Cafeteria Plans Do Not Have to Permit Midyear Election Changes

On July 29, 2019July 29, 2019 By Michelle Turner, MBA, CEBSIn Cafeteria plans, HIPAALeave a comment

Changes

Under an Internal Revenue Code Section 125 cafeteria plan, employee’s elections must generally be irrevocable until the beginning of the next plan year. In other words, employees are unable to make a change to their pretax elections made when newly hired or open enrollment unless they experience a permitted election change event (e.g. change in status) allowed under IRS rules (26 CFR § 1.125-4) and the event is recognized by the employers cafeteria plan.

Employers do not have to allow any exceptions to the irrevocable rule for pretax elections¹. However, the IRS does allow employers to design their cafeteria plans to permit employees to change their pretax elections prospectively² when certain conditions are met.

NOTE: Section 125 permitted election changes are regarding pretax deductions to pay for benefits, not the actual enrollment (or disenrollment) in an insurance plan.

But I thought if an employee got married, or had a baby we had to let them enroll in our plan?

It is true, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires group medical plans to permit midyear enrollment due to certain events (marriage, birth, adoption, loss of other group coverage etc.). The HIPAA special enrollment requirement is only for medical, it’s not required for excepted benefits, i.e. stand-alone dental, vision or most FSAs. (29 CFR § 2590.701-6)

NOTE: HIPAA is not a directive regarding how benefits are paid, it only mandates that an employee must be allowed to enroll in the medical plan.

HIPAA special enrollment events are a subset of the Section 125 permitted election change events that provide special rights. Therefore, for practical matters, and to avoid requiring the premium to be taken post-tax, at a minimum, employers generally include HIPAA special enrollment events as permissible events allowing for a change to the pretax election, when designing their cafeteria plan³.

Footnotes:

¹The irrevocable pretax election rules do not apply to health savings accounts (HSAs). Employees may prospectively change (start/stop, increase/decrease) their HSA contribution election at any time during the plan year. An employer must allow for changes at least monthly.

²Under HIPAA special enrollment (birth, adoption or placement for adoption) a retroactive pretax election change may be made. Likewise, if the plan has no waiting period (e.g. employees are eligible for coverage as of the first day of employment), employers may allow new employees to make a retroactive pretax election within 30 days of employment. However, if an employer has a waiting period (e.g. first of the month following date of hire, 30 days etc.) the new employee may only make a prospective election. (i.e. the effective date must be a date after the enrollment form was signed and submitted.)

³HIPAA requires group health plans, to give special enrollment opportunities for HIPAA specific events. Carriers are not required to incorporate all the election changes an employer may allow as permitted, by Treasury Regulations in Section 1.125. Therefore, employers with fully insured coverage, who recognize changes outside of what is required by HIPAA should confirm with their insurance carrier the group insurance contract and permissible cafeteria plan midyear change events are consistent.

“Takes” or “Accepts” Insurance Doesn’t Necessarily Mean In-Network

On July 22, 2019July 19, 2019 By Michelle Turner, MBA, CEBSIn In-networkLeave a comment

Although this video is corny, it is spot on and I couldn’t have done a better job writing a blog on a common problem. A provider saying they “take” or “accept” your insurance does not mean they are in-network. Rather it only means they welcome patients with insurance and generally will submit an insurance claim for their services to your health plan but it’s possible they are out-of-network (OON) and are able to balance bill you for the amount insurance doesn’t pay.

Balance billing is when an out-of-network provider attempts to collect the difference between the amount the provider charged for services and the amount the health plan (insurance carrier) was willing to pay. Whereas when a provider is in-network, they must accept the “contracted rate” agreed upon with the insurance carrier and may not bill you for the difference. Currently out-of- network providers are not under this same obligation.

The best way to guarantee the provider you are seeing is in-network is to call your health insurance carrier using the number on the back of your insurance card to confirm or most carriers have online tools for you to search for an in-network provider too.

However, in times of an emergency, it’s not realistic for you to previously have researched and figured out if a facility is in-network, nor may you even have the ability to select the emergency room, treating physicians, or ambulance providers.

Likewise, surprise bills can also arise when you receive planned care. For example, if you schedule a surgery at an in-network facility (e.g. a hospital) only to find out later (when the bill arrives) that the anesthesiologist did not not participate in your health plan’s network. (It’s very common for radiologists, anesthesiologists and pathologists to be OON.) In both situations, you were not in a position to choose the provider nor to determine that provider’s insurance network status.

