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U.S. Supreme Court Upholds Final Rules Allowing Employer-Sponsored Health Plans to Decline to Cover Contraceptives Due to Moral or Religious Objections

Posted on July 9th, 2020

U.S. Supreme Court Upholds Final Rules Allowing Employer-Sponsored Health Plans to Decline to Cover Contraceptives Due to Moral or Religious Objections

On July 8, 2020, the United States Supreme Court upheld the Final Rules issued by the Department of Health and Human Services (HHS) that exempt all employers with a religious objection to contraception, and all non-profit and non-publicly traded for-profit employers with a moral objection to contraception, from complying with the previous contraceptive coverage requirements adopted by HHS under President Obama.

Background on ACA’s Contraceptive Coverage Mandate

The ACA was enacted in March 2010. The ACA requires covered employers to provide women with “preventive care and screenings” without cost sharing.  “Preventive care and screenings” was not defined in the law; however, the law authorized guidelines, which did not exist at the time, to be developed by the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services (HHS).  The Departments promulgated rules to, among other things, provide guidelines for preventive care and screening, but did not use the traditional notice and comment rulemaking process, opting instead to utilize a “good cause exception” to the Administrative Procedures Act (APA), which allows rules to be effective immediately.

In 2011, regulations were released that contained the HRSA guidelines that included all Food and Drug Administration (FDA)-approved contraceptives, sterilization procedures, and patient education and counseling for women with reproductive capacity, as prescribed by a health care provider. Once these rules took effect in 2012, women enrolled in most health plans and health insurance policies (non-grandfathered plans and policies) were guaranteed coverage for recommended preventive care, including all FDA-approved contraceptive services prescribed by a health care provider, without cost sharing.

In 2013, new rules were released with exemptions for certain religious employers (generally churches and houses of worship), as well as “accommodations” for non-profit religious organizations that “self-certify” their objection to providing contraceptive coverage on religious grounds. Under the accommodation approach, an eligible employer did not have to arrange or pay for contraceptive coverage. Employers could provide their self-certification to their insurance carrier or third-party administrator (TPA), which will make contraceptive services available for women enrolled in the employer’s plan, at no cost to the women or the employer.

In 2014, regulations were published to establish another option for an employer to avail itself of the religious accommodation. Under these rules, an eligible employer may notify HHS in writing of its religious objection to providing coverage for contraceptive services. HHS or the Department of Labor, as applicable, will notify the insurer or TPA that the employer objects to providing coverage for contraceptive services and that the insurer or TPA is responsible for providing enrollees in the health plan separate no-cost payments for contraceptive services.

In 2015, in response to the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., regulations were released that expanded the availability of the accommodation to include a closely held for-profit entity that has a religious objection to providing coverage for some or all contraceptive services.

In 2017, President Trump issued an Executive Order that directed the Departments to consider amending the contraceptive coverage regulations in order to promote religious liberty. Specifically, the Executive Order instructed the Departments to “consider issuing amended regulations . . . to address conscience-based objections to the preventative-care mandate.”

Consistent with the executive order, in 2018, the Departments issued “Interim Final Rules with Request for Comment” and provided 60 days for comments before issuing the final regulations in November 2018. The final regulations were effective on January 14, 2019.

Overview of the Moral & Religious Objection Regulations

The Regulations expand existing exemptions to the ACA’s contraceptive care requirement. The Religious Exemption automatically exempts all employers—non-profit and for-profit organizations alike—with a religious objection to contraception from complying with the contraceptive care requirement.

The Moral Exemption exempts all non-profit employers and non-publicly traded for-profit employers with a moral objection to contraception from complying with the contraceptive care requirement. The rules also give exempted employers the authority to decide whether their employees receive independent contraceptive care coverage through the accommodation process. In other words, by making the accommodation process voluntary for employers, employees would no longer be guaranteed the seamless coverage for contraceptive care that currently exists under the accommodation process.

Entities that qualify for the exemptions include churches and their integrated auxiliaries, nonprofit organizations, closely-held for-profit entities, for-profit entities that are not closely held, any non-governmental employer, as well as institutions of higher education and health insurers offering group or individual insurance coverage. Publicly traded companies, however, are not eligible for the Moral Exemption.

Challenge to the Interim and Final Regulations

Pennsylvania and New Jersey challenged the final regulations, claiming the regulations were both procedurally defective and substantively unlawful.  Specifically, they argued the Departments lacked authority under the law (both the ACA and the Religious Freedom Restoration Act (RFRA)) to allow such moral or religious exemptions and that the Departments failed to comply with the APAs notice and comment requirements.  The rules were enjoined in federal district court, and the decision was upheld by the Third District Court of Appeals. The 3rd District Court of Appeals decision was appealed to the United States Supreme Court.

