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What do employers need to consider regarding benefits recordkeeping and disclosures? The Employee Retirement Income Security Act (ERISA) provides extensive reporting and disclosure and other administrative requirements for employee benefit plans. The law and regulations also provide for numerous exemptions from the various requirements.
Additional disclosure requirements apply to health plans. The Affordable Care Act (ACA) added many additional reporting, disclosure, and notice requirements for health plans and insurers, including additional internal and external appeal requirements for health insurers and group health plans.
Employers must also consider the Medicare Part D prescription drug coverage provisions that impose reporting and disclosure requirements on health plans that cover Medicare-eligible individuals. Additionally, the Pension Protection Act of 2006 (PPA) imposes reporting and notice requirements.
ERISA has extensive reporting and disclosure requirements for pension, profit-sharing, stock bonus plans, and most “welfare plans” (i.e., health care, life insurance, prepaid legal services, disability insurance). Forms and documents may have to be filed with the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Pension Benefit Guarantee Corporation (PBGC). Others go directly to plan participants.
In general, ERISA “preempts” (i.e., overrides) state law. However, there are a few exceptions to this rule. ERISA does not supersede state insurance laws, so group health and life insurance plans are subject to state insurance mandates. Self-insured plans are exempt from state regulation.
The DOL is authorized to grant partial and complete exemptions from ERISA's reporting and disclosure requirements. For example, welfare plans with fewer than 100 participants that are unfunded (paid out of general company funds and not a separate trust fund) or paid through insurance contracts are exempted from most filing and reporting requirements (but not the summary plan description (SPD) requirement) (29 CFR 2520.104-20 and 29 CFR 2520.104-44). There is also an alternative method of compliance available for unfunded or insured pension plans that are established to provide benefits for a select group of highly paid or management employees (29 CFR 2520.104-23).
Even if DOL regulations exempt a plan from reporting and disclosure requirements, the IRS may require it to file tax returns and other reports.
SPDs, summaries of material changes to the plan, summary annual reports, changes to information included in the SPD of group health plans, benefit statements, and other documents that must be distributed to plan participants and beneficiaries generally may be distributed electronically under final regulations issued by the DOL (29 CFR 2520.104b-1(c)).
Electronic distribution system requirements. Before using electronic distribution, the plan administrator must take steps to ensure that the distribution system:
• Results in actual receipt by participants (e.g., through the use of a return-receipt or notice of undelivered electronic mail feature or periodic reviews or surveys by the plan administrator to confirm the integrity of the delivery system); and
• Protects the confidentiality of personal information relating to the individual’s accounts and benefits (e.g., by incorporating into the system measures designed to preclude unauthorized receipt of or access to such information by individuals other than the individual for whom the information is intended).
Electronic document requirements. The electronically distributed documents must be prepared and furnished in a manner that is consistent with the style, format, and content requirements applicable to the particular document. In addition, notice must be provided to each participant or beneficiary to whom an electronic document is being delivered that apprises the recipient of a document's particular significance and of the participant's right to request and receive, free of charge, a paper copy of the document from the plan administrator. This notice must be provided at the time a document is furnished electronically, but may be provided in electronic or nonelectronic form.
Electronic distribution without prior consent. Benefit plan documents may be provided electronically without prior consent to plan participants:
• Who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee; and
• For whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties.
Electronic distribution requiring prior consent. Participants, beneficiaries, or any other persons entitled to receive benefit plan documents may affirmatively consent, in electronic or nonelectronic form, to receiving documents through electronic media. If the documents are to be furnished through the Internet or other electronic communication network, the individual must have affirmatively consented or confirmed consent electronically, in a manner that reasonably demonstrates the individual’s ability to access information in the electronic form that will be used to provide the information that is the subject of the consent and has provided an address for the receipt of electronically furnished documents.
Before consenting, the individual must be provided, in electronic or nonelectronic form, a clear and conspicuous statement indicating:
• The types of documents to which the consent would apply;
• That consent can be withdrawn at any time without charge;
• The procedures for withdrawing consent and for updating the participants’, beneficiaries’, or other individuals’ address for receipt of electronically furnished documents or other information;
• The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and
• Any hardware and software requirements for accessing and retaining the documents.
Summary of benefits and coverage requirement.The Department of Health and Human Services (HHS), the IRS, and the DOL have issued national standards for providing a summary of benefits and coverage (SBC) explanation that accurately describes the benefits and coverage under group health plans and group or individual health insurance coverage as required by the ACA. The SBC is to be provided to applicants, enrollees, reenrollees, and policyholders or certificate holders. The regulations include a uniform glossary of terms.
The following documents, available online at http://www.dol.gov/ebsa, are provided to assist in preparing an SBC:
• An SBC template;
• A sample completed SBC;
• Instructions;
• “Why This Matters” language;
• Coverage examples; and
• A uniform glossary.
Standardized comparison tool. Regulations provide that an SBC include a new, standardized health plan comparison tool for consumers known as “coverage examples.” The tool uses a format modeled on the nutrition facts label required for packaged foods. The coverage examples illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for common medical situations. These examples are intended to help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when he or she may need the coverage.
Uniform glossary. Health insurance companies and group health plans are required to make available a uniform glossary of health coverage and medical terms commonly used in plan documents, such as “deductible” and “copay”. The uniform glossary is intended to help consumers understand some of the most common, and sometimes confusing, language used in health insurance documents.
