Legal Alert Archives - Benefit Advisors Network

OSHA Emergency Temporary Standard for COVID-19 Vaccine and Testing Stayed By 5th Circuit Court of Appeals

Posted on November 16, 2021November 16, 2021 by Stacy Barrow

On September 9, 2021, President Biden announced that he ordered OSHA to develop an emergency temporary standard (ETS) that would require private employers with 100 or more employees to mandate that employees either receive one of the three available COVID-19 vaccines or submit to weekly COVID-19 testing. On November 5, 2021, OSHA published its COVID-19 Vaccination and Testing Emergency Temporary Standard, which included a summary, fact sheet, and FAQs. The ETS was immediately challenged by a number of petitioners, including states and private companies, seeking to permanently enjoin enforcement of the ETS. On November 6, 2021, the United States Court of Appeals for the Fifth Circuit (the 5^th Circuit), temporarily stayed enforcement of the ETS pending briefing by the parties and expedited judicial review.

After completing its expedited review, on November 12, 2021, the 5^th Circuit affirmed its initial stay, holding that petitioners met all four factors to establish the need for a further stay, and ordered OSHA to take no further steps to implement or enforce the ETS pending adequate judicial review of the request for a permanent injunction. The U.S. Department of Justice disagreed that an immediate stay was necessary given that a “multi-circuit lottery” will occur on or about November 16, after which all lawsuits challenging the ETS will be heard by one federal appeals court.

OSHA ETS

As a reminder, the ETS requires employers with 100 or more employees to develop and implement a mandatory, written COVID-19 vaccination policy by December 5, 2021, or a written policy requiring employees to either be vaccinated or produce a negative COVID-19 test result and wear a face covering at work. Employers are required to begin enforcing the policy on January 4, 2022, meaning most employees of covered employers would have to submit to regular testing and wear a face covering or be fully vaccinated by January 4, 2022.

The ETS permits covered employers to allow for reasonable accommodation for employees who cannot be vaccinated and/or wear a face-covering due to a disability, as defined by the ADA, or if vaccination, and/or testing for COVID-19, and/or wearing a face-covering conflicts with an employee’s sincerely held religious belief, practice, or observance.

Further, the ETS requires employers to provide employees with time off for obtaining their vaccinations. Specifically, the ETS requires employers to provide employees with a reasonable amount of paid time (up to 4 hours at their regular rate of pay per dose, as applicable) to travel to and receive their COVID-19 vaccine dose(s). Further, employers are required to provide reasonable time and paid sick leave to employees who need the time to recover from the side effects of either dose, as applicable, of the vaccine.

Temporary Injunction Order

As the 5^th Circuit recognized, OSHA rarely implements an ETS, as this is an extraordinary power provided to the agency. The OSHA ETS powers have only been used ten times in fifty years. Six ETS’s were challenged in court; only one survived. In this instance, the 5^th Circuit found many issues with the ETS, including that it appears to be overly broad as it applies to employers in almost all industries and workplaces in the country without accounting for obvious differences in risks facing employees given these differences, and for not addressing how the ETS purports to save workers from grave danger in workplaces with 100 or more employees, but workers, including vulnerable workers, in workplaces with fewer than 100 employees do not require similar protection.

While OSHA attempted to address its basis for focusing on larger employers in its ETS (i.e., larger employers it believed would be better equipped to administer the mandate), the 5^th Circuit points out that the agency’s mission is to ensure “safe and healthy working conditions and to preserve human resources.” Thus, if COVID-19 is a true workplace emergency, then it should be targeted to ensure workplace safety for all employees. Moreover, the 5^th Circuit recognized that taking almost two months (from the date of the President’s directive) to develop an ETS when we are almost two years into the pandemic calls into question the true “emergent” need for the ETS.

In its motion to oppose the stay, OSHA explained that it acted now because voluntary safety measured proved ineffective, COVID grew more virulent (e.g., the Delta variant), and fully approved vaccines and tests are increasingly available. OSHA believes the contention that it incorrectly applied the ETS to all job sites and employees of all ages disregards OSHA’s explanation, supporting evidence, and permitted exemptions (e.g., for those working from home, alone, or outdoors). OSHA noted that its standards are not required to operate on an employer-by-employer basis or employee-by-employee basis.

Moreover, OSHA believes the petitioners did not show that their claims would outweigh the harm of staying the ETS, which OSHA believes will save thousands of lives and prevent hundreds of thousands of hospitalizations. OSHA’s analysis indicates that the stay would likely cost dozens or even hundreds of lives per day. OSHA believes that the petitioners’ claims are speculative and remote and do not outweigh the interest in protecting employees from COVID-19 while the case progresses.

