Post-Election: Health Care Reform Here to Stay

Post-Election: Health Care Reform Here to Stay

November 27, 2012

James R. Napoli
jnapoli@proskauer.com

© 2012 Proskauer. All Rights Reserved.

Welcome and Introduction

• The Political Question
• Impact on Employers/Plan Sponsors
• Tax Provisions under ACA Relevant to Employers
• Employer Reporting Obligations Under ACA
• Litigation Risks
• Questions

2

The Political Question

• Chief Justice Roberts:

“…we possess neither the expertise nor the
prerogative to make policy judgments. Those
decisions are entrusted to our Nation’s elected
leaders, who can be thrown out of office if the
people disagree with them. It is not our job to
protect the people from the consequences of their
political choices.”

• The November election will become a referendum on the Act

3


• President Obama and Democratic Candidates ran
on the positive aspects of the Act:
Coverage to Age 26
Elimination of Lifetime and Annual Limits
Abolition of pre-existing conditions
Access for individual and small employers through
Exchanges
Subsidies for those who can least afford coverage

4


• Governor Romney and Republican Candidates ran
on the negative aspects of the Act:
Governor Romney took a “Repeal and Replace” posture
Constitutes a tax disproportionately applied to lower- and
middle-income earners
Empowers federal regulators to dictate to employers and
individuals and the medical community
Increased costs and deficits

5

The Political Question - Exchanges

• Types of Exchanges: State, Federally Facilitated, and
Partnership
• All states to establish an Exchange by January 1, 2014
• 2017: States may allow large employers to enter Exchanges
• Exchange plans must offer “essential health benefits” at
certain levels; must be community rated
• Federal subsidies will be available to help people buy
coverage
• CBO expects 20 Million individuals utilizing exchanges by
2020

6

Exchange Options: As of September 2012

Data Source: Kaiser Family statehealthfacts.org
7

Impact on Employers/Plan Sponsors
- Preventive Care Rules

• Non-grandfathered plans must provide preventive care without
cost-sharing
• Initially applied to services with an "A" or "B" rating from the
United States Preventive Services Task Force (immunization,
screenings and preventative care for infants, children and
adolescents, additional care for women)
• Later expanded by HHS to include all FDA approved
contraceptives (effective for plan years starting August 1, 2012)
• HHS will permit employers "who, based on religious beliefs, do
not currently provide contraceptive coverage in their insurance
plan" until August 1, 2013, to comply

9

– Other Mandates (2013)

• Form W-2 reporting requirement (for the 2012 tax year)
• $2,500 limit on employee contributions to health FSAs (for plan
years beginning in 2013)
• Requirement for employers to notify employees of the availability
of health insurance exchanges (March 2013)
• Expansion of FICA in 2013 to include an additional 3.8% tax on
the unearned income of high income individuals
• 0.9% Medicare payroll tax increase in 2013 on high income
individuals

10


• The “pay-or-play” mandate
• Employer certification to HHS regarding whether its group health
plan provides “minimum essential coverage”
• Increase in permitted wellness incentives from 20% to 30% (50%
for tobacco cessation programs)
• For large employers (200+ employees), automatic enrollment of
new employees in a group health plan (effective date unknown)
• 90 day limit on waiting periods
• Coverage under non-grandfathered plans for certain approved
clinical trials

11


• Complete prohibition on annual dollar limits
• Guaranteed availability and renewability of insured
group health plans
• Prohibition on preexisting condition exclusions

12

– Regulatory Uncertainty

• Guidance on nondiscrimination rules for non-grandfathered,
insured plans
• Additional guidance and regulations on the preventive care rules
Expect rules for women’s preventive services with respect to self-
insured plans of religious employers
• Guidance on “essential health benefits”
• Guidance on the “pay-or-play” mandate
Definition of full time employee; Exclusions; Process
• Rules on automatic enrollment provisions
• Clarification regarding limits on cost sharing effective 2014
• Additional guidance on state Exchanges

13

– Audit Risk

• DOL, IRS and HHS audits will increase
Already seeing audits of grandfathered status by
DOL under the Act
• DOL efforts focus on increasing employer
compliance rather than assessing penalties in
early years