SBC format and appearance. Regulations provide that an SBC may be provided either as a stand-alone document or in combination with other summary materials (for example, an SPD) if the SBC information is intact and prominently displayed at the beginning of the materials (such as immediately after the table of contents in an SPD).
SBC template requirement. Group health plans and health insurance issuers in the group and individual markets are required to use the full SBC template. To the extent a plan’s terms that are required to be described in the SBC template cannot reasonably be described in a manner consistent with the template and instructions, the plan must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as is reasonably possible.
Language requirements. The ACA requires group health plans and health insurers to provide the SBC in a culturally and linguistically appropriate manner. The regulations provide that a plan satisfies this requirement by following the rules for providing claims and appeals notices in a culturally and linguistically appropriate manner. Under those rules, plans and issuers must provide notices in a culturally and linguistically appropriate manner when 10 percent or more of the population residing in the claimant’s county are literate only in the same non-English language, as determined based on American Community Survey data published by the U.S. Census Bureau. The HHS will provide translations of the SBC template, sample language, and a uniform glossary in Spanish, Tagalog, Chinese, and Navajo at http://www.cms.gov. The HHS may also make these materials available in other languages to facilitate voluntary distribution of SBCs to other individuals with limited English proficiency.
Template content. The template is based on the statutory requirement that the SBC be presented in a uniform format that does not exceed four pages in length and does not include print smaller than 12-point font; be presented in a culturally and linguistically appropriate manner using terminology understandable by the average plan enrollee; and include the following:
• Uniform definitions of standard insurance terms and medical terms so that consumers may compare health insurance coverage and understand the terms of coverage (or exception to such coverage);
• A description of the coverage, including cost sharing, for each of the categories of the essential health benefits that must be provided and other benefits identified by the HHS;
• The exceptions, reductions, and limitations on coverage;
• The cost-sharing provisions, including deductible, coinsurance, and copayment obligations;
• The renewability and continuation of coverage provisions;
• Coverage examples;
• A statement of whether the plan or coverage provides minimum essential coverage (as defined under Internal Revenue Code (IRC) Sec. 5000A(f)) and whether the plan's or coverage's share of the total allowed costs of benefits provided under the plan or coverage meets applicable requirements;
• A statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted to determine the governing contractual provisions of the coverage;
• Contact information for questions;
• For issuers, an Internet Web address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
• For plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;
• For plans and issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage; and
• An Internet address for obtaining the uniform glossary, as well as a contact phone number to obtain a paper copy of the uniform glossary and a disclosure that paper copies are available.
Benefits summary distribution. An SBC may be provided in paper or electronic form. The regulations provide flexibility to plans and insurers for distribution. Assuming certain consumer safeguards are met, in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by e-mail. Additionally, the regulations provide flexibility in the instructions for completing the SBC in recognition of unique plan designs.
Entities that must provide an SBC include the health insurance issuer (including a group health plan that is not a self-insured plan) offering health insurance coverage within the United States and, in the case of a self-insured group health plan, the plan sponsor or designated administrator of the plan.
Notice of modifications. If a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for ERISA Sec. 102) that is not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification will become effective.
Preemption. The national SBC standard will preempt any related state standards that require a summary of benefits and coverage that provides less information to consumers than the national standard.
Penalty for failure to provide. An entity that willfully fails to provide an SBC may be fined not more than $1,000 for each failure. A failure with respect to each individual enrollee is a separate offense.
Informing employees of the cost of coverage reporting on W-2 forms. Employers are required to report on Form W-2 the total cost of group health coverage, including the portion paid by the employer and the portion paid by the employee. However, this reporting requirement does not mean such coverage is taxable. It is only meant for informational purposes and is designed to provide employees with useful and comparable consumer information regarding the cost of their healthcare coverage.
Quality-of-care reporting. Group health plans and health insurance issuers offering group or individual health insurance coverage are required to report information on benefits and healthcare provider reimbursement structures that improve health outcomes through the implementation of certain activities (42 USC 300gg-17). Examples of the categories of activities to be reported include:
• Quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives;
• Activities to prevent hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and postdischarge reinforcement by an appropriate healthcare professional;
• Activities to improve patient safety and reduce medical errors through the appropriate use of best clinical practices, evidence-based medicine, and health information technology under the plan or coverage; and
• Wellness and health promotion activities.
Plans and insurers must annually report to the HHS whether the benefits under the plan or coverage satisfy these elements. The report must be made available to plan enrollees during each open enrollment period. The HHS is to make the reports available to the public on an Internet site.
Notice to employees of coverage options. Employers are to provide existing employees and new employees at the time of hiring with a written notice informing them of the following:
• The existence of an exchange, including a description of the services provided by such an exchange and how the employee may contact the exchange to request assistance;
• That if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under IRC Sec. 36B if the employee purchases a qualified health plan through the exchange; and
• That if the employee purchases a qualified health plan through the exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes (29 USC 218b).
Model notices can be found at http://www.dol.gov/ebsa.
IRC Sections 6055 and 6056 reporting. Section 6056, enacted by the ACA, concerns information reporting by applicable large employers on health insurance coverage offered under employer-sponsored plans. The same “applicable large employers” that are subject to the “play or pay” provision (generally, employers with 50 or more full-time employees, including full-time equivalent employees) are also subject to these reporting requirements. Such employers must report certain information to the IRS, including details about the healthcare coverage (if any) they offer to full-time employees. This reporting is designed to help the IRS administer the play or pay provision. Section 6055 concerns information reporting requirements for providers of minimum essential health coverage. Although Section 6055 is mainly geared toward health insurers, it does concern certain employers.