In a 7-2 decision, with only Justices Sotomayor and Ginsburg dissenting, the Court reversed and remanded the decision, holding that the Departments had the authority under the ACA to promulgate religious and moral exemptions because the ACA granted the Departments full authority to define “preventive care and screenings” in its guidelines, which also includes full authority to establish any exemptions to the guidelines.  Furthermore, the Court recognized that the Departments were compelled to, and not prevented from, consider the RFRA in promulgating their guidelines.  Finally, the Court determined the Departments fully complied with the APA by providing adequate notice, allowing 60 days for comments, and publishing the final regulations more than 30 days before they were effective.

Impact on Employers

Employers may avail themselves of the Moral and Religious Exemptions, but should consult with qualified ERISA counsel before making plan changes to ensure they do so appropriately and in compliance with any applicable state law, where contraceptive coverage may be a state-mandated benefit. Practically speaking, this means that employers sponsoring fully insured non-grandfathered group health plans may be precluded from exercising either exemption because insurance carriers in those states would be required to write policies that provide such coverage. While the regulations allow employers to exclude contraception from coverage under certain conditions, it’s possible an employer availing itself under either exemption could potentially face private lawsuits from participants and beneficiaries under Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on sex, depending on the facts and circumstances.

 

About the Author.  This alert was prepared for [INSERT AGENGY NAME] by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2020 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.

 

Bostock v. Clayton County Supreme Court Ruling – Time to Review Your Employee Benefit Plans

Posted on July 6th, 2020

Background:

The Civil Rights Act of 1964 is an important law that is both a civil rights and labor law and on its basic level outlaws discrimination on the basis of race, color, religion, sex, or national origin. More specifically under Title VII, which governs equal employment opportunity, it is unlawful for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment for any of the basis of race, color, religion, sex, or national origin.

The heart of the most recent Supreme Court ruling on Title VII in Bostock v. Clayton County was an employee’s “sex” included an employee’s sexual orientation or gender identity, therefore, protecting an employee from termination (or being hired) because they were gay or transgender.

The Supreme Court’s ruling answered that question by definitively stating “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.” The Supreme Court made clear that under the Civil Rights Act “sex” includes gender identity and sexual orientation.

What Does This Mean for Employee Benefit Plans?

Although Bostock v. Clayton County was specifically focused on the hiring and termination of LGBTQ individuals it may have implications for employee benefits. Employee benefits are a fringe benefit program and receipt of benefits under fringe benefit programs also are protected from discriminatory practices and decisions under Title VII.

In light of this Supreme Court decision, employers sponsoring group health plans may want to review their benefit plans to assess whether coverage discriminates on the basis of sex, for instance:

  • Eligibility terms:
    • If the plan covers spouses, does it allow same sex-spouses?
    • If the plan permits coverage of domestic partners, does it allow for same-sex domestic partners?
  • Benefits:
    • Does the plan cover gender dysphoria and related services? 
    • Do the family-planning benefits need to be expanded?
      • What are the infertility services & how does one qualify?
    • Is gender-affirmation surgery considered a temporary disability under the disability plan?

If an employer discovers their plans may be viewed as discriminatory or they prefer not to implement coverage changes impacting LGBTQ participants (i.e. cover gender dysphoria and related services), or have a self-funded plan currently with a blanket exclusion, they should seek legal advice. These exclusions are likely to now be challenged under this new Supreme Court precedent. The Supreme Court has unequivocally stated that under Title VII, sex does include sexual orientation or gender identity and discrimination on the basis of sex under employment law is not permissible. That includes benefits because they are a term & condition of employment.  

 

This article was last reviewed and up to date as of 7/5/2020.

Disclaimer: This blog was written by Michelle Turner, MBA, Compliance Consultant, Alera Group Central Region. This blog post intends to provide general information regarding the status of, and/or potential concerns related to, current employer HR & benefits issues. This blog should not be construed as, nor is it intended to provide, legal advice. The opinions expressed herein are based upon the author’s experience as a Compliance Consultant and may not reflect the opinions of your counsel. 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such.  Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice.  This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.