14

Insurance Mandates and Market Reforms

• Failure to comply with the Act’s insurance mandates and
market reforms (such as coverage of adult children,
elimination of lifetime limits, etc.) may subject the employer
to an excise tax
$100 per day per affected individual
Limited to the lesser of $500,000 or 10% of employer’s healthcare
costs for the prior tax year
Exceptions:
Failures due to reasonable cause that are corrected within 30 days
after the plan knew or should have known about the failure
Employer did not know the failure occurred and could not have known
by exercising reasonable diligence

15

IRS Form 8928 Reporting

• Employers are required to self-report failures to comply with
COBRA, HIPAA, GINA, MHPAEA, and other federal laws
Effective January 1, 2010
Updated in 2011 to reflect PPACA mandates

• Penalty is $100/day per affected individual
• Penalty will not apply if the failure is timely corrected and
was not caused by willful neglect
• Exceptions for small employers: less than 50 employees on
business days in prior year

16


• Once a plan is notified of an IRS examination, “reasonable
cause” exception is limited
• Penalties can be up to $2,500 per affected individual for de
minimis violations, or $15,000 per affected individual for
violations that are not de minimis

17


• If required, Form 8928 must be filed no later than the
company's income tax return due date for the
applicable year (regardless of any extensions)
However, an automatic 6-month extension may be obtained by
filing Form 7004 by the regular due date (along with the taxes)

• A late filing may result in a penalty of 5% of the unpaid
tax per month (up to 25%)
Additional penalties may apply if the tax is not timely paid
(.5% per month, up to 25%), unless failure is due to
reasonable cause and not willful neglect

18

Notice of Availability of Insurance Exchange

• Effective March 23, 2013, employers must provide notice of
the existence of the health insurance exchange
Notifies employees of the potential eligibility for federal
assistance if the employer's health plan is “unaffordable” and
the possibility that the employer may not contribute to the cost
of coverage purchased through an Exchange

19

Coming Soon: Transitional Reinsurance
Program

• Assessment on carriers and TPAs (on behalf of self-
funded plans)
• Generally applies to all group health plans – no exceptions for
non-ERISA plans (e.g., governmental or church plans)
• Applies on a per-member basis
• Does not apply to HIPAA-excepted benefits
• Applies to 2014-2016 plan years
• Intended to stabilize premiums in the individual markets
• Additional employer recordkeeping and cost
requirements

20

Non-Discrimination Rules

• Delayed until guidance released
• Will apply to non-grandfathered, fully-insured plans
after release (already apply to self-insured)
• Prohibits discrimination in favor of “highly
compensated employees” with respect to eligibility &
benefits
Note: Testing Performed on a Controlled Group Basis

• Penalty: up to $500,000 under ACA

21

Comparative Effectiveness Fee

• Effective for plan years ending after September 30, 2012 and
before October 1, 2019
• $2 fee per member per year
Paid by insurers if insured plan
Paid by plan sponsor if self-funded plan
• Fee reduced to $1 for plan years ending before October 1,
2013
• For plan years beginning after September 30, 2014, fee
increases based on national health expenditures
• Fee supposed to sunset after 2019

22

Comparative Effectiveness Fee

• Fee applies separately to insurers and plan sponsors
An HRA that is integrated with an insured group health plan is
subject to the fee, as is the insurer, even though the HRA and the
insured plan are maintained by the same plan sponsor
• Insurers and plan sponsors must pay these fees annually on
Form 720, which is due by July 31 of each year
• A return will generally cover policy or plan years that end
during the preceding calendar year
• Form 720 may be filed electronically

23

W-2 Reporting of Health Costs

• Beginning with 2012 Forms (i.e., Forms issued in January
2013), employers must report aggregate cost of health
coverage
• Small Employer Exception: those issuing less than 250 W-2’s
in prior year exempt until further guidance issued
• Reportable cost includes the entire cost of the coverage
(without any reduction for employee contributions)
• Cost of coverage is determined under rules similar to those for
determining COBRA premiums (excluding 2% administrative
charge)

24

W-2 Reporting of Health Costs

• Employers could be subject to significant penalties each
year for failing to properly report the cost of employer-
sponsored coverage
• Penalty of $100 per Form W-2, capped at $1.5 million
per year
For failures corrected within 30 days, the penalty is reduced
to $30 per Form W-2, capped at $250,000 for the year
For failures corrected after 30 days but on or before August
1, the penalty is $60 per Form W-2, capped at $500,000 for
the year

