2009 Health and Welfare Plan Compliance Checklist

It has been a busy year for plan sponsors and administrators trying to keep track of legislation and regulations affecting health and welfare plans. To help you stay on track, we have summarized a number of these laws and regulations in this year-end summary. Be sure to carefully review your plans and administrative procedures to make sure they comply with these new legal requirements.

New Final Regulations Require Self-Reporting for Plan Excise Taxes

Effective January 1, 2010, plan sponsors must report on an IRS Form 8928 any excise tax for which the plan is liable under IRC Sections 4980B, 4980D, 4980E, or 4980G. These sections impose excise taxes for violations of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) portability and nondiscrimination, the Genetic Information Nondiscrimination Act (“GINA”), Mental Health Parity, the Newborns’ and Mothers’ Health Protection Act, Michelle’s Law, and Health Savings Account (“HSA”) comparable employer contribution rules. The amount of the excise tax imposed for violations is generally $100 per day per affected individual. For HSA comparable employer contributions, the excise tax for violations is generally 35% of the amount contributed by the employer to all employees’ HSAs within the calendar year. The Form 8928 must be filed with the employer’s, insurer’s, or third-party administrator’s income tax return if the violation has not been timely corrected and the filer knew (or exercising reasonable diligence would have known) about any violation and the applicability of the excise tax. Multiemployer plans must file on or before the last day of the seventh month following the end of the plan year (i.e., July 31 for calendar year plans). Use these links to access the final regulation (74 Fed. Reg. 45994) and a draft of Form 8928.

The Children’s Health Insurance Program Reauthorization Act of 2009

On February 4, 2009, President Obama signed the Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIP”) into law. CHIP reauthorized funding for the joint federal and state health insurance program for low income children, provided for a new premium subsidy for employer-sponsored health plan coverage, and requires plans to facilitate two new special enrollment rights. Beginning April 1, 2009, states may elect to make premium subsidies available to parents of children who are eligible for Medicaid or CHIP coverage and for coverage under a qualified employer group health plan. The subsidies give parents the option of keeping their children covered under the state’s health program or enrolling them in their employer’s health plan. To facilitate enrollment and coverage for these families, plans must permit eligible employees to enroll within 60 days of becoming eligible for premium assistance under Medicaid or CHIP. Plans must also permit employees to enroll within 60 days of any loss of coverage under a Medicaid or CHIP program. These new special enrollment rights should have been implemented as of April 1, 2009.

Furthermore, each employer that maintains a group health plan in a state that has elected to provide premium assistance subsidies under Medicaid or CHIP will now be required to provide an annual notice to employees describing the potential opportunity for premium assistance, and the benefits available to them. A model notice is expected to be issued by the Department of Labor and Department of Health and Human Services (“HHS”) by February 4, 2010. The annual notice to employees must be provided starting with the first plan year that begins after the date on which that model notice is first issued. To help determine the effectiveness of the premium subsidy program, employers will also be required to provide any information requested by the applicable state regarding the subsidy.

Action Items:

  • All employers that sponsor group health plans must develop administrative procedures to incorporate the new special enrollment rules.
  • Amendments to group health plans and Section 125 cafeteria plans may also be required to include the two new special enrollment events.

Michelle’s Law

For plan years beginning on or after October 9, 2009 (January 1, 2010, for calendar year plans), plan sponsors of group health plans must provide extended coverage to dependents who would otherwise lose coverage because they must take a leave of absence from school or change their enrollment because of a serious illness or injury. Under Michelle’s Law, the dependent must remain eligible for coverage under the plan for up to earlier of:

  • one year beginning with the first day of the leave of absence; or
  • the date that the dependent’s coverage would otherwise terminate under the terms of the plan.

The purpose of this law is to provide students with the opportunity to remain covered under a parent’s group health plan despite not being enrolled in a postsecondary school during a medically necessary leave of absence. This extended coverage may be conditioned on the plan’s receipt of a written certification from the dependent’s physician regarding the dependent’s serious illness or injury and need for leave (or other change in enrollment).