The most important of the ERISA reports is the SPD, which is a basic information package provided to participants and beneficiaries (29 USC 1022 ). Often, much of the information that is to be given to participants is provided by the insurance carrier that ultimately pays the benefits.
The plan administrator must automatically furnish the SPD to participants covered under the plan within 90 days of the participant becoming covered under the plan, or within 90 days of a beneficiary first receiving benefits (29 USC 1024(b)(1)(A)). For a new plan, the SPD must be furnished within 120 days after the plan becomes subject to ERISA (29 USC 1024(b)(1)(B)). After a participant has received the SPD initially, the plan administrator must furnish an updated SPD every 5 years if changes are made to the SPD or plan. In the unlikely event that no changes are made to the SPD or plan, the plan administrator must furnish the SPD every 10 years after the SPD is initially furnished.
SPDs must include the following information, if applicable:
• The name of the plan (and if different, the name by which it is commonly known by participants and beneficiaries);
• The name and address of the sponsoring employer or organization (along with other information depending on the entity);
• The sponsor's IRS employer identification number (EIN) and the plan number assigned by the sponsor;
• The type of plan (e.g., pension, 401(k), health, disability);
• The type of administration of the plan (e.g., control administration, insurer administration);
• The name, business address, and business telephone number of the plan administrator;
• The name of the person designated as agent for service of legal process and the address at which process may be served on such person, plus a statement that service may be made upon a plan trustee or the plan administrator;
• The name, title, and address of the principal place of business of each trustee of the plan;
• If the plan is maintained pursuant to one or more collective bargaining agreements (CBAs), a statement that the plan is maintained pursuant to a CBA, that a copy of the CBA may be obtained by any participant or beneficiary upon written request to the plan administrator, and that the CBA is available for examination by participants and beneficiaries;
• The plan's eligibility requirements for participation and for benefits;
• For pension plans, a statement describing any applicable joint and survivor annuity requirements;
• A statement identifying circumstances that might result in a disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery of benefits;
• For pension plans, information about pension insurance or the lack thereof;
• In the case of a pension plan, a description and explanation of the plan provisions for determining years of service for eligibility to participate, vesting, breaks in service, and years of participation for benefit accrual;
• In the case of a group health plan, a description of the rights and obligations of participants and beneficiaries with respect to continuation coverage, including, among other things, information concerning qualifying events and qualified beneficiaries, premiums, notice and election requirements and procedures, and duration of coverage;
• The sources of contributions to the plan (e.g., employer, employee organization, employees) and the method by which the amount of contribution is calculated;
• The identity of any funding medium used for the accumulation of assets for paying benefits, including any insurance company, trust fund, or any other institution, organization, or entity that maintains a fund for paying plan benefits;
• The plan's fiscal year;
• The plan's claims procedures, including time limits; remedies available under the plan; procedures for filing claims forms, for providing notifications of benefit determinations, and for reviewing denied claims; and (in the case of health plans) procedures for obtaining preauthorizations, approvals, or utilization reviews;
• The plan sponsor's authority to terminate the plan or amend or eliminate benefits under the plan;
• Information on coverage by the PBGC; and
• A statement of ERISA rights (29 CFR 2520.102-3).
Health benefit information. The SPD of a group health plan must also often contain more items, including the following, as appropriate:
• The plan’s requirements for eligibility for participation in the plan and eligibility to receive benefits;
• If the plan provides an extensive schedule of benefits, a general description of the plan benefits if reference is made to the detailed schedule of benefits and the schedule of benefits is available without cost to any participant or beneficiary who requests it;
• The procedures regarding qualified medical child support orders (QMCSOs);
• In the case of a plan covered by the continuation requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA), a description of COBRA rights;
• A description of any cost-sharing provisions, including premiums, deductibles, coinsurance, and copayment amounts;
• Any annual or lifetime caps or other limits on benefits under the plan;
• The extent to which preventive services are covered under the plan;
• How existing and new drugs are covered under the plan;
• How coverage is provided for medical tests, devices, and procedures;
• Provisions governing the use of network providers, the composition of the provider network, and how coverage is provided for out-of-network services;
• Conditions or limits on the selection of primary care providers or specialists and on obtaining emergency medical care;
• Requirements for preauthorizations or utilization review;
• A statement clearly identifying the circumstances that may result in disqualification, ineligibility, or denial, loss, forfeiture, rescission, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights) of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits in the SPD;
• For group health plans that provide maternity or newborn infant coverage, a statement describing any requirements under federal or state law applicable to the plan and any health insurance coverage under the plan relating to hospital length of stay in connection with childbirth for the mother or newborn child;
• An explanation of the plan’s wellness program and the availability of a reasonable alternative standard, if applicable;
• A statement, if applicable, that a plan is grandfathered for purposes of complying with the requirements of the ACA; and
• A description of the patient protection rights applicable to plans that require or allow the designation of a primary care physician, including a primary care physician for children, and a statement regarding the right to access obstetric or gynecological care for women without prior authorization.
Note: The claims procedure may be provided as a separate document if the SPD itself so states. The listing of providers may be furnished as a separate document that accompanies the plan's SPD if the SPD contains a general description of the provider network and states that the provider lists are furnished automatically, without charge, as a separate document.