Situations like these are reasons why there is currently a push in Congress to pass “balance billing” laws to alleviate Americans from receiving a surprise bill. Both parties in Congress agree, you should not be surprised by an out-of-network health care bill. There has not however been agreement on the the best approach to address them. It remains to be seen if a bill can still pass before the Senate’s recess in August.

Resources:

COBRA Participants & Open Enrollment

On July 15, 2019July 4, 2019 By Michelle Turner, MBA, CEBSIn COBRALeave a comment

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COBRA regulations state that COBRA qualified beneficiaries (QBs) are entitled to the same rights under a group health plan as are similarly situated non-COBRA beneficiaries i.e. active participants (§ 54.4980B-5 Q&A-1).

COBRA qualified beneficiary includes:

individuals currently enrolled and paying for COBRA
individuals in their 60-day election period
individuals who have elected, but not yet paid for COBRA

During open enrollment, COBRA qualified beneficiaries have the same rights as active employees. (§ 54.4980B–5 Q&A–4c) For instance, they may:

Add coverage they didn’t previously have while on COBRA (e.g., enroll in dental and vision coverage at OE even if previously covered only by medical) § 54.4980B-5, Q/A-4
Drop coverage
Add dependents (as non-qualified beneficiaries with no independent COBRA rights), even if they were not covered at the time of the qualifying event § 54.4980B-5, Q/A-5
Drop dependents
Switch to another benefit package within the same plan (e.g., change medical plan option from PPO to HMO).

To be compliant, during open enrollment it’s important that employers remember to provide COBRA QBs everything they would need to make an informed coverage decision and election as if they were active employees. The open enrollment materials must be provided to QBs in a manner that is “reasonably expected to ensure receipt”. Generally, this would mean 1st class mail to the last known home address. A Certificate of Mailing is also a best practice.

Who Is Responsible for Offering COBRA Open Enrollment?

COBRA open enrollment is always the responsibility of the employer. Even if the employer has a third party administrator (TPA) handling COBRA notices, ultimately it is still the employer’s responsibility to communicate with their TPA on who will be handling the COBRA open enrollment. This is typically not included as part of the regular TPA COBRA administrative services, but many will assist for an additional fee.

What if an enrolled participant doesn’t send back their OE election?

There are different schools of thought on the answer to this question.

Per COBRA statutes, there are only 6 ways COBRA may terminate before max. coverage period ends: (§ 54.4980B–7 Q/A-1)

Failure to pay on time
Early termination when employer ceases to provide any group health plan
Early termination because of coverage under other group health plan coverage
Early termination because of Medicare entitlement
Early termination when QB in disability extension found not disabled
Early termination for cause (e.g. fraudulent claims)

There is nothing in the regulations that says failure to re-elect during OE is cause for termination. So, it’s my understanding, if the plan(s) the participant is on didn’t change, then their coverage should roll over into the new plan year and they should be billed the new plan year’s premiums. If the plans did change, they should be enrolled in the plan most comparable (i.e. what replaced the coverage they had). If they fail to send in payment, they’ll term for non-payment accordingly.

However, that being said, at least one court has held that the plan may terminate COBRA coverage for a QB who fails to re-enroll after they are provided OE materials and are notified that failure to re-enroll will lead to a loss of coverage. This is because, §54.4980B-7, Q/A-1(b), provides that “a group health plan can terminate for cause the coverage of a qualified beneficiary receiving COBRA continuation coverage on the same basis that the plan terminates for cause the coverage of similarly situated nonCOBRA beneficiaries.” So some interpret this, (as did the the court ruling) to mean, because COBRA participants have the same rights (and responsibilities) during open enrollment as similarly situated employees, if an employer requires active enrollment by employees during open enrollment, they can require active enrollment by COBRA participants too.

In my experience, it’s best to keep QBs enrolled on their current plans (or the the plans most comparable to what they currently have) unless an employer is provided other guidance from their legal counsel.

NOTE: Don’t forget about your employees on FMLA. They too have the same open enrollment rights for the health plan as active employees

Dallas & San Antonio Paid Sick Leave Ordinance Scheduled to Take Effect 8/1/2019

On July 8, 2019July 4, 2019 By Michelle Turner, MBA, CEBSIn Paid Sick Leave, TexasLeave a comment

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Background

Texas does not have a statewide paid sick leave; however, paid sick leave ordinances in Dallas and San Antonio are scheduled to take effect on August 1, 2019.

NOTE: Austin’s paid sick leave ordinance, which was supposed to go into effect this past October, has been held unconstitutional by the Third Court of Appeals in Austin. The Third Court of Appeals decided that it violated the Texas Constitution because it was pre-empted by the Texas Minimum Wage Act. Given the similarities among the ordinances, the Texas Supreme Court’s decision on the Austin ordinance may impact the San Antonio and Dallas ordinances.