What Does This Mean for Employers?

With the temporary stay in effect, covered employers are, at this time, not required to meet the December 5, 2021, and January 4, 2022 deadlines to, among other things, develop their vaccine policies and require employees to be fully vaccinated or submit to regular testing and wearing face coverings at work, respectively.

It is unclear when the ETS will, if at all, be effective and enforceable against covered employers, though it is likely that this issue will move quickly through the courts. The next step for the ETS involves consolidating all outstanding lawsuits challenging it via a “multi-circuit lottery” to determine which federal appeals court will decide them. The lottery is expected to occur on or about November 16, 2021.

It is worth noting, however, the 5^th Circuit’s order only applies to OSHA’s ETS and does not prevent employers from mandating on their own that their employees be vaccinated, subject to the ADA and Title VII if a reasonable accommodation is required. Employers have already successfully implemented such mandates that have withstood challenges in federal court. In the meantime, employers should be prepared to implement a mandatory vaccine policy if the 5^th Circuits temporary stay is lifted or overturned.

Finally, because the ETS does not apply to federal contractors (who must comply with the President’s Executive Order and the Safer Federal Workforce Task Force COVID19 Workplace Safety: Guidance for Federal Contractors and Subcontractors) or employees providing healthcare services or healthcare support services who are subject to the Healthcare ETS while the Healthcare ETS is in effect, the 5^th Circuits stay does not impact employers covered by these requirements. Employers and employees subject to these requirements must continue to comply at this time.

___________________________________________

About the Authors. This alert was prepared 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.

This article is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

Legal Alert: Reminder PCORI Fees Due By July 31, 2019

Posted on May 21, 2019May 22, 2019 by Stacy Barrow

REMINDER: PCORI Fees Due By July 31, 2019

Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming July 31, 2019 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (PCORI). As background, the PCORI was established as part of the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury. Under the ACA, most employer sponsors and insurers will be required to pay PCORI fees until 2019 (the fee does not apply to plan years ending on or after October 1, 2019). For employers with calendar year plans, this July’s payment will be their final PCORI filing.

The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date. This year, employers will pay the fee for plan years ending in 2018.

• For plan years that ended between January 1, 2018 and September 30, 2018, the fee is $2.39 per covered life and is due by July 31, 2019.
• For plan years that ended between October 1, 2018 and December 31, 2018, the fee is $2.45 per covered life and is due by July 31, 2019.

For example, a plan year that ran from July 1, 2017 through June 30, 2018 will pay a fee of $2.39 per covered life. Calendar year 2018 plans will pay a fee of $2.45 per covered life.

NOTE: 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.

Employers that sponsor self-insured group health plans must report and pay PCORI fees using IRS Form 720, Quarterly Federal Excise Tax Return. If this is the employer’s last PCORI payment and they do not expect to owe excise taxes that are reportable on Form 720 in future quarters, they may check the “final return” box above Part I of Form 720.

Note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it generally should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions. However, an employer’s payment of PCORI fees is tax deductible as an ordinary and necessary business expense.

Historical Information for Prior Years
• For plan years that ended between October 1, 2017 and December 31, 2017, the fee is $2.39 per covered life and is due by July 31, 2018.
• For plan years that ended between January 1, 2017 and September 30, 2017, the fee is $2.26 per covered life and is due by July 31, 2018.
• For plan years that ended between October 1, 2016 and December 31, 2016, the fee is $2.26 per covered life and was due by July 31, 2017.
• For plan years that ended between January 1, 2016 and September 30, 2016, the fee is $2.17 per covered life and was due by July 31, 2017.
• For plan years that ended between October 1, 2015 and December 31, 2015, the fee was $2.17 per covered life and was due by August 1, 2016.
• For plan years that ended between January 1, 2015 and September 30, 2015, the fee was $2.08 per covered life and was due by August 1, 2016.
• For plan years that ended between October 1, 2014 and December 31, 2014, the fee was $2.08 per covered life and was due by July 31, 2015.
• For plan years that ended between January 1, 2014 and September 30, 2014, the fee was $2 per covered life and was due by July 31, 2015.
• For plan years that ended between October 1, 2013 and December 31, 2013, the fee was $2 per covered life and was due by July 31, 2014.
• For plan years that ended between January 1, 2013 and September 30, 2013, the fee was $1 per covered life and was due by July 31, 2014.
• For plan years that ended between October 1, 2012 and December 31, 2012, the fee was $1 per covered life and was due by July 31, 2013.

Counting Methods for Self-Insured Plans

Plan sponsors may choose from three methods when determining the average number of lives covered by their plans.

