State Regulations and Federally Mandated Benefits

State regulators have exclusive authority to audit self-funded plan reserves and require corrective action

The course lists four reasons: (1) self-funders design plans as insured clones and want to know what is preempted, (2) ERISA preemption is not global, (3) the role of the state is constantly changing, and (4) some plans like MEWAs operate as fully insured by statutory edict. State regulators having exclusive audit authority over self-funded plan reserves is not stated.

Some courts have held ERISA preempts state privacy laws applied to ERISA-covered plans, while other courts have reached the opposite conclusion, requiring case-by-case analysis

The course states that many states have recently adopted data breach notification laws. Some courts have held that ERISA preempts state privacy laws when they apply to ERISA-covered plans, while other courts have reached the opposite conclusion. The course advises that each state law should be examined to determine whether it is likely preempted.

By licensing (the state where the insurer does business requires compliance with its group requirements) and by state of delivery (requiring certificates issued to residents meet minimum coverage of their state)

The course explains that extraterritorial application of group requirements occurs in two ways: (1) By Licensing — a state may require an insurer to meet all of its group requirements as a condition to retaining the insurer's license to do business in that state; and (2) By State of Delivery — a state may require that certificates issued to its residents meet its minimum coverage requirements, even though the master contract was delivered in another state.

Many states are now administering their mandated benefits laws extraterritorially, and special-interest groups are pushing for all mandated benefits laws to be applied extraterritorially

The course notes that because of uncertain law, state regulators historically tended not to require certificates delivered in their states to provide their state's mandated benefits when the master contract was delivered elsewhere. However, the current trend is that many states are now administering their mandated benefits laws extraterritorially, and special-interest groups seeking mandated benefits are attempting to have all mandated benefits laws administered extraterritorially.

It is wise to have access to the impact of state regulations in case the plan fails the ERISA-exemption test

The course specifically states that confusion about what constitutes a self-funded plan and when an ERISA exception (church and state plans) applies continues to be a problem. In cases where plan leaders are not 100% certain the plan is ERISA-exempt, it is wise to have access to the impact of state regulations in case the plan fails the ERISA-exemption test.

MO-92 (Stop Loss Insurance Model Act), because many TPA clients purchase stop-loss insurance and the TPA must understand the legal rules to properly structure the plan and advise customers

The course identifies MO-92 (Stop Loss Insurance Model Act) as establishing criteria for the issuance of stop-loss insurance policies. It is specifically flagged as important for TPAs because many TPA clients purchase stop-loss insurance, and the exact terms such as attachment points, minimum employer size, and scope of coverage are dictated by state law. A TPA must understand these rules to properly structure the plan and advise its customers.

MO-120 (Coordination of Benefits Model Regulation), because courts sometimes look to it to resolve disputes between self-funded and fully insured plans about which plan pays first

The course identifies MO-120 (Coordination of Benefits Model Regulation) as establishing a uniform order of benefit determination, reducing duplication of benefits, and providing greater efficiency in claims processing when a person is covered under more than one plan. The HCAA comment notes that courts sometimes look to this model regulation to help resolve disputes between self-funded and fully insured plans about which plan must pay first.

TPAs may be asked to administer a plan involving unrelated employers, which raises the concern that the arrangement could be an unapproved MEWA that is illegal under state law

The course explains that MO-220 (Prevention of Illegal Multiple Employer Welfare Arrangements and Other Illegal Health Insurers Model Regulation) establishes specific standards for persons and licensees who become aware of or are asked to assist illegal MEWA operations. The HCAA comment specifically notes that TPAs will sometimes be asked to administer a plan involving unrelated employers, which raises a concern about whether such an arrangement is a MEWA, and an unapproved MEWA can be illegal under state law.

MO-75 (Health Carrier External Review Model Act) and MO-76 (Uniform Health Carrier External Review Model Act)

The course identifies both MO-75 (Health Carrier External Review Model Act) and MO-76 (Uniform Health Carrier External Review Model Act) as important for TPAs. Both HCAA comments note that under the ACA, external review is required for many non-grandfathered health plans, including self-funded plans, making these laws important for TPAs.

