As reported in the Sept. 14, 2010 edition of Compliance Corner, Internal Revenue Service (IRS) Notice 2010-59 provides that effective Jan. 1, 2011, the cost of an over-the-counter (OTC) medicine or drug may not be reimbursed from flexible spending arrangements (FSA) or health reimbursement arrangements (HRA) unless a prescription is first obtained. This change does not affect insulin, even if purchased without a prescription, and does not affect other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

Similar rules apply to health savings accounts (HSA) and Archer medical savings accounts for medicines or drugs purchased after Dec. 31, 2010. Distributions from these accounts that do not satisfy the new (OTC) rules are considered to be for nonqualified medical expenses. These nonqualified medical reimbursements would be includible in gross income and subject to a 20 percent additional tax.

The rules governing cafeteria plans generally require plan amendments to take effect on a prospective basis. However, Notice 2010-59 provides that notwithstanding this general rule, an amendment to conform a cafeteria plan to the requirements of Notice 2010-59 may be made effective retroactively - if it is adopted no later than June 30, 2011. This will apply to expenses incurred after Dec. 31, 2010 (or after Jan. 15, 2011, as may be permitted for health FSA and HRA debit card purchases).

IRS Notice 2010-59 

Health Reform Updates 

On May 26, 2011, the Department of Health and Human Services' (HHS) Centers for Medicare & Medicaid Services (CMS) released its final rule on the Patient Protection and Affordable Care Act (PPACA) rate review provisions. The rules outline CMS' ability to review all rate increases that exceed 10 percent and require carriers to disclose and justify the rate increases publicly if CMS finds an increase to be unreasonable. The 10 percent benchmark will apply for 2011 and 2012. After that, HHS will transition to state-based benchmarks. CMS does not have the authority to regulate rate increases but the belief is that greater transparency will motivate carriers to modify future rate increases. CMS will have the ability in 2014 to exclude carriers from participating in the exchanges if the carrier has a history of excessive rate increases.

States are not required to review rates, but HHS has awarded $44 million in grants to help states improve their rate review processes. The rule will take effect on Sept. 2, 2011.

Final Rule 

The Patient Protection and Affordable Care Act (PPACA), is currently the subject of numerous legal challenges across the country, and three of those challenges are currently pending before federal appellate courts. The first federal appellate court to hear such a challenge, the U.S. Court of Appeals for the Fourth Circuit, heard oral argument for two separate cases, both originating from Virginia, on May 10, 2011. These cases were decided differently at the district court level; with one court ruling that PPACA's individual mandate was constitutional and the other ruling it is unconstitutional. The three-judge panel that heard the cases was picked at random and comprised of all Democratic appointees. In a separate challenge to PPACA originating in Michigan and now being appealed, the Sixth Circuit recently announced that the randomly selected three-judge panel for its case will consist of two Republican appointees and one Democratic appointee. The Sixth Circuit is scheduled to hear argument in the case on June 1, 2011. In still another challenge, originating in Florida and filed by more than 26 states in which the district court ruled the individual mandated to be unconstitutional; the Eleventh Circuit is scheduled to hear oral argument on June 8, 2011. The Supreme Court is ultimately expected to render an opinion on this issue. Stay tuned for additional developments.

Link to Sixth Circuit
Link to Fourth Circuit
Link to Eleventh Circuit 

The majority of programs under PPACA are funded through mandatory spending instead of discretionary spending. Discretionary programs are funded by the annual appropriations process, whereas mandatory programs cannot be defunded in a budget bill. To defund a mandatory program, the mandatory spending must be repealed. Thus, to defund implementation of PPACA, Republicans have continued to push for changes to mandatory spending. On April 13, 2011, the U.S. House of Representatives passed HR 1217, which would repeal the Prevention and Public Health Fund established by PPACA. The Prevention and Public Health Fund contains almost $18 billion in mandatory spending, including $200 million for small business wellness plan grants, and is a major component of health reform. However, this bill will not likely pass the Senate. Even if it were to obtain Senate approval, the White House released a Statement of Administration Policy on HR 1217 indicating that any attempts to eliminate funding or repeal the Prevention and Public Health Fund will be met with a veto.

In a separate measure, the U.S. House of Representatives approved HR 1213 on May 3rd to defund mandatory federal funding to states to establish health insurance exchanges under PPACA. One day later, the House passed HR 1214 to cancel mandatory PPACA funding for the construction of school-based health centers. Both measures were passed along party lines, and neither bill is expected to gain traction in the Senate.