Weekly Wrap-up: Wellbeing Resources

Posted on July 6th, 2020

I hope you all had a wonderful holiday weekend!  So….when is the last time you took a vacation day?  If you said ‘pre-COVID', you’re not alone.  With nowhere to go, many employees have cancelled vacations and have no plans in sight for time off.  Without an official ‘vacation’ planned, do we still need time off?  Resoundingly, the answer is yes.  The Harvard Business Review recently discussed how employee work hours have soared since the start of the pandemic but people’s capacity to focus and be productive has crashed.   The article shares some sound advice they received from a survey to employers on how to encourage time off but I like the simple survey feedback they received from Limeade’s CEO Henry Albrecht, “Share the rules, show care, model the behaviors, and trust people to do the right thing”. 

Have a safe and healthy week.    

 

  Career Wellbeing

  • How the Cult of Sleep-Deprivation Affects Work – Many high-powered jobs require you to work long hours and give up sleep. But can that harm your career? Tune into this 30-minute episode of the Anxious Overachiever to find out. 

  

  Social & Family Wellbeing

Social

Family

  • Managing Summer Disruptions (and Beyond) for our Kids due to COVID – In this quick video, Dr. Tina Payne Bryson talks about the disappointment our kids might feel as their summer activities are being cancelled due to the pandemic. There may be highs and lows as they deal with anger, sadness, and frustration. But as parents, we can prepare by anticipating that our kids might need a little more support from us, not just when we tell them but throughout the summer. Watch the full video to learn more.

  

  Financial Wellbeing

  

  Physical Wellbeing

  • Overcoming Sugar Addiction – This podcast interview with Dr. Mark Hyman discusses why quitting sugar is so difficult (hint: because it’s an actual physical addiction). The discussion dives into how we can reset our biochemistry and take back our health.
  • Make the Most of Your SPF – This article explains the difference between chemical and mineral SPF’s and tells you when to apply them for the best results. 

 

  Emotional Wellbeing

  • Mastering Resiliency – Award-winning Author and Resiliency Expert, Jenny Evans, teaches you how to conquer stress and unlock your peak performance. 
  • 30-Minute Vinyasa Yoga – Join Namaste Wellness for a 30-minute class to release stress and deepen the mind-body connection. Thursday, July 9th at 7:30 AM. RSVP HERE.

  

  Community Wellbeing

  • New Ways to Support Mental Health, Addiction, and Community wellbeing – The organization, Mindful Philanthropy, launched to expand informed giving to mental health and addiction initiatives. This is an amazing resource to find out how you can support these incredibly important causes. 

  

  EMPLOYER FOCUSED RESOURCES

  • The Real Causes of Employee Burnout – According to a recent Gallup report, 76% of employees experience burnout at least sometimes. Will reducing hours solve the problem? Learn the real causes of burnout and what you can do about it. 
  • Managers, Encourage Your Team to Take Time Off – This great piece by the Harvard Business Review discusses the reluctancy of employees to take time off right now some strategies to approach this. 

 

For more resources and updates, check out our Coronavirus Resource Center at aleragroup.com/coronavirus/.

 

About the Author

Andrea Davis, Director of Wellbeing
Andrea joined Alera Group Northeast (formerly CBP) in July 2013, bringing over 15 years of experience in management consulting and strategic solutions. As the Director of Wellbeing, she is responsible for assisting with the development, implementation and evaluation of comprehensive wellness strategies for existing and prospective Alera Group clients. She provides assistance and support to Alera Group clients by developing personalized programs that fit clients’ unique health management needs, wellness program implementation, committee development, promotion and marketing of their programs to encourage participation. In addition, Andrea conducts program analysis and generates reports related to program participation, health assessment and client utilization. 

 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such.  Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice.  This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.

Alera Group Appoints Jim Wochele as Vice President, Sales Development

Posted on July 1st, 2020

Alera Group is excited to announce that Jim Wochele has recently been appointed as its national Vice President of Sales Development, effective June 29, 2020. Wochele will oversee sales training & development, strategy and execution across the United States.

Wochele is an accomplished consultant, sales manager and keynote speaker who has provided proven activity-based and process-driven selling strategies to agencies and brokers throughout the U.S. and Canada. Prior to joining Alera Group, Wochele spent nine years at MarshBerry, moving from Sales Management Consultant to Vice President of Consulting.

“We are incredibly excited to welcome Jim Wochele to the Alera Group team, and we look forward to all the great work he will be doing leading our sales team,” said Jim Blue, President of Alera Group. “Jim’s leadership skills and sales expertise will make a powerful impact on Alera Group firms across the country.”