Actual Count method. Plan sponsors may calculate the sum of the lives covered for each day in the plan year and then divide that sum by the number of days in the year.

Snapshot method. Plan sponsors may calculate the sum of the lives covered on one date in each quarter of the year (or an equal number of dates in each quarter) and then divide that number by the number of days on which a count was made. The number of lives covered on any one day may be determined by counting the actual number of lives covered on that day or by treating those with self-only coverage as one life and those with coverage other than self-only as 2.35 lives (the “Snapshot Factor method”).

Form 5500 method. Sponsors of plans offering self-only coverage may add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, in each case as reported on Form 5500, and divide by 2. For plans that offer more than self-only coverage, sponsors may simply add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, as reported on Form 5500.

Special rules for HRAs. The plan sponsor of an HRA may treat each participant’s HRA as covering a single covered life for counting purposes, and therefore, the plan sponsor is not required to count any spouse, dependent or other beneficiaries of the participant. If the plan sponsor maintains another self-insured health plan with the same plan year, participants in the HRA who also participate in the other self-insured health plan only need to be counted once for purposes of determining the fees applicable to the self-insured plans.

About the Author. This alert was prepared for Benefit Advisors Network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm. He can be reached at sbarrow@marbarlaw.com.

This message is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

Legal Alert: CMS Extends Transition Relief for Non-Compliant Plans through 2020

Posted on April 10, 2019June 24, 2019 by Stacy Barrow

On March 25, 2019, the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended five times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards. The transition policy has been extended to policy years beginning on or before October 1, 2020, provided that all policies end by December 31, 2020. This means individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2020, depending on the policy year. Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2020 start date in order to take full advantage of the extension.

Background
The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.
Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.

Transition Relief Policy
Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting between Jan. 1, 2014, and Oct. 1, 2014 (and associated group health plans of small businesses), will not be out of compliance with specified ACA reforms. These plans are referred to as “grandmothered” plans.
To qualify for the transition relief, issuers must send a notice to all individuals and small businesses that received a cancellation or termination notice with respect to the coverage (or to all individuals and small businesses that would otherwise receive a cancellation or termination notice with respect to the coverage).
The transition relief only applies with respect to individuals and small businesses with coverage that was in effect since 2014. It does not apply with respect to individuals and small businesses that obtain new coverage after 2014. All new plans must comply with the full set of ACA reforms.

One-year Extension
According to CMS, the extension will ensure that consumers have multiple health insurance coverage options and states continue to have flexibility in their markets. Also, like the original transition relief, issuers that renew coverage under the extended transition relief must, for each policy year, provide a notice to affected individuals and small businesses.
Under the transition relief extension, at the option of the states, issuers that have issued policies under the transitional relief in 2014 may renew these policies at any time through October 1, 2020 and affected individuals and small businesses may choose to re-enroll in the coverage through October 1, 2020. Policies that are renewed under the extended transition relief are not considered to be out of compliance with the following ACA reforms:

• community premium rating standards, so consumers might be charged more based on factors such as gender or a pre-existing medical condition, and it might not comply with rules limiting age banding (PHS Act section 2701);
• guaranteed availability and renewability (PHS Act sections 2702 & 2703);
• if the coverage is an individual market policy, the ban on preexisting medical conditions for adults, so it might exclude coverage for treatment of an adult’s pre-existing medical condition such as diabetes or cancer (PHS Act section 2704);
• if the coverage is an individual market policy, discrimination based on health status, so consumers may have premium increases based on claims experience or receipt of health care (PHS Act section 2705);
• coverage of essential health benefits or limit on annual out-of-pocket spending, so it might not cover benefits such as prescription drugs or maternity care, or might have unlimited cost-sharing (PHS Act section 2707); and
• standards for participation in clinical trials, so consumers might not have coverage for services related to a clinical trial for a life-threatening or other serious disease (PHS Act section 2709).

Legal Alert: Medical Loss Ratio Rebates

Posted on October 5, 2018October 5, 2018 by Stacy Barrow

Medical Loss Ratio Rebates Under the Affordable Care Act
The U.S. Department of Health and Human Services (“HHS”) has provided guidance on the Affordable Care Act’s (“ACA’s”) medical loss ratio (“MLR”) rule, which requires health insurers to spend a certain percentage of premium dollars on claims or activities that improve health care quality or provide a rebate to policyholders. HHS has released amended and final regulations (the “Regulations”), which govern the distribution of rebates by issuers in group markets. At the same time, the U.S. Department of Labor (“DOL”) issued Technical Release 2011-04 (“TR 2011-04”), which clarifies how rebates will be treated under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Medical Loss Ratio Rule
The MLR rule requires health insurance companies in the group or individual market to provide an annual rebate to enrollees if the insurer’s “medical loss ratio” falls below a certain minimum level—generally, 85 percent in the large group market and 80 percent in the small group or individual market. For these purposes, the numerator of the MLR equals the insurer’s incurred claims and expenditures for activities that improve health care quality, and the denominator equals the insurer’s premium revenue minus federal and state taxes and licensing and regulatory fees.