HR 1217
HR 1213
HR 1214 

PPACA prohibits group health plans and individual policies from imposing any preexisting condition exclusions, effective for plan years beginning on or after Jan. 1, 2014. This prohibition takes effect earlier-as of plan years beginning on or after Sept. 23, 2010 (i.e., Jan. 1, 2011 for calendar-year plans) with respect to individuals enrolled in the plan who are under 19 years of age. Beginning in 2014, individuals who do not have access to affordable employer coverage will be eligible to purchase insurance (with subsidies, if they qualify) through state health insurance exchanges regardless of any pre-existing conditions. In the near term to cover individuals with pre-existing conditions who have been uninsured for six months, PPACA required and appropriated $5 billion for the creation of interim federally subsidized high-risk pools specifically designed for such individuals. The pool is known as the federal Pre-existing Condition Insurance Plan (PCIP). This national program can work with existing state high-risk pools and will end on Jan. 1, 2014, once the exchanges are operational and other pre-existing condition and guarantee issue provisions take effect. A number of states have chosen to operate the federal high risk pool themselves, while other states have opted for the U.S. Department of Health and Human Services to administer the program in their states.

To date, more than 18,000 individuals have enrolled in the PCIP, which is 47 percent more than in February 2011 and more than twice as many as in late 2010. Thus far, the enrollment figures are significantly below the five million which were expected to enroll in the PCIP. According to recent reports, Pennsylvania has the highest number of enrollees, 2,684, followed by California with 1,543 enrollees, and Texas, with 1,298 enrollees. North Dakota had the fewest number of enrollees, six.

For more information 

Federal Updates 

On May 16, 2011, the U.S. Supreme Court declined to review a Fourth Circuit appellate court ruling holding that a school district did not violate the Americans with Disabilities Act (ADA) by refusing a disabled teacher's request for reassignment to a specific, vacant position for which she was qualified and to which she requested to be transferred.

Following the surgical removal of her esophagus and a recovery period lasting several months, the teacher requested that the school district reassign her to a high school art teacher position, so she would have a "fixed classroom" to accommodate her post-surgery limitations, which included the need to take frequent bathroom breaks and to eat several small meals during working hours. Although at least two such teaching jobs were available, the district instead assigned her to a substitute teacher's role in which she had no fixed classroom. But the district said it provided her with a reasonable accommodation by assigning the teacher to classrooms that were close to bathrooms, allowing her to eat during instructional periods and excusing her from physically intensive duties.

The teacher then sued under the ADA, alleging that the school district unreasonably failed to accommodate her disability. In ruling for the school district, the federal district court held that the school was "only required to offer a reasonable accommodation, not the perfect or [the teacher's] preferred accommodation." Accordingly, the district court held that the teacher's placement as a full-time art teacher in a high school "satisfied [the district's] duty to reasonably accommodate [the teacher] regardless of her desire for a different placement." The Fourth Circuit upheld the district court ruling noting that the "ADA [does] not require that an employer provide a disabled employee with a perfect accommodation or an accommodation most preferable to the employee."

Now that the Supreme Court has declined to hear the case, the decision of the Fourth Circuit stands, meaning that this decision is legal precedent in that jurisdiction. Keep in mind that because of the variances in interpretations under the ADA, employers may be subject to different standards imposed by a court or legal precedent, depending on the exact circumstances and location of the disability claim.

Petition Denied
Fourth Circuit Opinion

On May 26, 2011, the U.S. Supreme Court upheld the Legal Arizona Workers Act, which allows Arizona to revoke the business licenses of employers that knowingly hire illegal immigrants and requires employers in the state to use E-Verify. (See U.S. Chamber of Commerce et al. v. Whiting

et al., U.S. Supreme Court case number [09-115].) As background, E-Verify is a free Web-based service offered by the Department of Homeland Security that is designed to match the Social Security number and driver's license information submitted on an employment application with the same information stored in government records. Under federal law, participation in the E-Verify system is voluntary.

The Supreme Court rejected arguments that the Arizona law was preempted by federal law, finding that Arizona's employer sanctions provisions are not expressly preempted and that the mandatory E-Verify requirement does not conflict with the federal government's employment verification plan. By upholding the law, the Supreme Court has cleared the way for 50 different state laws regarding employment eligibility verification. As such, employers need to be aware of the laws in their state when hiring new personnel.