To make clear that life and health insurers cannot classify individuals without a rational basis for each decision

The course describes MO-887 as identifying specific acts or practices in life and health insurance that are prohibited by the NAIC Unfair Trade Practices Act (MDL-880). Its main purpose is to make clear that life and health insurers cannot classify individuals without a rational basis for each decision. This does not prohibit all classification — it requires a rational basis.

MO-10 (Health Insurance Reserves Model Regulation)

The course identifies MO-10 (Health Insurance Reserves Model Regulation) as the model that implements the NAIC Standard Valuation Law (MDL-820), defines categories of reserves, and sets forth the minimum claim, premium, and contract reserve requirements. The regulation also provides for gross premium valuation to evaluate adequacy of reserves. The HCAA comment notes this is primarily for insurance companies, not TPAs.

All three provide a mechanism for small employers to join together solely for the purpose of procuring health insurance as an exception to false group or fictitious group laws, and the course says they are primarily for health insurance issuers, not TPAs

The course describes MO-78 (Single Health Care Voluntary Purchasing Alliance Model Act), MO-80 (Regional Health Care Voluntary Purchasing Alliance Model Act), and MO-82 (Private Health Care Voluntary Purchasing Alliance Model Act) as all sharing the purpose of improving fairness, efficiency, and competition in healthcare coverage for employers with no more than a specified number of employees. Each provides a mechanism for small employers to join together solely for procuring health insurance and operates as an exception to existing false group or fictitious group laws. All three are classified as primarily for health insurance issuers, not TPAs.

The conflict that occurs when the carrier responsible for providing benefits also has discretionary authority to decide what benefits are due

The course describes MO-42 as helping ensure that health insurance benefits and disability-income protection coverage are contractually guaranteed and helping avoid the conflict of interest that occurs when the carrier responsible for providing benefits has discretionary authority to decide what benefits are due.

That pregnancy and childbirth be treated as any other illness

The course states that the Pregnancy Discrimination Act of 1978 requires that pregnancy and childbirth be treated as any other illness. This is listed among the chronological federal statutes impacting self-funded group health plans.

12 months (Omnibus Budget Reconciliation Act of 1981), then 18 months (Omnibus Budget Reconciliation Act of 1990), then 30 months (Balanced Budget Act of 1997)

The course describes the ESRD coordination period progression: the Omnibus Budget Reconciliation Act of 1981 established the employer health plan as primary to Medicare for the first 12 months after ESRD onset; the Omnibus Budget Reconciliation Act of 1990 extended this from 12 to 18 months and redefined the coordination period; and the Balanced Budget Act of 1997 extended it further to 30 months.

Introduced COBRA continuation, removed the age 70 cap in applying Medicare secondary rules, and made Medicare the secondary payer for disabled active individuals under large group plans

The course states that the Consolidated Omnibus Budget Reconciliation Act of 1985 (1) introduced COBRA continuation, (2) removed the age 70 cap in applying Medicare secondary rules, and (3) made Medicare the secondary payer for disabled active individuals under large group plans.

Employers with at least 20 employees had to offer covered persons ages 65-70 the same benefits as younger workers, and such older covered persons would be secondary to Medicare

The course states that the Tax Equity and Fiscal Responsibility Act of 1982 required that employers with at least 20 employees offer covered persons (ages 65-70) the same benefits as to younger workers. Such older covered persons would be secondary to Medicare.

It eliminated the requirement that employers distribute summary plan descriptions and summaries of materials to employees, and required the federal government to issue rules to expand paperless administration of benefits

The course states that the Taxpayer Relief Act of 1997 amended ERISA to eliminate the requirement that employers distribute summary plan descriptions and summaries of materials to employees (i.e., potential plan beneficiaries). Also, the federal government must issue rules to expand paperless administration of benefits.