Avoid litigation. Lack of care in the wording of SPDs can give rise to unintended liability and, if misleading, could also subject an employer to legal penalties. Courts will interpret ambiguous language in an SPD in favor of plan participants. If there is a conflict between the content of the plan document and the SPD, courts will generally apply the provision that is most favorable to the participant. For this reason, the SPD should be formulated in consultation with an attorney, accountant, or benefits specialist and should be frequently reviewed.
If your plan covers a certain percentage of participants who are literate only in the same non-English language, the plan administrator does not need to issue an SPD in a non-English language. However, the SPD must include a prominent notice written in the non-English language common to these participants that notifies the participants that assistance with the SPD is available in their own language (29 CFR 2520.102-2(c)). The notice must clearly explain in the same non-English language the procedures that must be followed in order to obtain assistance with the SPD.
This foreign language assistance applies in the cases of:
• A plan covering fewer than 100 participants at the beginning of the plan year and in which 25 percent or more of all participants are literate only in the same non-English language; or
• A plan covering 100 or more participants at the beginning of the plan year and in which the lesser of (1) 500 or more participants, or (2) 10 percent or more of all plan participants are literate only in the same non-English language.
Many self-funded group health plan sponsors have adopted, or are considering adopting, a wrap document. In some cases, the "wrap" approach is used to combine otherwise unrelated welfare plan benefits into a single, integrated welfare benefit plan (i.e., the unrelated benefits are "wrapped" together). In other cases, separate benefits are not "wrapped"; rather, the plan document consists of a "shell" that "wraps around" the benefit provisions contained in an SPD to comprise the formal ERISA plan.
The touted advantages of taking a "wrap" approach include easier document administration and maintenance, reduction in potential litigation attributable to discrepancies between the plan and the SPD, and a possible reduction in the number of required Form 5500 filings. Disadvantages include ERISA compliance headaches (such as Form 5500, audit, and trust requirements) that may arise when previously unrelated ERISA plans are "wrapped" imprudently.
An SMM describes material modifications to a plan and changes in the information required to be in the SPD (29 CFR 2520.104b-3). When a plan is amended or an SPD is changed, participants must be informed of the change through an SMM. Distributing an updated SPD satisfies the SMM requirement. An SMM must be distributed automatically to participants and pension plan beneficiaries receiving benefits no later than 210 days after the end of the plan year in which the change is adopted.
An SAR is a narrative summary of Form 5500 (29 CFR 2520.104b-10). Plan sponsors must automatically distribute the SAR to participants and pension plan beneficiaries receiving benefits within 9 months after end of plan year or 2 months after due date for filing Form 5500 (if there is an approved extension).
ERISA and the IRC allow participants in certain individual account plans that hold publicly traded employer stock to divest these investments (26 USC 401(a)(35)). The requirements do not apply to an employee stock ownership plan (ESOP) if there are no elective, employee, or matching contributions to the plan, and the plan is separate from any other defined benefit plan or individual account plan maintained by the same employer. A participant must be allowed to direct the plan to immediately divest any employer securities attributable to employee contributions and elective deferrals and to reinvest an equivalent amount in other specified investment options. In the case of the portion of the account attributable to employer contributions other than elective deferrals, which is invested in employer securities, a participant who has completed at least 3 years of service must be allowed to direct the plan to divest any such securities and to reinvest an equivalent amount in other specified investment options. Please see the Retirement Savings and Pension Plans section.
No later than 30 days before the first date on which a participant is eligible to divest employer securities, the plan administrator must provide that participant with a notice that explains the right to divest and describes the importance of diversifying the investment of retirement account assets. The IRS has issued a model notice, which is included in IRS Notice 2006-107 and can be found at http://www.irs.gov.
ERISA requires that the administrator of an individual account plan furnish benefit statements at least once each calendar quarter if participants or beneficiaries have the right to direct the investment of assets in their plan accounts (29 USC 1025). The statement is required at least once each calendar year to participants or beneficiaries who have their own accounts under the plan but do not have the right to direct the investment of assets in that account. The statements must also be furnished upon written request to a plan beneficiary not listed above. Active, vested participants in a defined benefit plan must be provided with a statement at least once every 3 years or a notice describing the availability of the statement. The statement must be written in a manner calculated to be understood by the average plan participant and may be delivered in written, electronic, or other appropriate form to the extent the form is reasonably accessible to the participant or beneficiary.
Content of the statement. The statement is to indicate, on the basis of the latest available information, the total benefits accrued and the vested benefits, if any, that have accrued, or the earliest date on which benefits will become vested. The statement must also include an explanation of any permitted disparity under IRC Sec. 401(l) or any floor-offset arrangement that may be applied in determining the amount of accrued benefits.
In the case of individual account plans, the statement must include the value of each investment to which assets in the participant's account have been allocated, determined as of the most recent valuation date under the plan, including the value of any assets held in the form of employer securities, whether the securities were contributed by the plan sponsor or acquired at the direction of the plan or of the participant or beneficiary.
In the case of pension benefit statements to participants and beneficiaries who can direct investments, the statement must also include the following:
• An explanation of any limitations or restrictions on any right of the participant or beneficiary to direct an investment;
• An explanation, written in a manner calculated to be understood by the average plan participant, of the importance, for the long-term retirement security of participants and beneficiaries, of a well-balanced and diversified investment portfolio, including a statement that holding more than 20 percent of a portfolio in the security of one entity (such as employer securities) creates the risk that the account investments may not be adequately diversified; and
• Notice directing the participant or beneficiary to DOL's Internet website for sources of information on individual investing and diversification.