U.S. Chamber of Commerce et al. v. Whiting 

The Internal Revenue Service (IRS) Employee Plans Compliance Unit recently initiated a questionnaire project directed at a random sample of institutes of higher education and focused on whether an organization's 403(b) plan satisfies the "universal availability" requirement. Under that rule, and with very limited exceptions, if one employee has the opportunity to defer a portion of salary under the plan, then generally all employees must be offered the same opportunity. The information gathered from the project will result in a report issued by the IRS identifying areas where additional 403(b) education, guidance, and outreach are needed. As part of the questionnaire, organizations have to answer 21 questions for the 2010 calendar year. The IRS will then either deem a plan to be compliant or request additional information from the organization. Upon review, if a problem is found the IRS will work with the organization to correct it.

Notably, similar to the 401(k) plan questionnaire project, which is in the final stages of IRS review (a report is expected out in September 2011), receipt of the questionnaire does not bar a plan sponsor from using the Voluntary Correction Program under the Employee Plans Compliance Resolution System (EPCRS) to correct certain errors. That said, the current version of EPCRS, outlined in Revenue Procedure 2008-50, does not provide as many corrections for 403(b) plans as are available to other types of plans - mainly because Revenue Procedure 2008-50 was written before 403(b) plans were required to be set forth in writing. The IRS is expected to release an updated version of EPCRS for 403(b) corrections later this year.

Source: Littler Mendelson

In Solis v. Food Employers Labor Relations Ass'n, 2011 WL 1663597 (4th Cir. 2011), the Fourth Circuit affirmed a federal district court ruling, which recognized a fiduciary exception to the attorney-client privilege in a case where the Department of Labor (DOL) investigated two multiemployer plans. The investigation, which related to the management of plan funds, was initiated by multi-million-dollar losses resulting from investments in Madoff-related entities. In response to a DOL subpoena for certain documents, the plans withheld some items based on the attorney-client privilege. When the DOL sued to enforce the subpoena, the federal district court ordered the documents produced, finding that the privilege did not apply in the circumstance.

The Fourth Circuit agreed with the lower court, holding that the attorney-client privilege does not extend to communications between an ERISA fiduciary and a plan attorney regarding matters of plan administration. The court based its ruling, in part, on the reasoning that "the fiduciary exception is based on the rationale that the benefit of any legal advice obtained by a trustee regarding matters of trust administration runs to the beneficiaries [therefore]...trustees...cannot subordinate the fiduciary obligations owed to the beneficiaries to their own private interests under the guise of attorney-client privilege." Following precedent in other jurisdictions, the court did note that the fiduciary exception does have limits and would not apply, for instance, to communications between ERISA fiduciaries and plan attorneys regarding non-fiduciary matters, such as adopting, amending, or terminating an ERISA plan.

Plan sponsors should keep in mind that application of the fiduciary exception to any particular legal communication will vary based on the facts and circumstances of the particular case, and may be more complicated in the context of plans maintained by single employers. Therefore, plan sponsors wishing to invoke the attorney-client privilege in connection with their ERISA plans should remain alert to the legal precedent and complexity existing in this area.

CMS has posted on its website revised model disclosure notices that are to be provided to Medicare Part D eligible individuals after April 1, 2011. The revisions reflect the change in the Medicare Part D annual coordinated election period from its prior timeframe (Nov. 15 to Dec. 31) to its new timeframe (Oct. 15 to Dec. 7). The change applies beginning with plan year 2012 (i.e., beginning with the 2011 election period). Employers using the model disclosure notices will need to replace them with the revised versions. Employers that use a customized version of the notices should make sure their versions are consistent with the revised model notices. There is no requirement that notices be provided in any language other than English; however Spanish versions of the model notices are available.

Revenue Procedure 2011-32 sets forth the 2012 inflation adjusted deduction limitations for annual contributions made to an HSA. For 2012, the annual limitation on HSA deductions for an individual with self-only coverage under a high deductible health plan (HDHP) is $3,100 and with family coverage under a HDHP is $6,250. This represents an increase from $3,050 and $6,150 respectively. The HSA contribution limits apply to the individual HSA account holder on the basis of his or her taxable year, which for almost everyone, is the calendar year.

For 2012, an HDHP must have an annual deductible that is not less than $1,200 (no change from 2011) for self-only coverage or $2,400 (no change from 2011) for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,050 for self-only coverage or $12,100 for family coverage. As a reminder, an individual may take an above-the-line deduction for contributions made to the individual's HSA (i.e., the amounts will reduce the individual's adjusted gross income).