“As Vice President of Sales Development at Alera Group, I look forward to strengthening our organic growth efforts throughout the country,” said Jim Wochele. “Alera Group has an amazing brand already, and I will work collaboratively with our sales teams to get that message out to future clients so we can help more businesses and individuals manage their risks in employee benefits, property & casualty, wealth management and retirement services.”

Wochele will be based out of Cleveland, Ohio. He joins Alera Group as the latest member of an industry-leading team of professionals across the United States. For more information about Alera Group, visit www.aleragroup.com

###

About Alera Group

With over 80 locations across the country and nearly 2,000 teammates, Alera Group works together to deliver solutions in employee benefits, property and casualty, retirement services and wealth management. Built on a unique model of collaboration, Alera Group is now the 17th largest independent insurance agency in the United States. For more information, visit aleragroup.com.

CMS Guidance: Accumulator Programs

Posted on June 23rd, 2020

WHAT IS AN ACCUMULATOR PROGRAM?
Many prescription drug manufacturers offer financial assistance (e.g. coupons) to patients in order to reduce their out of pocket costs, particularly for very expensive drugs. Standard practice is for an "accumulator program" to exclude the value of such financial assistance from counting toward a health plan enrollee’s annual "cost sharing" limit, defined to include: deductibles, coinsurance, copayments or similar charges; and any other expenditure required of an enrollee which is a qualified medical expense with respect to an essential health benefit covered under the plan. In other words, financial assistance in the form of coupons or other direct support provided by a manufacturer did not count as money spent by an enrollee toward their out of pocket maximum (OOPM or MOOP).

WHAT DOES THE FINAL RULE SAY ABOUT ACCUMULATOR PROGRAMS?
Under the final rule published in the Federal Register on  May 14, 2020, to the extent consistent with applicable state law, health plans and issuers can choose whether to count or exclude towards the annual limitation on cost sharing, any amount a participant pays using a drug manufacturer's coupon or any form of direct support offered by drug manufacturers for a specific brand-name prescription drug regardless of whether they have a medically appropriate generic equivalent available. Note, that some states (e.g. Arizona, Illinois, Virginia, and West Virginia) have insurance laws requiring in certain circumstances, the support offered by drug manufacturers be included in the participant's annual cost-sharing limit. Fully insured health plans and insurers will need to be aware of any state law restrictions, however the state laws would not apply to self-funded health plans.

This is different from the rule for 2020, which a plan could exclude the amount only if there was a medically appropriate generic equivalent available. The 2020 final rule was not enforced because of conflicting rules with IRS guidance on the requirement to disregard the manufacturer's assistance when determining if the deductible for an HDHP had been satisfied.

WHAT DOES THE FINAL RULE MEAN FOR PLAN SPONSORS?
Plan sponsors may continue to count or exclude the financial assistance provided to patients towards their out of pocket limit, whichever method is provided for in their plan documents. HHS however, encourages employers to be clear and transparent in all enrollment materials (e.g. benefit guides, plan summary descriptions) regarding whether direct drug manufacturer support amounts will or will not count towards the annual limitation on cost sharing. This information may be essential for an employee in deciding between plans.

Plan sponsors and insurers (to the extent consistent with applicable state law) have the option to count or not count prescription drug manufacturer coupons & other discounts toward cost-sharing limits regardless of whether the brand-name drug does or does not have a generic equivalent.

However, there are still unanswered questions regarding whether plan sponsors with qualified HDHPs are able to count the financial assistance toward the HDHP deductible. The IRS has previously made it clear, specifically, Q&A-9 of IRS Notice 2004-50, that an HDHP must disregard drug discounts and other manufacturer and provider discounts when determining if the deductible for an HDHP has been satisfied and does not allow these amounts to be considered towards meeting the required deductible. Also, to meet the requirements of section 223 of the Code, an HDHP may only take into account the amount the individual actually paid, not including any rebates or discounts when determining whether the individual has satisfied the deductible.

Therefore, it appears unless additional IRS guidance is issued, plan sponsors with an HDHP must exclude the value of a drug manufacturer's financial assistance to be an HSA-compatible HSA.

HOW WILL THE FINAL RULE IMPACT HEALTH PLANS?
Issuers and group health plans need not make changes on how they have historically handled direct drug manufacturer support amounts and will continue to have flexibility, subject to state law and other applicable requirements (if any), to determine if and how to factor in direct drug manufacturer support amounts towards the annual limitation on cost sharing.