Final regulations establishing minimum network adequacy standards for all group health plans

The course lists these significant HIPAA regulations: final rules for administration and enforcement including claims procedures; healthcare integrity and protection data bank to combat fraud and abuse; final rules for health insurance portability and renewability; interim regulations for state and local government plans; interim final rules for nondiscrimination in health coverage in the group market; and electronic data interchange standards. Minimum network adequacy standards are not listed.

It was renamed the Mental Health Parity and Addiction Equity Act (MHPAEA), which expanded mental health parity requirements and required parity with respect to substance use disorder benefits

The course states that the Mental Health Parity Act of 1996 said special annual and lifetime maximums could not be applied exclusively to mental health conditions. It was expanded in a later modification and renamed the Mental Health Parity and Addiction Equity Act (MHPAEA). The modification expanded the mental health parity requirements and required parity with respect to substance use disorder benefits.

They may classify and underwrite according to state laws or provide benefit plans with risk classifications, but only as long as these practices are not used to circumvent the purposes of the ADA

The course states that the ADA specifically permits insurance providers (including employers as self-funders) to classify and underwrite according to state laws or to provide benefit plans with risk classifications. These important caveats are available only as long as they are not used to circumvent the purposes of the act.

A scheme, a plan, stratagem, or artifice of evasion

The course states that in the relevant Supreme Court decisions, the Court took the word subterfuge at its dictionary meaning, which the justices believed meant a scheme, a plan, stratagem, or artifice of evasion. The course also notes that a plan is not shielded from ADA merely because the plan or its rules were in place prior to the passage of the act.

Limiting exclusionary amendments are acceptable if there is a provable economic necessity, and offering full coverage at contributory surcharges to the handicapped/disabled would be acceptable if there is an actuarial basis

The course states two conclusions that may reasonably be reached from case law: (1) limiting exclusionary amendments are acceptable if there is a provable economic necessity, and (2) offering full coverage but at contributory surcharges to the handicapped/disabled would be acceptable if there is an actuarial basis. However, the course cautions these conclusions are by no means assured and some observers believe any scheme of risk-classifying disabled participants is necessarily a subterfuge to ADA.

The insurer attempted, without success, to block the Native American's discrimination claim by citing the McCarran-Ferguson Act

The course describes a case where an insurer rated up a Native American for automobile coverage solely because of his race. The aggrieved sought relief in federal court, and the insurer attempted, without success, to block the Native American's claim to discrimination by citing the McCarran-Ferguson Act.

In both cases, the courts held that the aggrieved person's complaint could be heard in federal court, McCarran-Ferguson Act notwithstanding

The course describes two cases: in one, a female sought relief when a plan used a sex-differentiated annuity table giving her fewer benefits, and the court held her complaint could be heard in federal court, McCarran-Ferguson Act notwithstanding. A similar decision was reached with comparable logic where the practice at issue was a life expectancy table rather than an annuity table.

When the plan can demonstrate the employee was not singled out, surcharges have actuarial and underwriting justification, are nondiscriminatory as to all covered persons, serve explainable business purposes, and involve no age, sex, or race discrimination

The course presents a scenario where Employee A, who is disabled, argues that a surcharge for habits or physical conditions is a subterfuge. The course states A's complaint should not prevail, assuming the plan demonstrates: (1) actuarial and underwriting justification for the surcharge, (2) surcharges were nondiscriminatory as regards all covered persons, (3) explainable business purposes for the plan's substandard surcharges, and (4) no age, sex, race, etc., discrimination.

The court reasoned that economic necessity was the motivating reason behind the exclusionary amendment

The course states that the court held it acceptable to rider out hospital mental health care from group plans, even though it obviously discriminated against the disabled. The court reasoned that economic necessity was the motivating reason behind the exclusionary amendment.

They are nothing more than rights as general creditors, and generally do not receive any priority with the rights of the preferred creditors

The course states that when a self-funding employer becomes bankrupt, rights of participants to unpaid benefits are nothing more than rights as general creditors. It is generally the case that such rights do not receive any priority with the rights of the preferred creditors.