Alternative notice. The requirements to provide notice of the vested pension benefits, if any, that have accrued, or the earliest date on which benefits will become vested are met if, at least annually, the plan updates this information and provides in a separate statement the information needed to enable a participant or beneficiary to determine their vested benefits. In the case of a defined benefit plan, the requirement to provide a statement every 3 years is met if at least once each year the plan administrator provides the participant a notice of the availability of the pension benefit statement and the ways in which the participant may obtain such statement. This notice may be delivered in written, electronic, or other appropriate form to the extent such form is reasonably accessible to the participant.
Until further guidance is issued, the DOL will treat plan administrators as satisfying the benefit statement requirements if the administrator has acted in good faith with a reasonable interpretation of the requirements. The DOL has provided an explanation of what it views as good-faith compliance with certain requirements of ERISA Sec. 105 (DOL Field Assistance Bulletin No. 2006-03), which can be located at http://www.dol.gov/ebsa/regs/fab_2006-3.html.
Several special notice requirements apply to group healthcare plans, including, for example:
• The Initial COBRA Notice;
• The COBRA Election Notice;
• The Notice of Unavailability of COBRA;
• The Notice of Early Termination of COBRA Coverage;
• The Medical Child Support Order (MCSO) Notice;
• The Notice of Special Enrollment Rights;
• The Employer Children’s Health Insurance Program Reauthorization Act (CHIP) Notice;
• The Newborns’ Act Description of Rights; and
• The Women’s Health and Cancer Rights Act (WHCRA) Notices.
Group health plans must provide participants and beneficiaries with a summary of any material reduction in covered services or benefits within 60 days after such a plan modification is adopted (29 CFR 2520.104b-3). Alternatively, plan sponsors may provide such descriptions at regular intervals of no more than 90 days. The requirement may be satisfied by an insert in a union newspaper or company publication that is regularly furnished to participants at intervals of not more than 90 days. Participants and beneficiaries who do not receive these publications must be notified within 60 days after the date of adoption.
To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to participants or beneficiaries describing the benefits provided under the plan or health insurance coverage, that the plan or health insurance coverage believes that it is a grandfathered health plan within the meaning of Section 1251 of the ACA, and provide contact information for questions and complaints (29 CFR 2590.715-1251).
Employers are required to report on Form W-2 the total cost of group health coverage, including the portion paid by the employer and the portion paid by the employee.
The HHS, the IRS, and the DOL have issued national standards for providing an SBC explanation that accurately describes the benefits and coverage under group health plans and group or individual health insurance coverage as required by the ACA (29 CFR 2590.715-2715). The SBC is to be provided to applicants, enrollees, reenrollees, and policyholders or certificate holders. The regulations include a uniform glossary of terms. Additional SBC information and guidance is available above and at https://www.dol.gov.
If a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for ERISA Sec. 102) that is not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification will become effective (29 CFR 2590.715-2715).
Employers are to provide to each employee written notice informing the employee about insurance exchanges and financial assistance at the time of hiring.
If a group health plan or insurer requires the designation of a primary care provider, the plan or insurer must provide a notice informing each participant of the provision on naming a primary care provider and the participant's rights in this regard (29 CFR 2590.715-2719A). The notice must be included whenever the plan or insurer provides a participant with an SPD or other similar description of benefits under the plan or coverage.
Group health plans and health insurance issuers offering group or individual health insurance coverage are required to report information on benefits and healthcare provider reimbursement structures that improve health outcomes through the implementation of certain activities (42 USC 300gg-17). Plans and insurers must annually report to the HHS whether the benefits under the plan or coverage satisfy these elements. The report must be made available to plan enrollees during each open enrollment period. The HHS is to make the reports available to the public on an Internet site.
Section 6056, enacted by the ACA, concerns information reporting by applicable large employers on health insurance coverage offered under employer-sponsored plans. The same “applicable large employers” that are subject to the “play or pay” provision (generally, employers with 50 or more full-time employees, including full-time equivalent employees) are also subject to these reporting requirements. Such employers must report certain information to the IRS, including details about the healthcare coverage (if any) they offer to full-time employees. This reporting is designed to help the IRS administer the play or pay provision. Section 6055 concerns information reporting requirements for providers of minimum essential health coverage. Although Section 6055 is mainly geared toward health insurers, it does concern certain employers.
IRC Sec. 4375(a) imposes a fee on the issuers of specified health insurance policies (including self-insured plans) for each policy/plan year ending on or after October 1, 2012, and before October 1, 2019. The Comparative Effectiveness Research (CER) Fee is a certain amount determined annually multiplied by the average number of lives covered under the policy/plan. The money collected will fund the Patient-Centered Outcomes Research Institute. The Institute's research will assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine by publicizing comparative clinical effectiveness research findings.
Reporting and paying the fee. Form 720, Quarterly Federal Excise Tax Return, which reports liability for the CER Fee, must be filed by July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Issuers and plan sponsors that are required to pay the fee but are not required to report any other liabilities on Form 720 will be required to file Form 720 only once a year (i.e., they will not have to file Form 720 for the first, third, or fourth quarters of the year). Instructions for how to fill out Form 720 and calculate the fee are located at http://www.irs.gov/pub/irs-pdf/i720.pdf.