Revenue Procedure 2011-32  

CMS has revised its Mandatory Reporting User Guide published due to the enactment of Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) at the end of 2007. The revisions were needed to clarify certain provisions, make some technical changes, incorporate previously announced revisions, and describe a few new procedures. As a reminder, the Guide outlines the requirements of "responsible reporting entities" (RREs) to report to CMS about whether group health plans (GHP) are (or have been) primary to Medicare. Some of the revisions are outlined below:

• HRAs. The instructions have been revised to state that amounts carried over from previous years must be included when determining whether the current year's annual benefit value is less than $1,000 for purposes of the HRA reporting exemption. Also, termination dates should not be submitted simply because the annual benefit value of an HRA drops below the $1,000 threshold or is exhausted.
• 30-Day Exception Eliminated. A provision was deleted that prohibited the posting of "MSP occurrences" (i.e., periods in which GHP coverage is primary to Medicare) when the period lasted less than 30 days. As a result, RREs must submit coverage information and termination dates for periods of less than 30 days.
• Annual Confirmations by RREs. Beginning in 2012, the authorized representatives of RREs will receive annual profile reports by email that will need to be reviewed, signed, and returned within 30 days, or the RRE's reporting ID may be deactivated.
• TIN Reference Response File. Beginning Oct.1, 2011, CMS will implement a new procedure for validating taxpayer identification numbers (TINs) and addresses.
• Alerts. The Guide notes that additional information about the reporting process will be provided in the form of alerts, which will be posted on the CMS web site and incorporated into the Guide when it is reissued. Alerts published subsequent to the latest Guide must be consulted to get a complete picture of the reporting requirements.

MMSEA Section 111 Mandatory Reporting Group Health Plan User Guide, Version 3.2

A draft of new Form 8955-SSA is now available. As mentioned in the March 3, 2011, edition of Compliance Corner, IRS Announcement 2011-21 provided details on the new Form 8955-SSA to be used to report participants with deferred vested benefits from an employer-sponsored retirement plan. The draft Form 8955-SSA is subject to change and requires approval from the Office of Management and Budget before it is officially released. If you have any comments on this draft form, you can submit them to the IRS on their web site. Include the word "DRAFT" in your response. Submit your comments within 30 days from the date the draft was posted. As a reminder, for calendar year plans, the 2009 8955-SSA due date (without extension) will generally be Aug. 1, 2011. This annual filing replaces the former Form 5500 Schedule SSA, which was removed from Form 5500 electronic reporting because such reports were available for the public to view and the Schedule SSA contained information on individuals, including their social security numbers. Thus, plan sponsors filed their 2009 Form 5500 without the Schedule SSA and have been waiting for further guidance with regards to the 8955-SSA.  

IRS Announcement 2011-21
Draft Form 8955-SSA (2009)
Form 8955-SSA 2-D Barcode Standards
FAQs regarding Form 8955-SSA 

State Updates 

On April 25, 2011, the governor signed into law SB 1357. The new law provides that physicians or primary care practitioners that provide medical services may charge a $25 missed-appointment fee to patients who miss a scheduled appointment. The new law relates to the Arizona Health Care Cost Containment System, and is effective immediately.

SB 1357

On May 17, 2011, Delaware Gov. Jack Markell signed HB 28. The new law enables health insurance carriers to make "stop-loss" insurance coverage available to employers with more than 15 employees. The bill was passed because the issuance of stop-loss coverage to small employers - defined as having no more than 50 employees - was set to be prohibited as of July 1, 2011. The new law will limit that prohibition to employers with only 15 or fewer employees.

HB 28   

Source: Littler Mendelson

On May 11, 2011, Governor Jack Markell signed Delaware's civil union bill, SB 30, into law. Effective Jan. 1, 2012, the state of Delaware will recognize the legal relationship of a civil union between two persons of the same-sex validly formed in jurisdictions outside of Delaware as well as within the state of Delaware. Under the law, same-sex couples will be provided certain legal protections and benefits previously only available to opposite-sex couples, including all of the same rights, benefits, protections and responsibilities as married persons under Delaware law. Importantly, the law does not change federal law, which restricts marriage benefits to opposite-sex couples. The law also does not revise the definition of marriage or eligibility requirements for marriage.