The bankruptcy code defines 'corporation' to include a business trust, but courts have generally established that an employee benefit trust is not a business trust, so no bankruptcy relief is available

The course explains that the bankruptcy laws are sufficiently broad to permit persons (individuals, partnerships, corporations) to file. Corporation is defined to include a business trust. However, it has been generally established by court decisions covering bankruptcy that an employee benefit trust is not a business trust. Therefore, no bankruptcy relief is possible for a bankrupt MEWA, for example.

They are below workers' wages in priority but above other priority claims of some creditors

The course states that unsecured claims to an employee benefit plan are below workers' wages in priority but above other priority claims of some creditors. The bankruptcy code limits the amount of prioritized claims to those incurred within the last six months and not in excess of $2,000 per participant.

Retiree life, health, and disability benefits are required to be paid as administrative expenses during bankruptcy proceedings, and trustees may deem group-invoiced premiums to be necessary business expenses paid as general operating expenses

The course states that bankruptcy laws impact employee benefits in specific ways: (1) the life, health, and disability benefits of retirees are required to be paid by the trustees in bankruptcy as administrative expenses during bankruptcy proceedings, and (2) trustees in bankruptcy may deem group-invoiced premiums to be necessary business expenses and pay them as general operating expenses.

Unsecured claims over 180 days old would have a chance for priority, because this rule is designed to encourage employees to stay with a failing company in hopes of saving it

The course presents a timing scenario where the employer shuts down at time t, files for bankruptcy at t+8 months, and claims are for services incurred prior to t. In this instance, unsecured claims over 180 days old would have a chance for priority. The purpose of this rule is to encourage the employees to stay with a failing company in hopes of saving it.

ERISA does not preempt federal bankruptcy code

The course explicitly states that ERISA does not preempt federal bankruptcy code. This is a straightforward but important principle in the intersection of employee benefits law and bankruptcy law.

Wrongly motivated employers attracted to self-funding to capture insurer reserves, gain float advantage, and delay claims funding (TPA should avoid or terminate such plans); and the need to shut the plan down as soon as practicable when the employer experiences financial difficulties (TPA should resign if employer is unwilling)

The course identifies two practical concerns: (1) wrongly motivated employers attracted to self-funding for the wrong reason — to capture insurer reserves, gain float advantage with participant contributions, and delay claims funding — and the TPA should avoid or terminate such plans because under co-fiduciary obligation rules, the TPA may be expected to pay claims; (2) when financial difficulties become apparent, the plan should be shut down as soon as practicable, and if the employer is unwilling, the TPA should resign.

A formal proposal to the union and court with hearings, changes limited only to what is needed to rehabilitate, all parties must be fairly treated, and the union has the right to petition for rejection of the proposal

The course states that when a bankruptcy trustee seeks to repudiate or modify a collective bargaining agreement, the law requires several steps: (1) a formal proposal to the union and court with hearings, (2) changes must be only for what is needed to rehabilitate, (3) all parties must be fairly treated, and (4) the union has the right to petition for rejection of the proposal.

$200 per day for a family

The course specifies a daily sanction of $100 per day for an individual and $200 per day for a family. The $110 per day figure is the separate ERISA failure-to-report penalty, not the excise penalty.

Maximum liability is the lesser of 10% of plan benefit or $500,000; continuing failure adds $2,500 for infractions and $15,000 for major infractions (or the excise tax, if lesser) on top of the daily sanction

The course states the maximum liability is the lesser of 10% of plan benefit or $500,000. The continuing failure penalty is $2,500 for infractions and $15,000 for major infractions, or the excise tax if lesser, and this is in addition to the daily sanction of $100/$200 per day.

Six plans, because each different option for each employer constitutes a separate plan for purposes of the separate electability mandated by COBRA

The course states that a MEWA with three employers and a high- and low-option plan results in six plans for COBRA purposes. The fact that the MEWA reports as a single entity on Form 5500 is not controlling. Each different option is a plan because of COBRA's separate electability mandate.