Defining Group Size
For purposes of the MLR rule, the Affordable Care Act defines “small” and “large” group markets by reference to insurance coverage sold to small employers or large employers. The Affordable Care Act defines a small employer as one that employs 1-100 employees and a large employer as one that employs 101 or more employees. However, states are permitted to limit the definition of a small employer to one that employs 1-50 employees.

Rebates under ERISA
TR 2011-04 clarifies that insurers must provide any rebates to the policyholder of an ERISA plan (typically, the employer). To the extent that a rebate is owed to a group health plan governed by ERISA, any rebates paid to such plan may become “plan assets,” subjecting the policyholder and plan sponsor to special obligations concerning the treatment of the rebates. If the rebates are plan assets, then any individual who has control over the rebates is a “fiduciary” under ERISA and must act accordingly.

To avoid ERISA’s trust requirements, rebates must be used within three months of receipt by the policyholder to provide refunds or pay premiums (for example, directing insurers to apply the rebate toward future participant premium payments or toward benefit enhancements adopted by the plan sponsor).

Treatment of Rebates to Enrollees under ERISA plans
The Regulations require insurers of group health plans to pay rebates directly to the policyholder, who will be responsible for ensuring that employees benefit from the rebates to the extent they contributed to the cost of coverage. Rebates will most often take the form of premium reductions or other reductions in cost-sharing under the plan.

To the extent employees are entitled to a share of a rebate, it is not taxable to them if provided in the form of a premium reduction or other reduction in cost sharing under the plan. Note that if an employee’s pre-tax premium contribution is reduced one month, then his/her paycheck will be slightly higher that month. For example, if an employee’s monthly contribution is $100, but due to a rebate it’s only $95 one month, the extra $5 remains in the employee’s paycheck and is subject to taxes and withholding.

Treatment of Rebates to Employers
In situations where a plan or its trust is the policyholder, the DOL’s position is that the rebates are generally assets of the plan. Generally, the DOL will use “ordinary notions of property rights” as a guide.

In situations where the employer is the policyholder, the employer may, under certain circumstances, retain some or all of the rebates. In such situations, the DOL will look to the terms of the documents governing the plan, including the insurance policy. If these governing documents are unclear, then the DOL will take into consideration the source of funding for the insurance premium payments. In such situations, the amount of a rebate that is not a plan asset (and that the employer may therefore retain) is generally proportional to the amount that the employer contributed to the cost of insurance coverage. For example, if an employer and its employees each pay a fixed percentage of the cost, a percentage of the rebate equal to the percentage of participants’ cost would be attributable to participant contributions. In the event that there are multiple benefit options, a rebate attributable to one benefit option cannot be used to benefit enrollees in another benefit option.

Allocating the Employees’ Share of the Rebate
The portion of the rebate that is considered a plan asset must be handled according to ERISA’s general standards of fiduciary conduct. However, as long as the employer adheres to these standards, it has some discretion when allocating the rebate.

For example, if the employer finds that the cost of distributing shares of a rebate to former participants approximates the amount of the proceeds, the employer may decide to distribute the portion of a rebate attributable to employee contributions to current participants using a “reasonable, fair, and objective” method of allocation. Similarly, if distributing cash payments to participants is not cost-effective (for example, the payments would be de minimis amounts, or would have tax consequences for participants) the employer may apply the rebate toward future premium payments or benefit enhancements. An employer may also “weight” the rebate so that employees who paid a larger share of the premium will receive a larger share of the rebate.

Ultimately, many employers provide the employees’ share of the rebate in the form of a premium reduction or discount to all employees participating in the plan at the time the rebate is distributed. Employers should review all relevant facts and circumstances when determining how the rebate will be distributed.

Lastly, note that employers could potentially draft their plans to be clear that the employer retains all rebates; however, employees receive communications from the carriers that they may receive a rebate, so employers should consider the potential employee relations issues of that approach as well.

Recommendations
Employers should ensure that they have appropriate procedures in place for determining the amount of any MLR rebate issued by an insurer that would be considered “plan assets” under ERISA. Employers may want to revisit how they have treated demutualization proceeds or other rebates for assistance as to how they should treat any MLR rebates.