By Catherine L. Moreton, J.D.
Audits by the Department of Labor (DOL), complicated Medicare Part D regulations, a proposed guidance from the federal government on Health Savings Accounts (HSAs), and state action in the area of "Fair Share" legislation are all keeping the regulatory environment in the area of employee benefits active, said Kathryn Bakich, National Director of Healthcare Compliance for The Segal Company, during her presentation at the 2006 World at Work Total Rewards Conference in Anaheim, California.
Bakich said that the DOL continues to actively audit ERISA plans. She noted the following common problems found in past audits:
- "Hidden" preexisting exclusions
- Mental Health Parity Act "constructive dollar limits"
- Inadequate or untimely special enrollment notices
She said group health plans must also take care to provide updated notices of creditable coverage as required and to adopt written procedures by which employees may request and obtain such notices.
Medicare Part D is a complicated piece of legislation, said Bakich. Many employers took advantage of the Retiree Drug Subsidy in order to receive reimbursements from Medicare to offset the cost of providing drug benefits to retirees. Bakich noted that there are filing deadlines for receiving reimbursements and the program has been somewhat slow in making reimbursements. She said that once these issues are ironed out, it may be worth the time it takes employers to apply for reimbursement.
There is also significant regulatory activity in the area of consumer driven healthcare plans, such as Cafeteria Plans and HSAs. Bakich noted that IRS Notice 2005-42 provided for grace periods extending the time when employees could request reimbursement from their Flexible Spending Accounts (FSAs). However, she cautioned employers to carefully consider the affect grace periods may have on an employee's ability to contribute to an HSA during the time the grace period is in place. In general, employees will not be able to contribute to the HSA until the grace period has ended.
Bakich also discussed the Bush Administration's proposals related to HSAs. These accounts are the centerpiece of the Administration's health policy. However, Bakich said it remains unclear whether new HSA legislation will actually pass. HSA proposals include making premiums for high-deductible plans purchased in the individual markets tax deductible, providing tax credits for HSA premiums and deductibles paid on high-deductible plans, special rules for individuals who are chronically ill, and other tax-related incentives for participating in an HSA.
One other area highlighted by Bakich is the recent legislation in Maryland and Massachusetts often referred to as "Fair Share" legislation. In Maryland , the legislature passed a law that requires large employers to provide health insurance for employees or to pay up to eight percent of wages paid to employees into a state fund that will support the state Medicaid program. Bakich noted that there will most definitely be legal challenges to this law and it is quite possible that the courts will hold that the state law is preempted by ERISA. Massachusetts , on the other hand, passed a law that requires all uninsured individuals to obtain health insurance within three years. The legislation includes certain requirements for employers, and penalties or fines for noncompliance.
Bakich also discussed what she referred to as "Coming Attractions." According to Bakich, federal wellness regulations under HIPAA will soon be finalized, cafeteria plan regulations will be consolidated and reissued as proposed regulations, and pension reform legislation will be introduced to permit the carry forward of up to $500 for Flexible Spending Accounts.