SB 30 clearly states that a party to a civil union is included in any definition or use of the terms "dependent", "family", "husband and wife", and "spouse", among others as those terms are used throughout the laws of the state. Therefore, as a result of this legislation, private employers that offer fully insured group insurance coverage may be required to offer the same benefits to the partners of employees who have entered into civil unions as are offered to spouses of employees in opposite sex marriages. We will watch for guidance from the Delaware Insurance Department on whether they interpret the civil union law in this manner.

In contrast, an employer that provides insurance through a self funded plan will not be affected by the civil union law in this way. This is because self funded plans are governed by the federal ERISA, and are not regulated by the state. Employers with self funded plans should be aware, however, that certain provisions of the new law may extend to self funded employers in other employment matters (i.e., leave laws, bereavement policies, or other employment policies that benefit married employees).

Employers should anticipate a rise in requests for civil union partner benefits, particularly with respect to health plans. Prior to Jan. 1, 2012, employers should review their current benefit plans and policies, watch for guidance from the Delaware Insurance Department, and then determine what actions, if any, need to be taken to comply with the law. We anticipate that guidance regarding civil unions and employee benefit plans will continue to evolve, and we will keep you posted on any new developments in this area.

SB 30

On May 25, 2011, the Illinois Insurance Department published a bulletin directed toward consumers with general information and guidance about the Religious Freedom Protection and Civil Union Act, Public Act 96-1513, effective June 1, 2011. Separately, the department issued Company Bulletin 2011-06 to all insurers on May 26, 2011, which provides guidance for Illinois-licensed insurance companies regarding compliance with this Act.

The issuance of these two bulletins provides much needed clarification regarding whether health insurance policies issued in Illinois must provide coverage for civil union couples and their families that is identical to the coverage offered to married couples and their families. Additionally, rates for two-person (spousal) coverage or family coverage must not differ based on whether the family consists of married or civil union spouses.

The guidance confirms that Illinois policies must permit coverage to be added for a civil union spouse during the plan's annual open enrollment period or during a 30-day "special enrollment period" after the civil union becomes effective or the civil union spouse loses other coverage. Employers must offer this 30-day special enrollment period beginning on June 1, 2011 for those who have entered into a civil union in another state before June 1, 2011.

Finally, the bulletin provides clarification regarding the taxability of coverage, for a civil union spouse, purchased through an employer-sponsored plan. The bulletin confirms that coverage will generally be taxable for federal purposes and will result in "imputed income" that is equal to the excess of the fair market value of the coverage provided to the civil union spouse over the amount paid by the employee for coverage, subject to both federal income and payroll taxes.

Consumer Bulletin 5-25-11
Company Bulletin 2011-06 for Insurers

On April 28, 2011, the Iowa governor signed HF 597, which creates new procedures for external review of health care coverage decisions by health carriers under Iowa state law. The legislation also includes transition and applicability provisions, as well as model language to be used in the event of a final adverse determination by a health carrier. This legislation is in response to state mandated requirements under PPACA, including the requirement for a state to adopt an external review program by July 1, 2011.

HF 597

On April 29, 2011, the Commissioner of Insurance issued Bulletin 2011-3, which provides a summary of bills adopted by the 2011 Kentucky General Assembly during the Regular Session, and its individual affect on Kentucky's insurance statutes. Of particular interest are:

• SB 112- Prohibition on Copayment and Coinsurance for Occupational and Physical Therapy
• SB 114- Health Benefit Plan Wellness Programs
• HB 255- Health Insurance Tax Exclusion for Insurance Premiums Deductible Pursuant to PPACA

On May 16, 2011, Maine enacted a significant health care reform bill (LD 1333) that will open up Maine's insurance market to neighboring states. Under the new law, beginning in 2014 Maine residents and businesses will be allowed to purchase insurance from companies in other New England states (with the exception of Vermont) and small businesses will be able to band together to purchase insurance. While insurance companies will no longer be able to deny coverage based on pre-existing conditions, insurance companies will be aided by the creation of a "high-risk pool," which will cover Maine residents who use more health services. That program will be paid for with a $4 per month policyholder fee. The law also contains other provisions aimed at reform, such as a tax credit for small businesses to offer workplace wellness programs.

LD 1333 

Source: Littler Mendelson

On May 10, 2011, the governor signed into law HB 763. The new law relates to the electronic delivery of certain notices by an insurer to an applicant, an insured or a policyholder. Specifically, the new law relates to insurance policy cancellations, non-renewals, premium increases and reduction of coverage. The new law establishes certain requirements, procedures and conditions for the delivery of such notices by electronic means.

