Employee Benefits Unplugged - Straight Talk. Plain English.

Recall that the Patient Protection and Affordable Care Act (“PPACA”) – the health care reform legislation passed in 2010 – originally required that group health plans implement automatic enrollment in 2014.  The Internal Revenue Service, Department of Labor and Department of Health and Human Services have jointly issued, in the form of “Frequently Asked Questions” or “FAQs,” guidance that delays the implementation of the group health plan automatic enrollment requirement.  Employers (to whom the Fair Labor Standards Act applies and with more than 200 full-time employees) have reprieve regarding the original 2014 deadline until the DOL issues final regulations that provide automatic enrollment guidance.

The FAQs detail issues regarding the requirement for employers to provide coverage to full-time employees or be subject to a penalty assessment (the “employer shared responsibility provisions”).  The FAQs also provide guidance on how employers will determine whether employees are “full time employees” and how to use W-2 income rather than household income to determine whether coverage is “affordable coverage.”  The FAQs provide that the agencies will issue further guidance on the coordination of the employer shared responsibility provisions and the 90-day waiting period limitation (and even more specifically, the application of the waiting period limitation to part-time and seasonal employees).

This guidance provides specific examples that will assist companies in preparing for future compliance.  The agencies are accepting public comments on the guidance through April 9, 2012. 

The Affordable Care Act shifted the annual enrollment period for Medicare Part D a month to October 15th through December 7th. Prior to the change, annual enrollment began on November 15th.

CMS guidance, issued in 2009, provided that plans must provide Notices of Creditable (or Non-Creditable) Coverage at the following times:

• Prior to the Medicare annual enrollment period (which period the Affordable Care Act moved up a month earlier),
• Prior to an individual’s initial opportunity to enroll in Part D,
• Prior to the effective date of coverage for any Medicare-eligible individual that joins the plan,
• When the plan’s prescription drug coverage changes (i.e., ends, is no longer creditable or becomes creditable), and
• Upon request by an individual.

As the Medicare annual period change is effective for the 2012 Part D enrollment, which takes place in Fall 2011, plan sponsors must prepare to provide the Notice earlier this year and, of course, prior to October 15th.

Plan sponsors should determine if they must modify their Notices to reflect the Affordable Care Act change.

In our March 22nd client bulletin, we discussed the class action suit pending in the federal district court in Florida. Last week, the federal district court in Florida dismissed the class action lawsuit which alleged that an employer’s wellness program violated the Americans With Disabilities Act.  

In Bradley Seff vs. Broward County, U.S. District Judge K. Michael Moore granted summary judgment to Broward County on Monday, ruling that the wellness program falls under the safe harbor provision of the ADA and is based on insurance and risk management principles.

In 2009, Broward County implemented a wellness program.  The program required employees to take a health assessment test and produce a blood sample to determine glucose and cholesterol levels.  One year later, the county decided to apply a $20 surcharge per paycheck for individuals who did not participate in the program.

Bradley Seff, a former county employee, filed a class action complaint alleging that the county violated the ADA by requiring employees to undergo medical examinations and making medical inquiries about them.

The judge clearly disagreed with this assessment and stated, “It is clear to this court that the wellness program is not a subterfuge; it was not designed to evade the purpose of the ADA. Rather, it is a valid term of a benefits plan that falls within the ambit of the ADA's safe harbor provision.”  This ruling should relieve the anxieties of employers and wellness program vendors who were awaiting the court’s decision.  A finding that this sort of arrangement violated ADA would have had a significant impact on an employer’s ability and willingness to offer a wellness program.  

At least under ERISA and at least in some states.   

Last week, the United States Supreme Court declined to review a Third Circuit decision that ERISA § 510 (which makes it illegal to fire an employee “because he has given information or has testified or is about to testify in any inquiry or proceeding relating to [ERISA]”) did not protect an HR director’s unsolicited comments to management. Specifically, the director claimed she was fired after reporting to supervisors perceived ERISA violations (including the fiduciary breach of misrepresentation) regarding the company’s group health plan.  Shirley Edwards v. A.H. Cornell and Son, Inc., 610 F.3d 217 (3d Cir. 2010), cert. den. 2011 WL 767661 (S.Ct. 2011).

An employee suspects ERISA violations and tells her boss.  The company fires her.   Proper under ERISA?   Apparently so.

In declining to review Edwards, the Supreme Court leaves the Third Circuit aligned with the Second and Fourth Circuits in interpreting ERISA’s whistleblower protections narrowly, saying ERISA § 510 protects witnesses testifying in federal probes or other formal inquiries, not employees like the HR director who merely volunteers, of her own accord, alleged possibility of ERISA violations. In contrast, the Fifth Circuit, Ninth Circuit, and the U.S. Department of Labor interpret the provision more broadly and conclude ERISA § 510 protects these types of unsolicited comments, even if not subject to a formal outside probe or inquiry.

All this aside:  isn't it bad from a public relations viewpoint for a company to terminate someone  -- and an HR director at that (!!) -- one who, aside from perhaps internal ERISA counsel, is a great watchdog of sorts who can sniff out possible ERISA violations on behalf of plan participants?

[Mercifully, my employment lawyer colleague Robin Shea responds and rounds out this discussion in our sister blog, Employment & Labor Insider. . .]

Even though this type of firing apparently doesn't violate ERISA, it's probably still illegal under some other theory. How long do you think it would take for a good plaintiff's lawyer to come up with a claim based on these allegations? How about a wrongful discharge/public policy claim based on her internal complaints of misrepresentation?

We are getting questions from our clients about needed relief efforts in Japan and want to address a matter of critical importance:  employee insurance coverage.

Companies planning group relief efforts or permitting individual leave requests to assist with the earthquake/tsunami/nuclear reactor devastations in Japan must consider whether employees who travel outside the United States will have any issues with benefits coverage -- medical, accident, dismemberment, disability, emergency evacuation, or death.

For example, if an individual has an illness or injury sustained from overseas travel to/from/while in Japan, will the group health insurance coverage be effective?  Most policies and plans have limitations or exclusions regarding international coverage and specifically "dangerous activity."

Even if the current group coverage applies, the "out of network" provisions likely would require higher out-of-pocket payments by the employee, who may struggle with obtaining prompt reimbursement once back in the US. If the illness/injury is significant, will disability coverage apply? Similarly, in the event of death, would the existing life insurance policy cover?

Even with the urgency of the issues in Japan, companies and individuals must focus and plan accordingly. Companies should consider  additional coverage for their US ex-pat employees who will perform work in Japan. The individual should assess whether increased personal coverage is needed. We suggest a careful review of plan documents/contracts and, if necessary, written confirmation with insurers of the terms of coverage to avoid unexpected issues.

Read how the earthquake affects insurance rates overall in "Japan's Earthquake, Tsunami Will Spawn Higher U.S. Insurance Rates," for related material on the topic.