Action Items:

  • Amendments to group health plans may be required to provide this continuation of coverage right for dependents enrolled in an institution of higher education.
  • If a plan requires employees to certify the student- status of their dependents, the certification and related notice must include a description of this new extension of coverage.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008

For plan years beginning on or after October 3, 2009 (January 1, 2010, for calendar year plans), group health plans providing mental health and substance abuse benefits generally may not impose any financial requirements or any treatment limitations on those benefits that are more restrictive than the limits that apply to the plan’s medical and surgical benefits. On October 3, 2008, as part of the Emergency Economic Stabilization Act of 2008, The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “Act”) was enacted to strengthen the existing protections available under the existing Mental Health Parity Act. Financial requirements include deductibles, co-payments, coinsurance, and out-of-pocket expenses. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or other similar limits on the scope or duration of treatment.

Action Items:

  • Analyze your plan to determine if the plan’s limits on mental health and substance use disorder benefits comply with the Act, and prepare any necessary amendments.

The Genetic Information Nondiscrimination Act

For plan years beginning on or after November 21, 2009 (January 1, 2010, for calendar year plans), Title I of GINA and its implementing interim final regulations which were issued on October 7, 2009, prohibit plans and health insurance issuers from:

  • Increasing group premium or contribution amounts based on genetic information
  • Requesting or requiring an individual or family member to undergo a genetic test
  • Requesting, requiring or purchasing genetic information prior to or in connection with enrollment, or at any time for underwriting purposes

Perhaps the biggest impact on plans and plan sponsors is that they generally may not use health risk assessments that request information about genetic information (including questions about family medical history) if the assessment is requested during enrollment, the assessment provides for a reward (e.g., premium reduction), or if it provides any type of benefit under the plan that is based on genetic information provided. In our October 2009 issue, we discussed the steps plans must take to comply.

Action Items:

  • Review your plan and any health risk assessments to determine if genetic information is being collected and if such information is being collected in accordance with GINA.

The Health Information Technology for Economic and Clinical Health Act

President Obama signed the Health Information Technology for Economic and Clinical Health (“HITECH”) Act into law on February 17, 2009, as part of the American Recovery and Reinvestment Act of 2009 (“ARRA”). The HITECH Act significantly expands the HIPAA Privacy and Security requirements. As discussed in our April 2009 issue, the HITECH Act imposes higher penalties for violations of HIPAA, provides for audits by the Department of Health and Human Services and enforcement by the various State Attorneys General. The HITECH Act also requires business associates to comply with HIPAA as of February 17, 2010, and allows HHS to penalize business associates for non-compliance. As described in our August 2009 issue, the HITECH Act also requires covered entities to notify affected individuals, HHS and prominent media outlets if “unsecured PHI” has been breached. The interim rule regarding this new notification requirement became effective as of September 23, 2009. Sanctions, however, will not be imposed for any failure to provide notification for breaches that are discovered before February 17, 2010.

Action Items:

  • Covered entities, including employer group health plans, should review their existing HIPAA Privacy and Security Policies and Procedures as well as their HIPAA Notice of Privacy Practices to determine where revisions will be necessary.
  • Affected organizations should act immediately to ensure compliance, including training employees and other applicable workforce members on these requirements.
  • In addition, all Business Associate Agreements should be revised to incorporate the new requirements established by the HITECH Act.

COBRA Provisions in the American Recovery and Reinvestment Act of 2009

We discussed the COBRA subsidy provisions in the ARRA in our February 2009 and April 2009 issues. ARRA provides for a 65% reduction for up to nine months in the premium otherwise payable for COBRA coverage by assistance eligible individuals for coverage periods that commence on and after February 17, 2009. Assistance eligible individuals are individuals who elect COBRA as the result of an involuntary termination and loss of coverage during the period from September 1, 2008, through December 31, 2009.

Three bills have been introduced since October, 2009, that would extend the availability of the subsidy, two in the House (H.R. 3930 and H.R. 3966) and one in the Senate (S.B. 2730), to involuntarily terminated individuals who commence COBRA coverage in the first half of 2010. H.R. 3930 would also extend the nine-month subsidy period to 15 months. We will keep you updated on this and any other proposed legislation to extend the COBRA subsidy provisions.

Please contact us if you have any questions or need any assistance amending your plans.