Under HB 763 an insurer may deliver such notices by electronic means if the applicant, insured or policyholder (the party) has affirmatively consented to such electronic delivery and, before giving consent, is provided with a statement informing the party that they have the right to receive a paper copy of the notice and to withdraw their consent at any time without any penalties. Further, the party must be provided with the hardware and software requirements needed for access to the electronic notice, and the party must demonstrate that they can access information in the electronic form. HB 763 is effective Oct. 1, 2011.

HB 763

On April 11, 2011, the governor signed legislation, Chapter 9 of the 2011 Acts, amending the Massachusetts personal income tax to adopt the current exclusions from gross income for employer-provided benefits, including the exclusion provided for adult dependent coverage under the PPACA. The legislation is effective for tax years beginning on or after Jan. 1, 2010. As a result of the legislation, Massachusetts tax law now conforms to the federal tax law as it relates to adult dependent coverage. Thus, for Massachusetts personal income tax purposes, the fair market value of employer-provided coverage for dependents through the end of the year in which the dependent turns age 26 is not included in the gross income of the employee.

In connection with the new legislation, on May 26, 2011, the Massachusetts Department of Revenue released Working Draft TIR 11-XX, which is a Technical Information Release explaining the new legislation. Although a draft release, TIR 11-XX provides an explanation of the new legislation as it relates to federal law.

2011 Acts, Chapter 9 (see section 7)
TIR 11-XX

On May 17, 2011, the Mississippi Insurance Department issued Bulletin 2011-6. The bulletin is directed towards all licensed insurers offering dental insurance, and is meant to remind those offering dental insurance in Mississippi of the various laws relating to dental services. The bulletin specifically mentions Mississippi laws relating to the freedom of choice of dental practitioners, a dentist's right to participate in a network, X-ray requirements, in- and out-of-network provider payments, prompt pay laws, fees for non-covered services, and the legal relationship between a dentist and a patient.

Bulletin 2011-6

On May 18, 2011, the governor signed into law LB22. Under the new law, Nebraska will opt out from allowing health insurance plans that cover abortions to participate in the Nebraska health insurance exchanges. Nebraska also prohibits group health insurance plans or health maintenance agreements paid for with public funds from covering abortion unless necessary to prevent the death of the woman. As background, section 1303 of the PPACA provides that each state may pass laws prohibiting qualified health insurance plans offered through that state's health insurance exchange from offering abortion coverage. Section 1303 also allows a state to prohibit the use of public funds to subsidize health insurance plans that cover abortions within that state.

LB 22 also prohibits private health insurance sold in Nebraska from providing coverage for an elective abortion, except through an optional rider that is paid for solely by the insured. According to LB 22, an "elective abortion" means an abortion: (a) other than a spontaneous abortion; or (b) that is performed for any reason other than to prevent the death of the female upon whom the abortion is performed. LB 22 is effective Jan. 1, 2012. Idaho, Kentucky, Missouri, North Dakota and Oklahoma also ban private insurance companies from providing abortion coverage unless the payer has a separate insurance rider for abortion.

LB 22

On May 24, 2011, the governor signed into law AB 211 prohibiting discrimination in employment on the basis of sexual orientation or gender identity or expression. According to the new law, "gender identity or expression" means a gender-related identity, appearance, expression or behavior of a person, regardless of the person's assigned sex at birth. "Sexual orientation" means having or being perceived as having an orientation for heterosexuality, homosexuality or bisexuality. According to the new law, employers may not base hiring, compensation, termination or other employment-related decisions on the basis of gender identity or sexual orientation. In addition, individuals who have been discriminated against based on gender identity or sexual orientation have the same rights and protections afforded those discriminated against based on other protected classes, such as race, religion, age, disability, color, or national origin or ancestry. AB 211 is effective Oct. 1, 2011.

AB 211

On April 29, 2011, the North Carolina Department of Insurance issued Bulletin 11-B-06 concerning the establishment of the Long-term Care Partnership Program. The program became operationally available for marketing on March 7, 2011, but insurance carriers have been awaiting further guidance detailing the requirements to certify a policy under the Partnership Program. This bulletin suffices as such guidance, and includes the parameters for policy requirements.