Covered policies and plans. Final IRS regulations define the term “specified health insurance policy” to include only accident and health insurance policies that are issued for individuals residing in the United States. More specifically, the following types of insurance coverage or arrangements are subject to the fee:
• Accident and health coverage or major medical insurance;
• Retiree-only health or major medical coverage;
• Health or major medical coverage under multiple policies or plans;
• COBRA coverage;
• Health reimbursement accounts (HRAs), unless the arrangement satisfies the requirements for being treated as an excepted benefit;
• Flexible spending accounts (FSAs), unless the arrangement satisfies the requirements for being treated as an excepted benefit; and
• State and local government health or major medical plans for employees and/or retirees.
However, the following types of insurance coverage or arrangements are not subject to the fee:
• Stand-alone dental or vision coverage;
• Group insurance policies designed and issued specifically to cover primarily employees working and residing outside the United States;
• Self-insured health plans designed specifically to cover primarily employees who are working and residing outside the United States;
• Medicare;
• Medicaid;
• The Children’s Health Insurance Program (CHIP);
• Military health plans (programs established by federal law for providing medical care (other than through insurance policies) to individuals (spouses or dependents) by reason of the individual being (or having been) a member of the Armed Forces of the United States);
• Certain Indian tribal government health plans;
• Health savings accounts (HSAs);
• Archer medical savings accounts (MSAs);
• Hospital indemnity or specified illness benefits;
• Stop-loss or indemnity reinsurance;
• Employee assistance programs, disease management programs, or wellness programs (provided the program does not provide significant benefits in the nature of medical care or treatment);
• Accident-only coverage (including accidental death and dismemberment);
• Disability income coverage;
• Automobile medical payment coverage;
• Workers’ compensation or similar coverage; and
• On-site medical clinics.
There is a special rule for coverage under multiple applicable self-insured health plans. Generally, separate fees apply for lives covered by each specified health insurance policy or applicable self-insured health plan. However, two or more applicable self-insured health plans may be combined and treated as a single applicable self-insured health plan for purposes of calculating the fee if the plans have the same plan sponsor and the same plan year.
For example, if amounts in an HRA may be used to pay deductibles and copays under a specified health insurance policy, the HRA (an applicable self-insured health plan) and the policy would be subject to separate fees. But, an HRA that may be used to pay deductibles and copays under the applicable self-insured health plan is not subject to a separate fee (and the fee will apply only to the applicable self-insured health plan) if both the HRA and the applicable self-insured health plan have the same plan sponsor and the same plan year.
Because it is often difficult for an FSA or HRA sponsor to know how many dependents are covered, a special rule permits the plan sponsor to assume one covered life for each employee with an HRA and for each employee with a health FSA that is not an excepted benefit.
Fee calculation. The fee must be calculated using the applicable dollar amount in effect for the plan year and one of the permitted methods for determining the average number of lives covered under the plan during the plan year.
For specified health insurance policies, the permitted methods for determining the number of covered lives are:
• The actual count method;
• The snapshot method;
• The member months method; or
• The state form method.
For applicable self-insured plans, the permitted methods are:
• The actual count method;
• The snapshot method; or
• The Form 5500 method.
The Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule requires that individuals be provided with adequate notice of the uses and disclosures of their protected health information that may be made by a covered entity and of their privacy rights and the covered entity's legal duties with respect to protected health information. Please see the national Health Information Privacy (HIPAA) section.
The Medicare Modernization Act (MMA) created Medicare Part D, the retiree drug benefit. The MMA mandates that entities that provide prescription drug coverage to Medicare beneficiaries, including employer-sponsored health plans, disclose to all Part D-eligible individuals who are covered under, or who apply for, the plan's prescription drug coverage whether or not the coverage is "creditable prescription drug coverage" (42 USC 1395w-113(b)(6) and 42 CFR 423.56). This requirement applies whether or not the employer-sponsored coverage is primary or secondary to Part D coverage. Thus, the notice must be provided to Medicare-eligible retirees and their Medicare-eligible dependents who are covered under an employer-sponsored plan and Medicare-eligible active employees and Medicare-eligible dependents of active employees who are covered under the plan.
Employers must notify Medicare-eligible individuals about the status of the employer’s drug coverage at the following times:
• Annually before the Annual Coordinated Election Period begins;
• Before an individual’s Medicare Part D initial enrollment period;
• Before the effective date of the employer-provided prescription drug coverage (for any Medicare-eligible individual who chooses to join the employer’s plan);
• Whenever there is a status change in the employer-provided coverage (i.e., from creditable to noncreditable coverage or noncreditable to creditable coverage); and
• Whenever a Medicare-eligible individual requests the information (42 CFR 423.56(f)).
This requirement was created because a penalty applies to individuals who do not enroll in Medicare Plan D when first eligible to do so unless the individual has had creditable coverage following their initial enrollment period with no breaks of longer than 63 days until he or she does eventually enroll in Part D. Thus, knowing whether he or she has creditable coverage is a key factor in a Medicare-eligible individual's decision whether or not to enroll in a Part D plan.
Definition of “creditable coverage.” Coverage is "creditable" if its actuarial value equals or exceeds the actuarial value of standard prescription drug coverage under the Medicare prescription drug benefit, in effect at the start of such plan year, not taking into account the value of any discount or coverage provided during the coverage gap, and demonstrated through the use of generally accepted actuarial principles and in accordance with Centers for Medicare & Medicaid Services (CMS) guidelines.