EXAMPLE 1 – DO NOT COUNT THE COUPON 
Alex is an employee of BizCorp and has single-only coverage under its group health plan. The plan’s accumulator program does not count the value of any coupon toward any enrollee’s OOPM ($8150 in 2020).
Alex takes the brand-name drug Helpana (manufactured by RxPharma) for an autoimmune condition. A 30-day supply costs $6000. The plan pays $4500, leaving $1500 for Alex. Because it is so expensive, RxPharma provides a $1250 Helpana coupon.
The accumulator program will not apply the value of the coupon to Alex’s OOPM. Assuming no other expenses, Alex will pay $250/month ($3000 over a year) without reaching the OOPM limit.

EXAMPLE 2 – COUNT THE COUPON 
Same fact as Example 1, except BizCorp’s plan does not use an accumulator program. It counts any coupon used by any enrollee toward their OOPM limit. This means the entire $1,500 each month ($1,250 provided by the coupon plus the $250 paid by the employee) will be applied towards the OOPM.

For questions related to these issues, it is advisable to seek legal counsel.

 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such.  Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice.  This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.

Updated as of 06/22/2020.

Weekly Wrap-up: Wellbeing Resources

Posted on June 22nd, 2020

As many states are starting to ease restrictions and as some employees begin to return to work, our minds are focused on what the next phase of the pandemic will look like. Many companies are, wisely, issuing surveys about employee concerns regarding a return to work and needs for the future. What about also asking our employees to look back? We can’t negate the huge losses that are being experienced by so many, but we can use this as a learning opportunity. What can reflection tell us about our employee’s needs? Have there been any silver linings for our employees during the pandemic? How can we support our employees in living life differently going forward? Perhaps planning for the future while learning from the past can provide some good ideas on how to further enhance our Wellbeing programs.

      

  Career Wellbeing

  • Attach to a Purpose, not a Job Title – In this webinar, Belma McCaffrey of Work Bigger will share why looking for fulfillment in a job can often leave you feeling defeated, and how to attach yourself to a purpose instead.

  

  Social & Family Wellbeing

  Social

Family

 

  Financial Wellbeing

  • Work Towards Financial Freedom – In this course by Chris Farrel (Senior Economics Contributor at Marketplace), you will learn how to have more control over your finances and the tools to work toward your financial freedom. 

 

  Physical Wellbeing

 

  Emotional Wellbeing

  • Discomfort, Anxiety, and Grief: Confronting Racism with Colleagues (The Anxious Overachiever Podcast) – Amelia Ransom, Senior Director of Engagement and Diversity at Avalara, offers advice for how people of color can get what they need from their employers to help protect their mental health. Later in the episode, host Morra Aarons-Mele speaks with Benish Shah, Chief Growth Officer at Loop & Tie, about how white people can support their colleagues of color in a meaningful way.
  • Guided Meditation with Namaste Wellness – Join Namaste for a guided meditation designed to maximize the body’s own ability to manage stress as well as heal and transform itself. Tuesday, June 23rd at 7:30 AM ET. RSVP HEREFREE

  

  Community Wellbeing

 

  EMPLOYER FOCUSED RESOURCES

For more resources and updates, check out our Coronavirus Resource Center at aleragroup.com/coronavirus/.

 

About the Author

Andrea Davis, Director of Wellbeing
Andrea joined Alera Group Northeast (formerly CBP) in July 2013, bringing over 15 years of experience in management consulting and strategic solutions. As the Director of Wellbeing, she is responsible for assisting with the development, implementation and evaluation of comprehensive wellness strategies for existing and prospective Alera Group clients. She provides assistance and support to Alera Group clients by developing personalized programs that fit clients’ unique health management needs, wellness program implementation, committee development, promotion and marketing of their programs to encourage participation. In addition, Andrea conducts program analysis and generates reports related to program participation, health assessment and client utilization. 

 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute advice for any particular situation or fact pattern and cannot be relied upon as such.  Statements concerning financial, regulatory or legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal advice.  This document is owned by Alera Group, Inc., and its contents may not be reproduced, in whole or in part, without the written permission of Alera Group, Inc.

COVID-19 Update: How Insurance Companies are Helping Consumers

Posted on June 18th, 2020

In addition to payment relief to some customers, insurance companies are maintaining staff and supporting national pandemic relief efforts.

Immediate Customer Solutions

Many insurers are offering payment relief. For example, auto insurers have returned $10.5 billion so far to customers’ pockets around the country through premium relief. Customers who need payment relief or are looking to file a COVID-19 related claim should contact their insurance professional or go to their insurer’s website to find out what options are available to them.