25

W-2 Reporting Tips

• Use a “reasonable method” of valuing coverage for terminated
employees
Reporting not required if an employer accommodates a former
employee’s request for a W-2 prior to end of the year
• Not necessary to use the same method for every plan, but use
the same method with respect to each employee receiving
coverage under a plan
• Reportable costs must reflect any increase or decrease in cost
for the year
If an employee changes coverage during the year, the reportable
cost must account for the change in coverage

26

W-2 Reporting Failures

• Employers could be subject to significant penalties each
year for failing to properly report the cost of employer-
sponsored coverage
• Penalty of $100 per Form W-2, capped at $1.5 million
per year
For failures corrected within 30 days, the penalty is reduced
to $30 per Form W-2, capped at $250,000 for the year
For failures corrected after 30 days but on or before August
1, the penalty is $60 per Form W-2, capped at $500,000 for
the year

27

Summary of Benefits and Coverage

• The Basics
• Final Rule effective September 23, 2012
• SBC cannot exceed four double-sided pages in length and must be
“culturally and linguistically appropriate”
Special rules for plan designs that do not fit the template
• SBC must be accompanied by the “uniform glossary”
Available at www.healthcare.gov and www.dol.gov/ebsa/healthreform/
• HHS forms: http://cciio.cms.gov/resources/other/index.html#sbcug
• Upon renewal, an SBC need only be provided for the benefit option
in which a participant is enrolled, unless other SBCs are requested
• SBC is in addition to Summary Plan Description requirement

28


• The Basics (cont.)
• The SBC requirement applies jointly to plans and carriers
Carrier responsible for developing SBC for insured plan
Employer responsible for developing SBC for self-funded plan

• A plan or carrier that willfully fails to provide an SBC is
subject to a fine of up to $1,000 per offense
Each failure with respect to a participant is a separate offense

• SBC may be included with other documents (e.g., SPD)
as long as it is “prominently displayed”
• Premiums not required to be disclosed on SBC

29


• Timing of Initial Distribution
• Based on participants’ enrollment status
• For participants who are enrolling or reenrolling at open
enrollment (including late enrollees), the SBC must be
provided before the first day of open enrollment
beginning on or after September 23, 2012
• For participants who enroll other than through open
enrollment (including newly eligible employees and
special enrollees), the SBC must be provided starting on
the first day of the plan year beginning on or after
September 23, 2012
30


• Methods of Distributing the SBC
The SBC requirement is satisfied if a single SBC is provided to an
employee and spouse known to reside at the same address
The SBC requirement may be satisfied electronically, provided
the distribution complies with ERISA’s electronic disclosure rules
• Changes to the SBC
If a material modification is made mid-year that affects the
content of the SBC, and it’s not reflected in the most recent SBC,
the plan or carrier must provide enrollees 60 days’ advance
notice of the change
Plans are not required to distribute a new SBC 60 days in
advance of changes made in connection with the renewal

31


• Providing the SBC
• SBC must be provided at the following times:
Upon request (ASAP, but no later than 7 days)
Within 90 days of enrolling under a HIPAA special
enrollment
With open enrollment materials (or, if no materials are
provided, by the date the participant is eligible to
enroll)
If the SBC cannot be timely provided because the plan
terms have not been finalized, the SBC must be
provided within 7 days of finalizing the plan terms
32


• Content of the SBC
Uniform definitions of standard insurance and medical terms
Coverage description and cost sharing for certain benefits
The exceptions, reductions, and limitations of the coverage
The renewability and continuation of coverage provisions
Two coverage examples
Statement that the SBC is only a summary and to consult the
plan
Contact information for questions and obtaining plan documents
Web address for obtaining Rx information, a list of network
providers, and the “uniform glossary”
Statement as to whether the plan provides “minimum essential
coverage” (2014)
33

$2,500 Health FSA Limit

• Effective for plan years beginning in 2013
Limits annual employee contributions to $2,500
Indexed to the CPI starting in 2014
Does not limit employer contributions that are non-cashable

• To Do:
Communication to begin in 2012 (2nd half)
Plan amendments recommended by start of 2013 plan year
However, an amendment adopted by the end of 2014 may apply
retroactively if the plan has complied with the $2,500 limit

• Reminder: OTC drugs no longer reimbursable under
FSA/HRA/HSA without a prescription