Bulletin 11-B-06

On April 26, 2011, the governor signed SB 2138, which addresses the payment of accrued paid time off to employees who quit on fewer than 5 days' notice. If an employee voluntarily terminates employment with a private employer in North Dakota, the employer may withhold payment of accrued paid time off if:

• At the time of hiring, the employer provided the employee with written notice of this limitation on accrued paid time off;
• The employee was employed by the employer for less than 1 year; and
• The employee gave the employer fewer than 5 days' written or verbal notice.

The previous statute required employers to pay employees, whether terminated voluntarily or involuntarily, all unpaid wages by the next payday. The change in the law is effective Aug. 1, 2011.

SB 2138

On May 26, 2011, H 202 was signed into law by Gov. Peter Shumlin. The new law lays out three tasks: efforts to control health care costs, creation of a health insurance exchange, and establishment of a single-payer system. Some opponents consider the law's single-payer system to not go far enough because certain private insurers will be able to continue to operate in the state indefinitely. Vermont employers will be able to self-insure, but must share in the cost of the Green Mountain Care system through taxation or other means. The law creates a new health care board (Green Mountain Board) with the ability to control the rate of growth in both health insurance premiums and health care provider payments. The new board will be appointed by the governor, confirmed by the Senate, and in place by October, 2011.

The state will seek a waiver from PPACA requirements, which currently are not available until 2017 (U.S. SB 248 has been introduced, which will make waivers available in 2014). If Vermont receives a waiver, the health insurance exchange will be converted into the Green Mountain Care system. The law requires insurers to utilize the same pricing structure within the exchange and outside it. The exchange must be operational for small groups and individuals by Nov. 1, 2013. Green Mountain Care will be available to all Vermont residents, as defined in the law. An exploratory committee is being formed to determine how to fund Green Mountain Care and the committee is required to submit its proposal by January 2013. As with the signing of PPACA, there are few details available at this time. We will watch for information on the law's implementation.

H 202
 

On May 6, 2011, the Vermont legislature passed H 436, a large tax bill that included a provision to conform Vermont tax law to federal law. This development makes Vermont the latest state to conform the state's tax rules to federal law for purposes of adult child health coverage. Although employer-sponsored coverage provided to adult children is excludable from income for federal income tax purposes under the PPACA, a state's income tax does not necessarily follow the same rule. As a result of this legislative change, employers will be able to offer coverage to employees' adult children up to age 26 without employees being taxed by the state on the coverage.

H 436

On April 29, 2011, the governor signed into law HB 1958. The new law brings certain conflicting requirements of Virginia's health insurance laws into conformance with corresponding provisions of the PPACA. Among others, the areas where Virginia now conforms to federal law include: (1) requirements that employers offering dependent coverage provide coverage for dependents of employees until they reach age 26; (2) limits on the ability of insurers to impose annual and lifetime dollar limits on essential benefits; (3) limits on rescission of health insurance policies except in cases of fraud or misrepresentation; (4) requirements that non-grandfathered plans cover preventive services without out-of-pocket cost-sharing for the insured; and (5) prohibitions on non-grandfathered plans imposing pre-existing condition exclusions on enrollees who are under 19 years of age. The new law is effective July 1, 2011, and is set to expire on July 1, 2014.

HB 1958  Source: Littler Mendelson   

On April 29, 2011, the Virginia governor signed into law HB 1958. The new law brings inconsistent and conflicting requirements of Virginia's health insurance laws into conformance with corresponding provisions of PPACA that became effective on Sep. 23, 2010. The PPACA provisions that are implemented into Virginia law under HB 1958 include, among others, the adult dependent coverage mandate, the limits on rescission of health insurance policies, and the prohibitions on lifetime and annual essential benefit limit, preventive care cost-sharing, and pre-existing condition exclusions for children under age 19. HB 1958 is effectively immediately and will expire on July 1, 2014.

HB 1958
 

On April 29, 2011, the governor signed into law SB 1062. The new law requires health insurers, health care subscription plans, and HMOs to provide coverage for the diagnosis of autism spectrum disorder (ASD) and treatment for ASD in individuals from age two to six. Treatment for ASD includes applied behavioral analysis when provided or supervised by a board-certified behavior analysis and the prescribing practitioner is independent of the provider of the applied behavior analysis. The law does not apply to individual or small group policies, contracts, or plans. SB 1062 is effective July 1, 2011.