The 86th Texas Legislative Session failed to pass Senate Bill 2487, a seemingly well-supported bill to preempt all such ordinances from taking effect and being enforced. Without a Special Session, there is no other procedural method to revive the bill, and the Texas Legislature will not have an opportunity to address the sick leave preemption issue until the next session in January 2021.

High Level Key Points – for employers who have employees working in Dallas or San Antonio:

Effective dates:

August 1, 2019, for employers having more than five employees.
August 1, 2021 for employers with less than 5 employees.

Who is entitled?

Any employee (including part-time) who performed at least 80 hours of work for pay within the city in a year, including work performed through a temporary or employment agency.
Where the employee worked and for how many hours are the determining factors, regardless of whether the employer has a location within the city limits of Dallas or San Antonio.

What are qualified employees entitled to?

Employers with more than 15 employees – one hour of earned paid sick time for every 30 hours the employee worked in the city up to a yearly cap of 64 hours per employee per year.
Employers with less than 15 employees – one hour of earned paid sick time for every 30 hours the employee worked in the city for up to 48 hours per employee per year.

Notice requirements:

The employer must provide an employee at least a monthly statement showing the amount of the employee’s available earned paid sick time.
If an employer has an employee handbook, the ordinances require that the employer provide a statement of rights and remedies in the handbook.
The ordinances also require the display of a sign in a conspicuous place where other notices to employees are customarily posted.

What actions should an employer take?

Employers who already have a paid sick leave policy in effect that is the same as or more generous than these ordinances, (e.g. company’s policy already provides at least 64 hours (8 days) of paid time off to all employees (or 48 hours if less than 15 employees) the Dallas and San Antonio ordinances both state that they do not require an employer to provide additional earned paid sick time. However, employers should consider developing procedures that will comply with the additional ordinance requirements (e.g. notice).

An employer who has more than five employees performing work in San Antonio and/or Dallas and does not currently have a paid sick leave policy that is compliant with these ordinances, should watch for continuing developments and start thinking about the necessary changes they need to make to their policies and practices in order to comply with these new rules by August 1.

References:

Qualified Medical Child Support Order (QMSCO) & National Medical Support Notices (NMSN)

On July 1, 2019June 28, 2019 By Michelle Turner, MBA, CEBSIn ERISALeave a comment

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The Employee Retirement Income Security Act (ERISA) requires employment-based group health plans to extend health care coverage to the children of a parent-employee who is divorced, separated, or never married when ordered to do so by state authorities.

Generally, a State court or agency may require an ERISA-covered health plan to provide health benefits coverage to children by issuing a medical child support order. The court order forces coverage under the plan, even if the employee is not interested in obtaining plan coverage for the child.

Under ERISA §609(a), the group health plan must have procedures established to determine whether the medical child support order is “qualified”. Such an order is referred to as a Qualified Medical Child Support Order (QMCSO).

In addition, a State child support enforcement agency may obtain group health coverage for a child by issuing a National Medical Support Notice (NMSN). A NMSN is treated like a QMSCO if the group health plan determines it to be qualified (i.e. it’s appropriately completed by the agency).

Under the terms of the law, child support or other court orders which do not meet all the qualification requirements, are not “qualified” and plans are not required to provide any benefits to child, unless the deficiencies are later corrected.

Once a medical child support order has been determined to be a QMCSO, then the plan administrator must act in accordance with the order’s provisions as if it were part of the plan. (Qualified Medical Child Support Orders, Q/A 1-25)

Thus, plan administrators must comply with general QMCSO requirements when processing and administering benefits. For instance:

If the employee is eligible to participate in the plan, the child must be covered.
If, the employee is not enrolled in the plan, but as a condition for covering his dependents, the employee must be enrolled, the plan must enroll both.
If the employee named in a medical child support order has not satisfied the plan’s generally applicable waiting period, the administrator should have procedures in place so that the child will begin receiving benefits upon the employee’s satisfaction
of the waiting period.
If a group health plan does not provide any dependent coverage, an order may not require a plan to provide dependent coverage when that option is not otherwise available under the plan
A child covered pursuant to a QMCSO is a “qualified beneficiary” with the right to elect continuation coverage under COBRA, if the plan is subject to COBRA and if the child loses coverage as a result of a qualifying event.

Employers are required to have written procedures for assessing and responding to QMSCOs/NMSN notices and may be subject to sanctions or penalties imposed under State law and/or ERISA for failure to respond and/or for non-compliance with a QMSCO/NMSN notice.

For additional information, check out:

The Compliance Rundown

Month: July 2019