its own state exchange. 

SB 5445

On April 14, 2011, the Wisconsin Department of Revenue issued a notice to remind taxpayers that the new federal law relating to health care benefits for children under age 27 does not apply for Wisconsin income tax purposes unless the provisions are adopted by the Wisconsin legislature, which has not yet occurred. 

Notice   

Source: Littler Mendelsonm

On April 15, 2011, Governor Scott Walker signed SB 23 into law. The legislation pre-empts local governments such as cities, villages, and counties from enacting ordinances that would require employers to implement leave policies that deviate from the statewide standard and voids any ordinance that conflicts with the existing statewide standard, including any paid sick day legislation. The passage of SB 23 is in response to a court ruling in March, 2011, which approved Milwaukee's paid sick leave ordinance directed at large employers. Due to this legislation, the Milwaukee ordinance, which would have entitled employees to one hour of paid sick leave for every 30 hours of paid work within the city, up to 9 days annually, will not be enacted. Instead, SB 23 ensures that all jurisdictions will be uniform with the statewide standard, which requires employers with at least 50 employees to accommodate leave requests for various family and medical reasons. Qualified full-time workers are entitled to take up to six weeks of family leave and two weeks of medical leave during a 12-month period.  

SB 23

On Feb. 19, 2011, Governor Matt Mead signed SJR 0002, which amends the Wyoming Constitution to provide that each competent adult as the right to make his or her own health care decisions. The amendment also states that any person may have the ability to pay directly for health care without penalties or fines, and that the state legislature may prescribe reasonable and necessary restrictions on the right to health care access. Finally, within the constitutional amendment the state retained the right to health care access without undue governmental infringement. However, the legislation will need to be approved and ratified by a majority of the electors at the next general election in order for it to become a valid part of the Constitution. 

SJR 0002