SB 1062

On April 20, 2011, the governor signed into law HB 1432. Under the new law, private employers in Washington are covered by the military status discrimination prohibitions concerning veterans' preference. This means that such employers can give preference for employment to honorably discharged soldiers, sailors and marines who are veterans of U.S. wars or U.S. military campaigns for which campaign ribbons are awarded, as well as their widows or widowers. Employers may also give preference for employment to spouses of honorably discharged veterans who have a permanent, total service-connected disability. HB 1432 is effective July 22, 2011.

HB 1432
 

On May 3, 2011, the governor signed into law HB 1454. The law permits certain categories of workers who are at risk of exposure to human immunodeficiency virus (HIV) to request that a person be tested for blood-borne pathogens at the same time HIV testing is ordered. Specifically, law enforcement officers, firefighters, health care providers and staff that are considered at risk of substantial exposure to HIV, upon a substantial exposure to another person's bodily fluids in the course of their employment, may request a state or local health official to order testing for HIV upon the person to whose bodily fluids they were exposed. If the state or local official refuses, then the at-risk employee may petition the superior court for a hearing as to whether testing should be ordered.

The new law provides that testing for other blood-borne pathogens may be performed at the same time HIV testing is performed, if so requested by the at-risk employee. While Washington state privacy laws generally protect unauthorized use or disclosure of the results of the HIV test or the identities of the individuals involved, the new law provides that certain individuals may receive such information, including claims management personnel employed by or associated with an insurer, HMO, or self funded health plan. Employers of at-risk employees and employers that sponsor self funded plans should be aware of the new law.

Frequently Asked Questions 

No, there is no waiver from all of health care reform. Employers may be thinking of the term "grandfathered plans," which is referring to plans in existence on March 23, 2010, which have made minimal changes, defined under regulations, and are therefore exempt from some, but not all, of health care reform's mandates.

More abundant in the news, however, have been references to the "annual limit waivers" which have been granted to many prominent restaurant chains and labor unions. The annual limit waiver was brought about due to the fact that health care reform first restricts, and then later prohibits (in 2014), annual dollar limits on the value of "essential health benefits." Until 2014, restricted annual limits on essential health benefits are permissible under a three-year phased approach.

• $750,000 for plan years beginning on or after Sept. 23, 2010 but before Sept. 23, 2011
• $1.25 million for plan years beginning on or after Sept. 23, 2011 but before Sept. 23, 2012
• $2 million for plan years beginning on or after Sept. 23, 2012 and Jan. 1, 2014.

For plans issued or renewed beginning Jan. 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited.

A class of group health plans and health insurance coverage, generally known as "limited benefit" plans or "mini-med" plans, often has annual limits well below the restricted annual limits set out in the interim final regulations. Because this is often the only type of private insurance available to some workers, HHS issued temporary waivers to exempt these types of plans from the higher annual limits. These "annual limit waivers" only last for one year and are only available if the plan certifies that the waiver is necessary to prevent either a significant increase in premiums or decrease in access to coverage. Additionally, there is a notice requirement that applies to health plans that receive waivers that discloses that the plan's health care coverage is subject to an annual dollar limit lower than what is required under the law.

Employees who drop their own coverage or a dependent's coverage at open enrollment are generally not eligible for COBRA as cancelling plan coverage is not one of the seven possible COBRA triggering events. Such an employee or dependent could be eligible for COBRA if the open enrollment happened to coincide with a COBRA triggering event. However, in that case, the employee or dependent would need to timely notify the employer as designated by the COBRA Initial Notice of the triggering event to ensure protection of COBRA rights.

COBRA specifies seven triggering events that can be qualifying events if they result in a loss of coverage:

1. Voluntary or involuntary termination of the covered employee's employment other than by reason of gross misconduct;
2. Reduction of hours of the covered employee's employment;
3. Divorce or legal separation of the covered employee from the employee's spouse;
4. Death of the covered employee;
5. A dependent child ceases to be a dependent under the generally applicable requirements of the plan;
6. A covered employee becomes entitled to benefits under Medicare; and
7. An employer's bankruptcy, but only with respect to health coverage for retirees and their families.

Dropping one's own coverage or dropping a dependent during open enrollment is not one of seven possible COBRA triggering events. Thus, a cancellation of coverage at the employee's request during open enrollment will not in itself trigger COBRA.

Please note that there may be exceptions to this rule when coverage was dropped during open enrollment in anticipation of a divorce. Additionally, the terms of any applicable qualified medical child support orders should be consulted prior to dependents being dropped during open enrollment.