34

Additional 0.9% Medicare Payroll Tax

• Effective January 1, 2013
Under ACA, the employee portion of the FICA hospital
insurance (HI) payroll tax is increased by 0.9% for
employees with wages in excess of $200,000
($250,000 for married couples filing jointly)
Example: the current 1.45 percent HI tax rate applies to wages
up to $200,000/$250,000, and a 2.35 percent tax rate applies
to any wages over those amounts
The $200,000 and $250,000 thresholds are not indexed
Note: the 0.9% increase is not applicable to the employer’s
portion of the HI tax

35

Additional 0.9% Medicare Payroll Tax

• If the employer fails to withhold the additional 0.9%
tax on wages in excess of $200,000, the employer
will be liable for the taxes that were not withheld
If the employee ultimately pays the tax, the employer
will no longer be responsible
However, the employer will be liable for any penalties
that may result from its failure to withhold correctly

36

Elimination of tax deduction for RDS payments

• Retiree Drug Subsidy – federal program that provides tax-free
contribution to employers for up to 28% of annual retiree drug
costs
• Before ACA, employers could deduct their entire retiree drug
expense, including costs they paid using the tax-free
government subsidy
• However, starting in 2013, employers can no longer take a tax
deduction for the government-subsidized portion of
prescription drug expenses
Accounting rules may require employers to include the present
value of the future taxes as a current liability prior to 2013

37

Employer “Pay-or-Play” Mandate

• In 2014, the pay-or-play mandate requires employers of
50 FTE or more to offer quality, affordable health
insurance coverage to full time employees (30 hours per
week or 130 hours per month) and their families
• Failure to offer such coverage potentially subjects the
employer to a tax penalty for a given month if a full time
employee receives a federal premium tax credit and is
enrolled in coverage through an Exchange

38

What are the Pay-or-Play Penalties?

• Employers who “opt out” of providing benefits
• Employers who do not provide health coverage to all full
time employees (and their dependents) are penalized
• If at least one full time employee (30+hrs/wk or 130+ hrs/mo) is
eligible for, or receives, a tax credit and enrolls in exchange
coverage, the employer is subject to an annual penalty of $2,000
× all full time employees (except for the first 30)
• Penalty is assessed monthly (i.e., $167.67 per full time employee
per month)

39

What are the Pay-or-Play Penalties?

• Employers who provide “unaffordable” coverage
• Coverage is affordable only if the premium for single
coverage under the employer’s lowest cost plan with at
least a 60% “actuarial value” does not exceed 9.5% of
household income (or W-2 wages)
• Annual penalty is the lesser of $3,000 for each full time
employee who receives a tax credit and enrolls in
exchange coverage, or $2,000 multiplied by all full time
employees (subtracting first 30)
• Penalty is assessed monthly (i.e., $250 per subsidy-receiving full
time employee per month)

40

Determining Full Time Employee Status For
Purpose of the Pay or Play Tax

• “Look-back/stability period safe harbor” method
• The employer selects a 3-12 month “measurement”
period to determine which employees averaged at least
30 hours per week
• Employee will be treated either as full time or not full
time during the subsequent “stability period”,
regardless of hours worked
• Stability period is the longer of 6 months or the
measurement period

41

Variable Employees & Full Time Employee
Status

• A Variable Employee: On start date, it cannot be
determined whether employee is expected work on
average at least 30 hours per week
• Initial Measurement Period of Between 3 and 12 months
Assess average during Initial Measurement Period
Assessment is then used for stability period that is the same as
for ongoing employees
• Use of Administrative Period: can use an “administrative
period” but total can not exceed 13 months (plus the
remainder of the month if anniversary falls in middle of
month)

42

Coordination with 90-day Waiting Period Limit

• An employer will not be subject to a penalty for
the first three months following an employee’s
date of hire
• Coordinates with 90-day limit on waiting
periods, which is effective for plan years
beginning in 2014

43

Other Tax Related Provisions

• Taxes Relevant to Individuals
Increased excise tax on non-qualified HSA
distributions
Increased itemized deduction limit for medical
expenses
3.8% FICA tax on unearned income

• Individual Mandate and Federal Premium Tax
Credits

44

Other Tax Related Provisions

• Relevant to Individuals:
• Effective January 1, 2011, the penalty for using HSA funds for
non-medical purposes increased from 10% to 20%
• Effective January 1, 2014, the itemized deduction for medical
expenses is allowed only to the extent expenses exceed 10%
of AGI, increasing the threshold from 7.5%
The 10% threshold does not apply to individuals age 65+ until
January 1, 2017