Despite lower premiums and higher loss expectations during the pandemic insurers are keeping employees employed and serving customers. Many insurers have pledged to make no layoffs during the ongoing crisis; and insurers are implementing innovative solutions to carrying out daily operations while respecting social distancing.

Government-Backed Solutions

Insurers support the COVID-19 Business and Employee Continuity and Recovery Fund. They have pledged more than an estimated $220 million (according to Triple-I/Insurance Industry Charitable Foundation) in donations to the national and local organizations fighting the pandemic on the frontlines. Funded by the federal government and operated by a special federal administrator, the Recovery Fund would facilitate the distribution of federal funds and liquidity to impacted businesses during this time of incalculable business interruption.

The Insurance Information Institute (Tripe-I) points out that the insurance industry in the U.S. also faces several challenges during the crisis:

•    Some lawmakers want to void policy exclusions and pay out retroactively for non-existing coverages which would threaten the solvency of some insurers. Several reasons are offered:

•    Only a handful of business interruption policies cover communicable disease contamination; very few U.S. businesses purchase: so there has been little premium generated to fund these losses

•    Rewriting contracts after they have been agreed to is unconstitutional – Article I

•    Requiring an insurer to pay for losses it never insured would cause irreparable harm to the industry

•    Mandating business interruption payouts would eliminate the surplus set aside for covered claims in a matter of months.

•    Overall insurance claims will increase. Workers compensation insurers have exposure in healthcare, among first responders, and retailers who use delivery services.

•    Insurer premium revenue will decrease. More unemployment, less manufacturing, and less economic activity overall will lead to a reduction in premiums.

•    Insurer investment income will decrease. P/C insurer investments are largely in fixed income products, yet their equity portfolios and the continued low interest rate environment will reduce insurer investment income, a key revenue source.

•    Beyond the COVID-19 pandemic, insurers are preparing for more severe natural and man-made catastrophes — tornadoes, hurricanes, wildfires, cyberattacks. These covered catastrophes continue to increase in terms of overall loss costs.

Please contact your local advisor or email us at info@aleragroup.com to be connected with a local office. You can view our COVID-19 Resource Center here. 

As HHS Finalizes Its Updated §1557 Rules, the United States Supreme Court Rules Title VII Protects Individuals From Discrimination Due To Sexual Orientation or Gender Identity

Posted on June 17th, 2020

On June 12, 2020, the U.S. Department of Health and Human Services (“HHS”) released its Final Rule under Section 1557 of the Affordable Care Act which, among other things, modifies the regulation issued by HHS in May 2016 (“2016 Rules”).  The 2016 Rules were subject to multiple lawsuits over the years and HHS claims the Final Rules, among other things, “better comply with the mandates of Congress…reduce confusion…and clarify the scope of Section 1557 in keeping with pre-existing civil rights statutes and regulations prohibiting discrimination on the basis of race, color, national origin, sex, age, and disability.” 

Just days after the Final Rule was released, the United States Supreme Court released its much anticipated opinion in Bostock v. Clayton County, Georgia regarding whether an employee’s sexual orientation or gender identity protects them from discrimination on the basis of sex under Title VII.

While these two issues are seemingly unrelated, as we discuss in this alert, we believe the Court’s decision makes the Final Rule ripe for legal challenge.  The decision also impacts employer-sponsored group health plans regardless of whether they are “covered entities” for purposes of Section 1557.

Section 1557

Covered Entities

Under prior HHS Rules (issued in 2016) Section 1557 of the ACA applied to “covered entities,” which were defined as health programs or activities that receive “federal funding” from HHS (except Medicare Part B payments), including state and federal Marketplaces.  Examples include hospitals, health clinics, community health centers, group health plans, health insurance issuers, physician’s practices, nursing facilities, as well as employers with respect to their own employee health benefit programs if the employer is principally engaged in providing or administering health programs or activities (i.e., hospitals, physician practices, etc.), or the employer receives federal funds to fund the employer’s health benefit program.

Further, group health plans themselves were subject to the rule if they received federal funds from HHS (e.g., Medicare Part D Subsidies, Medicare Advantage). In other words, employers who were not principally engaged in providing health care or health coverage generally were not subject to these rules directly unless they sponsor an employee health benefit program that receives federal funding through HHS, such as a retiree medical plan that participates in the Medicare Part D retiree drug subsidy program.