Notice to the CMS. In addition to the disclosure to Part D-eligible individuals, a plan must also provide a disclosure of creditable coverage status to the CMS on an annual basis (42 CFR 423.56). This disclosure must be made whether or not the prescription drug coverage offered to Medicare Part D-eligible individuals is creditable. Disclosure forms are posted athttp://www.cms.hhs.gov. Because a plan sponsor that has applied for the Retiree Drug Subsidy (RDS) must provide an attestation that its prescription drug coverage is at least actuarially equivalent to the standard prescription drug coverage under Part D and because the actuarial equivalence standard includes the creditable coverage standard, a sponsor that has been approved for the RDS is exempt from filing the Disclosure Notice with the CMS for those qualified covered retirees for which the sponsor is claiming the RDS.
When to provide notice to the CMS. The Disclosure Notice must be made to CMS annually, and upon any change that affects whether the drug coverage is creditable. At a minimum, disclosure to the CMS must be made at the following times:
• Within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to the CMS;
• Within 30 days after the termination of the prescription drug plan; and
• Within 30 days after any change in the creditable coverage status of the prescription drug plan.
Sample notices. Sample Creditable Coverage Model Notice Letters are available at http://www.cms.hhs.gov.
The Medicare secondary payer (MSP) provisions of the Social Security Act require mandatory reporting to CMS by group health plan arrangements, liability insurers, workers' compensation insurers, and no-fault insurers of information needed to enforce the secondary payer requirements (42 USC 1395y(b)(7) and 42 USC 1395y(b)(8)).
Group health plan reporting. If you are an employer that offers group health plan coverage to your employees, your group health plan insurer or third-party administrator must report certain health insurance information about your employees to the CMS (42 USC 1395y(b)(7)). If you have a self-insured group health plan that is self-administered, you will be directly responsible for reporting information to the CMS. As an employer, you may need to cooperate with your insurer or third-party administrator so they can provide the required information.
There are several things you may be asked to do, such as to help the insurer or third-party administrator gather information to determine the entitlement of your employees or their spouses to Medicare. For example, you may have to provide the Medicare ID numbers or Social Security numbers of your employees and their spouses. Your insurer or third-party administrator may also ask you for the number of full-time and part-time employees in your organization.
Other reporting. If an employer has purchased commercial liability, no-fault, or workers’ compensation insurance, the insurer must report certain information (42 USC 1395y(b)(8)). If an employer has a self-funded plan for these types of insurance, the employer must report the required information. Information that must be reported includes information on claims, such as the claimant involved, claim payments, the ongoing responsibility for medical treatment, and information on settlements, judgments, etc.
Notice to employees. An employer that maintains a group health plan must annually provide to each employee residing in a state that provides premium assistance for the purchase of group health plan coverage through a Medicaid plan or CHIP a written notice informing the employee of potential opportunities currently available in the employee’s home state. The DOL maintains a list of states offering the required assistance, which is included in the model Employer CHIP Notice at http://savingmatters.dol.gov.
Employers subject to the employer CHIP Notice requirement. If a group health plan provides benefits for medical care directly (such as through a health maintenance organization) or through insurance, reimbursement, or in some other way to participants, beneficiaries, or providers in any state listed by the DOL, the plan is required to provide the Employer CHIP Notice, regardless of the employer’s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer, or any other service provider affiliated with the employer or the plan).
Employees who must be provided with the Employer CHIP Notice requirement. An Employer CHIP Notice must inform each employee, regardless of enrollment status, of potential opportunities for premium assistance in the state in which the employee resides. Thus, the notice must go to all employees who reside in one of the states listed by the DOL. The state in which the employee resides may or may not be the same as the state in which the employer, the employer’s principal place of business, the health plan, its insurer, or other service providers are located.
Notice to state Medicaid and CHIP agencies. The plan administrator of a group health plan that has participants or beneficiaries who are covered under a state Medicaid plan or a CHIP plan must disclose to the relevant agency, on request, information about the benefits available under the group health plan. This disclosure is to allow the agency to make a determination concerning the cost-effectiveness to the agency of providing medical or child health assistance by subsidizing premiums for the purchase of coverage under the employer's group health plan or to provide supplemental benefits instead. The CHIP Coverage Coordination Disclosure Form that is to be used for this purpose may be downloaded at https://www.cms.gov.
The Form 5500 Annual Return/ Report of Employee Benefit Plan and the Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan are used by plan administrators to satisfy various annual reporting obligations under ERISA and the IRC.
Filing. Plan administrators must file all 5500 and 5500-SF forms electronically using the ERISA Filing Acceptance System (EFAST2). Filers may file online using EFAST2’s Web-based IFILE filing system, or they may file through an EFAST2-approved vendor. Additionally, all delinquent and amended filings of Title I plans must also be submitted electronically through EFAST2. More information about electronic filing under EFAST2 can be located at efast.dol.gov.
The Form 5500 filing requirements vary according to the type of filer. There are three general types of Form 5500 filers:
• Small plans (generally plans with fewer than 100 participants as of the beginning of the plan year);
• Large plans (generally plans with 100 or more participants as of the beginning of the plan year); and
• Direct filing entities (DFEs).
Form 5500-SF. Form 5500-SF is a simplified version of Form 5500 that certain small plans may be eligible to file instead of the Form 5500. More specifically, pension plans and welfare plans with fewer than 100 participants at the beginning of the plan year that are not exempt from filing an annual return/report may be eligible to file Form 5500-SF. In addition to the limitation on the number of participants, Form 5500-SF may be filed only for a plan that:
• Is exempt from the requirement that the plan’s books and records be audited by an independent qualified public accountant (but not by reason of enhanced bonding);
• Has 100 percent of its assets invested in certain secure investments with a readily determinable fair market value;
• Holds no employer securities; and
• Is not a multiemployer plan.