45

3.8% FICA tax on unearned income

• Effective January 1, 2013, FICA taxes are expanded to include a
new 3.8% tax on the lesser of (A) net investment income, and (B)
the excess of AGI over $200,000 ($250,000 if filing jointly)
• Example 1:
• Individual’s wage income: $200,000 no 0.9% wage tax;
• Investment income: $ 50,000 3.8% tax paid on $10,000
• Assume modified AGI is: $210,000 (excess of AGI >$200K)
• Example 2:
• Individual’s wage income: $350,000 0.9% wage tax on $150k;
• Investment income: $ 50,000 3.8% tax paid on $50,000
• Assume modified AGI is: $325,000 (investment income)

46

Litigation Risk

• Workforce Realignment
• Retiree-Only Plans
• Retiree Medical Exit Strategy
• IROs
• Claims to Mandated Benefits
• Whistleblower Actions

47

Avoiding the Employer Mandate
– Workforce Realignment

• How are employers responding to the Employer Mandate?
Possible avoidance by reorganizing workforces
o Penalty determined based on “full-time” employees
o ACA “full-time” employees work at least 30 hrs per week
o Now, “part-time” employees work less than 40 hrs per week
o Employers may reduce employees’ hours below 30 per
week to avoid “full-time” employees under ACA

48

– Workforce Realignment (cont’d)

• Risks to workforce reorganization?
Discrimination, retaliation as to benefits (ERISA § 510)
o No discrimination or retaliation “against a participant or beneficiary for
exercising any right to which he is entitled”
o Or “interference with . . . any right to which [they] may become entitled”
o If motivated by a “specific intent” to interfere with benefits
Same, as to a protected class (e.g., ADEA and Title VII)
o Need to ensure that “adverse” employment action (i.e., cutback in hours)
does not disparately impact a protected class of employees
o Is there a legitimate business reason other than avoiding penalties?
Whistleblower action under ACA
o Cannot take adverse employment action against an employee who
reports a violation of ACA to the employer or a government agency

49

– Workforce Realignment (cont’d)

• How to minimize risks?
Determine affected employees and current benefit rights
Accomplish cost savings via plan design instead?
o Settlor function v. employment action
o Note: Still need to ensure plan design does not
disparately impact a protected class of employees
Document legitimate business reasons for
reclassifications

50

Avoiding ACA Coverage Mandates
– Retiree Only Plans

• ACA generally does not apply to “retiree-only plans”
Retiree-only plans cover fewer than 2 active employees

• What if plan covers both active and retirees?
ACA would apply to the entire plan
Would need to spin off the retirees into a separate
retiree only plan to avoid
ACA would continue to apply to active plan, but would
not apply to the new retiree only plan.

51

– Retiree Only Plans (cont’d)

• Risks of spinning off a retiree-only plan?
ERISA § 502(a)(1)(B): authorizes civil actions to recover
benefits due under a plan and enforce plan terms
ERISA § 502(a)(3): authorizes civil actions to enjoin any
act or practice which violates ERISA or the terms of the
plan or to obtain other “appropriate equitable relief” to
redress violations of ERISA or the Plan
LMRA § 301(a): authorizes civil actions to enforce CBA
terms

52

– Retiree Only Plans (cont’d)

• How can these risks be minimized?
Thoroughly review the plan documents, etc. to
determine the benefits “promised” to retirees
Thoroughly review the plan documents, etc. for valid
reservation of rights clauses
Follow the prescribed method for amending the plan(s)

53

Taking Advantage of Exchanges
– Retiree Medical Exit Strategy

• According to a recent study, ACA is a catalyst to employers
exiting sponsorship of retiree medical plans
• One exit strategy is to use the exchanges as a “soft
landing” for retirees who will lose employer-sponsored
coverage
• Risks are similar to the retiree medical spin off:
ERISA § 502(a)(1)(B): authorizes civil actions to recover benefits due
under a plan and enforce plan terms
ERISA § 502(a)(3): authorizes civil actions to enjoin any act or
practice which violates ERISA or the terms of the plan or to obtain
other “appropriate equitable relief” to redress violations of ERISA or
the Plan
LMRA § 301(a): authorizes civil actions to enforce the terms of a CBA

54

Taking Advantage of Exchanges
– Retiree Medical Exit Strategy (cont’d)

• How can these risks be minimized?
Thoroughly review the plan document, SPD, CBA, if
applicable, and other plan related materials to determine
the what benefits were “promised” to retirees
Thoroughly review the plan document, SPD, CBA, and
other plan related materials to determine whether a valid
reservation of the right to amend the terms and
conditions of plan coverage exists
Consider a court action to bind retirees

55

External Appeals & IROs
– Loss of Deferential Review?