This created confusion for many employers.  Therefore, in May 2019, HHS issued a proposed rule (“Proposed Rule”) that narrowed the scope of “covered entities” regulated by Section 1557 clarifying that entities not “principally engaged in health care” are not subject to Section 1557 unless they are funded by, and only to the extent funded by, HHS.  Additionally, Entities whose primary business is providing healthcare will also be regulated if they receive federal financial assistance.

Consistent with the Proposed Rule, the Final Rule eliminates the definition of “covered entity”, and clarifies that HHS enforcement authority only extends to (1)  a health program or activity, any part of which is receiving federal financial assistance, (2) any program or activity administered by HHS under Title I of the ACA (such as health insurance Marketplaces), but not those that are administered by another federal agency, and (3) any program or activity administered by an entity established under Title I of the ACA.  “Health program or activity” encompasses all operations of entities principally engaged in the business of providing healthcare that receive federal financial assistance.

Moreover, an entity principally or otherwise engaged in the business of providing health insurance is not, by virtue of such provision, principally engaged in the provision of healthcare.  Thus, the preamble to the Final Rule explains that to the extent an employer-sponsored group health plan does not receive federal financial assistance, such as credits, subsidies, or contracts of insurance, from HHS and is not principally engaged in the business of providing healthcare, the health plan and the employer are not covered entities.  This applies even if the plans are not covered by ERISA (e.g., church plans or non-federal governmental plans). 

Sex Discrimination

Section 1557 prohibits entities that receive federal financial assistance, any programs or activities administered by an Executive Agency under Title I of the ACA, or a health insurance marketplace (established under Title I) from discriminating against individuals on the basis of race, color, national origin, sex, age, or disability.

The Final Rule eliminates the definition of “on the basis of sex,” which previously included termination of pregnancy, sex stereotyping, and gender identity. By eliminating this definition, the Final Rule excludes gender identity, stereotyping, and pregnancy termination as protected categories under Section 1557. 

The Final Rule uses enforcement mechanisms under other applicable laws and regulations incorporated under Section 1557, which include including the Title VI of the Civil Rights Act of 1964 (race, color, or national origin), Title IX of the Education Amendments of 1972 (sex), the Age Discrimination act of 1975 (age), or Section 504 of the Rehabilitation Act (disability) for purposes of any violations of Section 1557.

To address the elimination of termination of pregnancy, the Final Rule includes the following provisions:

  • Individuals, hospitals or other institutions, programs or activities receiving federal funds cannot be forced or required to pay for a pregnancy termination.
  • No person, public or private entity can be required to pay for any benefit or services, including the use of facilities, related to a pregnancy termination.

Taglines

Under Section 1557, to assist individuals with limited English proficiency, covered entities were required to send certain notices in 15 different languages in every significant communication associated with the health plan that was larger than a brochure or postcard, such as SPDs.  As set forth in the Proposed Rule, HHS viewed this requirement as being too costly without data to back up that the taglines are beneficial.

Consistent with the Proposed Rule, the Final Rule eliminates the requirement for taglines to be included in significant communications associated with the health plan.

U.S. Supreme Court Decision Regarding Sexual Orientation and Gender Identity

Title VII of the Civil Rights Act of 1964 makes it unlawful for, among other things, an employer to fail or refuse to hire, discharge, or otherwise discriminate against an employee with respect to the employee’s compensation, terms, conditions, or privileges of employment because of the employee’s sex.  Due to a split among lower courts about whether an employee’s “sex” includes an employee’s sexual orientation or gender identity, the U.S. Supreme Court agreed to hear the issue in the Bostock case last year.  On Monday, June 15, 2020, the Court issued its much anticipated decision.   

President Trump’s appointee, Justice Gorsuch, wrote the Majority Opinion and was joined by Justices Roberts, Breyer, Ginsberg, Kagan, and Sotomayor in holding that an employer violates Tile VII if the employer terminates an employee based on the employee’s sexual orientation or gender identity.  While all parties conceded that the term “sex” in 1964 referred specifically to the biological distinctions between males and females, the Court concluded that when the an employer uses an employee’s sexual orientation or gender identity as a basis for hiring or firing, the employee’s sex is (or sex-based rules are) so inextricably intertwined with the decision that a violation of Title VII occurs. Specifically, the opinion provides, “It is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”

Therefore, whether “sex” discrimination includes gender identity or sexual orientation is a settled issued under federal law, and employers should ensure they update any handbooks or other employer policies and take any other necessary actions to ensure compliance with the law.