A cafeteria plan itself is not subject to COBRA, but a Health FSA offered under it is subject to COBRA; dependent care offered under a cafeteria plan is not subject to COBRA

The course states that a cafeteria or flex plan is not, by itself, subject to COBRA. However, a Health FSA offered under a cafeteria plan is subject to COBRA. Other benefits may or may not be subject; for example, dependent care is specifically not subject to COBRA.

The EAP benefits were essentially hotlines and referrals in which the EAP agency did no consultative work with trained counselors, either at home or on a contractual basis

Advisory Opinion 91-26A found that the EAP was not a COBRA benefit because its services were limited to hotlines and referrals, with no consultative work performed by trained counselors at home or on a contractual basis. Compare Advisory Opinion 88-04A, which ruled many EAPs were COBRA benefits.

It is primarily first aid in nature, is limited to present (and not former) employees, and is free to the employees

The course states that employer-provided on-site clinic care is not a plan if it is primarily first aid in nature, is limited to present (and not former) employees, and is free to the employees. All three conditions must be met.

Employee-pay-all plans are not considered plans for COBRA purposes, while franchise programs are considered a plan only if there is at least some employer contribution

The course states that employee-pay-all plans are not plans for COBRA purposes. Franchise programs are considered to be a plan, but only if there is at least some employer contribution. This distinction turns entirely on whether the employer contributes.

The person is not eligible for COBRA, and this failure also precludes any of the person's dependents from being afforded coverage

The course states that if a covered employee's status is attributable to a period as a nonresident alien with no earned US income, that person is not eligible for COBRA. Furthermore, such failure precludes any of this person's dependents from being afforded coverage as well.

Partners, agents and independent contractors, and corporate directors

The course lists partners, agents and independent contractors, and corporate directors as persons who may also be covered employees for COBRA purposes. For these non-employees, the term 'termination of employment' is replaced with 'termination of relationship.'

The newly acquired wife is not a qualified beneficiary, but the child born during COBRA continuation is a qualified beneficiary with rights to second qualifying events

The course states that John can add a newly acquired wife while he is a COBRA, but the newly acquired wife is not a qualified beneficiary. However, dependent children added under COBRA (including those born to or placed for adoption with the covered employee during continuation coverage) do become qualified beneficiaries with the right to second qualifying events.

The domestic partner is not a qualified beneficiary regardless of coverage under the plan, though some sponsors voluntarily provide COBRA-like rights

The course states that a domestic partner will not be a qualified beneficiary, regardless of whether the partner is covered under the plan. Some plan sponsors will choose, voluntarily, to provide COBRA-like rights to domestic partners, but this is not required by law.

Change of the plan's insurance carrier

The course lists the following qualifying events: employee's death, employment termination, reduction in hours, divorce or legal separation, employee's entitlement to Medicare, dependent child ceasing to be a dependent, and employer's filing under Chapter 11 bankruptcy. A change of insurers is explicitly stated to not be a qualifying event.

The event itself must occur, it must result in a loss of coverage, and it must occur while the plan is subject to COBRA

The course states that to be a qualifying event, the event must result in a loss of coverage, and a qualifying event must occur while the plan is subject to COBRA. Additionally, a COBRA-qualifying event may not occur prior to the date of COBRA eligibility or while the plan is COBRA exempt for any reason.

There is no requirement that applicants or beneficiaries purchase third-party coverage available to them, whether it is COBRA continuation coverage or insurance available by any other means

The course states that while the Medicaid Act requires assignment of medical support rights to the state, there is no requirement that applicants or beneficiaries purchase third-party coverage that is available to them, whether it is COBRA continuation or other insurance.

COBRA participants are full-plan citizens who are neither better off nor worse off than active counterparts; benefit increases or decreases to actives similarly apply to COBRAs

The course states that COBRA's participants are full-plan citizens, neither better off nor worse off than their active counterparts. Benefits increased or decreased to the active participants will similarly increase or decrease the benefits of the COBRA participants.