Federal external appeals process (does not apply to
grandfathered plans)

Group health plans, e.g., self-funded ERISA plans,
are required to provide external review processes by
Independent Review Organizations (“IROs”)
External review is final and binding

Will IROs be subject to ERISA’s fiduciary duties?

How does this impact the standard of review?

56

– Process

• Contracting with IROs
Plan may contract directly with IROs or through its TPA
Contracting IROs through a TPA does not relieve plan
fiduciaries of their oversight responsibilities
o Perform due diligence with respect to the selection of IROs
o Continued monitoring of IROs by appropriate plan fiduciary
o Indemnification issues
Keep fiduciary status in mind when contracting with IROs
and setting up external appeals procedures
o Is an IRO and ERISA fiduciary?

57

– Regulatory Uncertainty
• Safe harbor until further guidance
DOL and IRS will not take enforcement action if external review
procedure meets certain standards
Safe harbor allows use of state process or adoption of specific
procedures for the following:
o Initiating an external review
o Procedures for preliminary reviews to determining whether a claim is eligible
for external review
o Contracting with at least 3 IROs that meet minimum requirements
2 IROs by January 1, 2012
3rd IRO by July 1, 2012
o A process for the random assignment of external reviews to an IRO
o Standards for IRO decision making (including that it be de novo)
o Rules for providing notice of a final external review decision
o Process for expedited external review

58

– Litigation Risk

• Possible litigation involving IROs
Plan Administrator vs. IRO
o If IRO is a plan fiduciary
ERISA § 502(a)(3): authorizes civil actions to enjoin any act or
practice which violates ERISA or the terms of the plan or to
obtain other “appropriate equitable relief” to redress violations
of ERISA or the Plan
ERISA § 502(a)(2): authorizes civil actions to recover liabilities
associated with fiduciary breaches
o If IRO is not a plan fiduciary
Breach of contract
Professional negligence

59

– Litigation Risk

• Possible IRO litigation scenarios:
Plan Participant vs. IRO
o If IRO is a plan fiduciary
ERISA § 502(a)(3): authorizes civil actions to enjoin any act or practice
which violates ERISA or the terms of the plan or to obtain other
“appropriate equitable relief” to redress violations of ERISA or the Plan
o If IRO is not a plan fiduciary
ERISA preemption?
Plan Participant vs. Oversight Fiduciary
o ERISA § 502(a)(3): authorizes civil actions to enjoin any act or
practice which violates ERISA or the terms of the plan or to obtain
other “appropriate equitable relief” to redress violations of ERISA
or the Plan

60

Claims for Mandated Benefits

• Possible claims for failure to provide mandated
benefits:
ERISA § 502(a)(1)(B): authorizes civil actions to
recover benefits due under a plan and enforce plan
terms
ERISA § 502(a)(3): authorizes civil actions to enjoin
any act or practice which violates ERISA or the
terms of the plan or to obtain other “appropriate
equitable relief” to redress violations of ERISA or
the Plan

61

Claims for Mandated Benefits (cont’d)

• Mandates for grandfathered and non-grandfathered plans
• Plan years beginning on or after • Plan years beginning on or after
September 23, 2010 January 1, 2014:
No lifetime limits on essential health No annual limit on dollar value
benefits of essential benefits, without
exception
Minimum annual limits on dollar
value of essential health benefits Coverage of children to age 26,
regardless of other coverage
Coverage of children to age 26
(grandfathered plans may exclude No preexisting condition
children eligible for other coverage) exclusions
No rescission except in case of Waiting periods limited to 90
fraud days
No preexisting condition exclusions Changes to wellness plan
for children under age 19 incentives

62

Claims for Mandated Benefits (cont’d)

• Additional mandates for non-grandfathered plans only:
Limits on deductibles and out-of-pocket maximums
Nondiscrimination for insured plans determined under IRC 105(h)
Internal and external appeal process rules
Coverage of in-network preventive services with no cost-sharing
Special rules on choosing primary care provider
No prior authorization for OB/GYN visits
Coverage of out-of-network emergency services using in-network
cost-sharing and no prior authorization requirement
Coverage of treatment for those in clinical trials