Section 1557 in Light of the Supreme Court’s Decision

While many speculated that HHS delayed releasing the Final Rule on Section 1557 due to the outstanding U.S. Supreme Court decision, the timing could not have been any more interesting.  While the Bostock opinion speaks exclusively to Title VII and Section 1557 speaks to Title IX for purposes of sex discrimination, given the similar protections of Title IX and Title VII, which apply “because of” or “on the basis of” sex, we expect the removal of “gender identity” from the protections of Section 1557 will bring about new challenges to the Final Rule in light of the Bostock opinion.

Moreover, as Title VII prohibits employers from discriminating against employees in the terms and conditions of employment on the basis of their sex, including gender identity or sexual orientation, employers should consider this when determining coverage options for employees.  Blanket exclusions in group health plans for services related to gender dysphoria or gender identity disorder may be subject to challenge under Title VII.

 

About the Author.  This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2020 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.

Legal Alert: IRS Releases Updated Form 720 Used For PCORI Fee Payments

Posted on June 16th, 2020

As we recently reported, on June 8, 2020, the IRS released the applicable PCORI fee for plan years ending between October 1, 2019 and September 30, 2020.  As we indicated in that alert, an updated Form 720 had not yet been released and, therefore, employers were advised to wait to file their PCORI fees until the IRS released the updated form.  Late last week, the IRS issued the updated Form 720, which is the April 2020 Revised form. Employers who sponsored a self-funded health plan, including an HRA, with a plan year that ended in 2019 should use this updated Form 720 to pay the PCORI fee by the July 31, 2020 deadline.

As a reminder:

  • The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan. 
  • The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA.  In general, health FSAs are not subject to the PCORI fee.
  • Plans that ended between January 1, 2019 and September 30, 2019 use Form 720 to pay their PCORI fee of $2.45 per covered life. 
  • Plans that ended between October 1, 2019 and December 31, 2019, use Form 720 to pay their PCORI fee of $2.54 per covered life. 

 

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions. © 2020 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.

Alera Group Releases Results of COVID-19 Employer Pulse Survey: Phase 2

Posted on June 16th, 2020

One-Third of All Employers Furloughed Employees Yet Nearly 85% Plan to Bring Back Workers

Alera Group, a national employee benefits, property and casualty, retirement services and wealth management firm, today released the results of the Alera Group COVID-19 Employer Pulse Survey: Phase 2.

The survey identified several key findings:

  • Pandemic Response: More companies have implemented a formal infectious disease response plan, and 46% of employers surveyed are putting one in place now or considering adding one.
  • Increased Furloughs and Layoffs: 30% of surveyed companies have furloughed employees, but the majority are planning to bring back those employees within three months. The restaurant/entertainment and automotive industries have been the two hardest hit, furloughing roughly 80% and 70% of their workforces respectively. Size has also played a role: companies with 1,000 or more employees furloughed the most employees, at 56%. Companies in the 2549 employee range size faired the best with those companies laying off 16% of workforce.
  • Continuing Benefits: Of those that have furloughed employees, the majority of companies are continuing benefits, rather than requiring furloughed employees to go on COBRA. This response is similar to the results from the first Pulse Survey, where 87% were continuing benefits for furloughed employees.
  • Remote Work: A third of respondents say more than 75% of their workforce is doing well with remote work. Onethird also say they are likely to require employees to continue remotely to reduce physical office costs.
  • Employee Safety: Companies are taking a variety of actions to help keep their employees safe including increasing the frequency and depth of cleaning, providing protective gear, and limiting the number of employees in certain areas.

“One thing is certain; the impacts of COVID-19 have had a wide-reaching and deep impact on nearly every industry,” said Sally Prather, Employee Benefits Practice Leader for Alera Group. “Despite the challenges from the coronavirus, since the first survey, we’ve seen that many employers have been handling the situation to the best of their abilities. The good news that is worth repeating: 84% of those employers surveyed plan to bring furloughed employees back soon with the right health precautions.”

Continues Prather, “Employers should continue to stay updated with the CDC and follow their guidelines to make sure the transition from home to workplace runs smoothly and effectively.”

The Alera Group survey was conducted online from May 18 to May 29, 2020, and consisted of 804 employers across various sizes, industries and regions. The full survey report can be viewed here. The first edition of the survey was conducted online from March 27 to April 6, 2020, and consisted of 831 employers. The first edition of the survey can be found here.

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About Alera Group

With over 80 locations across the country and nearly 2,000 teammates, Alera Group works together to deliver solutions in employee benefits, property and casualty, retirement services and wealth management. Built on a unique model of collaboration, Alera Group is now the 17th largest independent insurance agency in the United States. For more information, visit aleragroup.com.

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