63

ACA Whistleblower Protections

• ACA prohibits employers from taking adverse action
against any employee because the employee:
received a premium tax credit or subsidy for a health plan
provided information to the employer or the federal or state
government concerning a violation, act or omission the employee
reasonably believes to be a violation relating to Title I of the ACA
testified or is about to testify in a proceeding concerning such
violation
assisted or participated, or is about to assist or participate, in such
a proceeding
objected to, or refused to perform any activity or assigned task the
employee reasonably believes to be such a violation

64

ACA Whistleblower Protections (cont’d)

• Standards of Proof
Claim – employee must prove by a preponderance of the evidence that the
employee’s protected activity was a contributing factor to the employer’s
adverse employment action
Defense – the employer can avoid liability only if it proves by clear and
convincing evidence that it would have taken the same action in the absence
of the employee engaging in the protected conduct
• Procedure
Administrative Process – employee must file a complaint with OSHA within
180 days of the employee becoming aware of the retaliatory action. OSHA will
then investigate the complaint and can order preliminary relief. Either party
can appeal OSHA’s determination by requesting a hearing before an
administrative law judge of the U.S. Department of Labor.
Federal Court – if the Secretary of Labor fails to issue a final decision within
210 days after a complaint is filed, or within 90 days after receiving a written
determination from OSHA, the complainant may pursue the claim in federal
court and may request a trial by jury

65

ACA Whistleblower Protections (cont’d)

• Remedies include reinstatement, back pay, special
damages (including emotional distress damages), and
attorneys’ fees
• Whistleblower protections and remedies are in addition
to any other rights under federal or state law or under
a collective bargaining agreement
• Whistleblower protections cannot be waived

66

Next Steps for Employers/Plan Sponsors

1. Review plan documents and SPDs
2. Address readiness for upcoming requirements
3. Consider all of your compliance options
4. Engage in the regulatory process

67

Questions?

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68

James R. Napoli
Senior Counsel

• James R. Napoli is a Senior Counsel in the Washington, D.C. office of Proskauer
Rose LLP, where he chairs the Firm’s Health Care Reform Task Force. He has
experience litigating matters involving claims to benefits under pension plans, long-
term disability plans, employer sponsored medical plans, and general insurance
contracts. He has litigated matters involving claims for breach of fiduciary duty and
fiduciary misrepresentation. The defense of actions raising ESOP valuation issues,
defined contribution account balance valuation issues, executive compensation
issues, ERISA §510 claims, and preemption issues have all been an important part
of Jim’s experience. He also has brought claims for breach of contract, breach of
fiduciary duty, and reimbursement on behalf of his ERISA party clients. Jim is also
experienced in representing clients before the IRS, DOL and PBGC. He recently
202.416.5862 served as counsel of record on an amicus brief filed with the US Supreme Court on
jnapoli@proskauer.com behalf of the American Benefits Council in the pending healthcare reform litigation.
He also participated in the settlement of Chrysler’s nearly $10 billion retiree medical
obligation with the UAW Retiree Medical Benefits Trust. In addition to his
controversy practice, Jim counsels employers on all aspects of their employee
benefit programs, including matters affecting tax-qualified retirement plans (such as
401(k) plans, cash balance pension plans, traditional defined benefit plans, and
other retirement plan designs); executive compensation plans; and welfare benefit
plans (including cafeteria plan, COBRA and other group health plan issues). Mr.
Napoli is a frequent speaker on employee benefit matters, including a series of
webinars and lectures on Healthcare Reform. He is the managing author of “The
New Health Care Reform Law - What Employers Need to Know,” published by
Thompson Publishing, and has authored numerous articles and other publications
on employee benefit matters.

69

Proskauer’s Global Presence

70

Post-Election: Health Care Reform Here to Stay

November 27, 2012

James R. Napoli
jnapoli@proskauer.com

The information provided in this slide presentation 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 firm, our lawyers or our clients. No client-lawyer relationship between you and the firm is or may be created by your access to or use of this presentation or any
information contained on them. Rather, the content is intended as a general overview of the subject matter covered. Proskauer Rose LLP (Proskauer) is not obligated to provide updates on the information
presented herein. Those viewing this presentation are encouraged to seek direct counsel on legal questions. © Proskauer Rose LLP. All Rights Reserved.


Post-Election: Health Care Reform Here to Stay

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