Filing deadline. Form 5500 and Form 5500-SF filed by plan administrators are due by the last day of the seventh calendar month after the end of the plan year (not to exceed 12 months in length). Extensions may be allowed in certain circumstances.
Filing assistance. Individuals can receive assistance with completing Form 5500 or Form 5500-SF and answers to their questions about the forms by calling the DOL EFAST2 Help Line at 866-GO-EFAST (866-463-3278) or by going online to efast.dol.gov.
Form 5500 reporting. Form 5500 filing consists of Form 5500 itself along with any necessary schedules and attachments. Forms and instructions are located at http://www.dol.gov/ebsa/5500main.html.
Form 5500 asks basic questions about a plan, such as:
• The type of plan (e.g., single-employer or multiemployer plan);
• Whether the plan is a collectively bargained plan;
• The name of the plan and plan number;
• The name, address, and EIN for the plan sponsor and plan administrator;
• The number of participants broken down by active, retired, or other status;
• The plan funding arrangement;
• The plan benefit arrangement; and
• The schedules that are attached to Form 5500.
Form 5500 schedules. There are nine schedules for Form 5500, but some apply only to pension plans. The pension plan schedules include:
• Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information);
• Schedule R (Retirement Plan Information); and
• Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information).
The other general schedules include:
• Schedule A (Insurance Information);
• Schedule C (Service Provider Information);
• Schedule D (DFE/Participating Plan Information);
• Schedule G (Financial Transaction Schedules);
• Schedule H (Financial Information); and
• Schedule I (Financial Information–Small Plan).
For a quick reference chart that describes the basic Form 5500 filing requirements, visit https://www.dol.gov/ebsa/pdf/rdguide.pdf.
Pension benefit plans. The following pension benefit plans are not required to file, and should not file, a Form 5500:
• Unfunded excess benefit plans as defined in ERISA Sec. 4(b)(5);
• Annuity or custodial account arrangements under IRC Sec. 403(b)(1) or (7) not established or maintained by an employer (DOL Reg. 29 CFR 2510.3-2(f));
• Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) that involve SIMPLE IRAs under IRC Sec. 408(p);
• Simplified employee pensions (SEPs) or salary reduction SEPs under IRC Sec. 408(k) that conform to the alternative method of compliance in DOL Reg. 29 CFR 2520.104-48 or 2520.104-49;
• Church plans not electing coverage under IRC Sec. 410(d);
• Pension plans that are maintained outside the United States primarily for the benefit of persons substantially all of whom are nonresident aliens (however, certain foreign plans are required to file the Form 5500-EZ with the IRS);
• Unfunded pension plans for select groups of management or highly compensated employees that meet the requirements of DOL Reg. 29 CFR 2520.104-23, including timely filing of registration statements with the DOL;
• Unfunded dues-financed pension benefit plans that meet the alternative method of compliance provided by 29 CFR 2520.104-27;
• Individual retirement accounts or annuities not considered as pension plans under DOL Reg. 29 CFR 2510.3-2(d);
• Governmental plans; and
• Certain “one-participant plans” (Instructions for Form 5500).
Welfare benefit plans. The following welfare benefit plans are not required to file, and should not file, a Form 5500:
• Welfare benefit plans that covered fewer than 100 participants as of the beginning of the plan year and are unfunded, fully insured, or a combination of insured and unfunded;
• Welfare benefit plans maintained outside the United States primarily for persons substantially all of whom are nonresident aliens;
• Governmental plans;
• Unfunded or insured welfare plans for a select group of top management or highly compensated employees that meet the requirements of DOL Reg. 29 CFR 2520.104-24;
• Employee benefit plans maintained only to comply with workers’ compensation, unemployment compensation, or disability insurance laws;
• Welfare benefit plans that participate in group insurance arrangements that file a Form 5500 on behalf of the welfare benefit plans as specified in DOL Reg. 29 CFR 2520.103-2;
• Apprenticeship or training plans meeting all of the conditions specified in 29 CFR 2520.104-22;
• Unfunded dues-financed welfare benefit plans exempted by DOL Reg. 29 CFR 2520.104-26;
• Church plans under ERISA Section 3(33); and
• Welfare benefit plans solely for (1) individuals, or individuals and their spouses, who wholly own a trade or business, whether incorporated or unincorporated, or (2) partners or the partners and the partners’ spouses in partnerships (Instructions for Form 5500).
In July 2016, the DOL issued a 777-page notice of proposed revisions and other guidance outlining several changes to Form 5500 aimed at keeping annual reporting by employee benefit plans in line with technical, legal, and regulatory changes. The proposed changes to Form 5500—which were issued along with a Notice of Proposed Rulemaking (NPRM) on updates to DOL’s regulations implementing the changes—would likely be effective for the 2019 plan year, for which report filing starts January 1, 2020. The DOL is joined by the IRS and the PBGC in issuing the planned revisions.
The DOL established the Delinquent Filer Voluntary Compliance (DFVC) Program to encourage voluntary compliance with the annual reporting requirements of ERISA. The DFVC Program gives delinquent plan administrators a way to avoid potentially higher civil penalty assessments by satisfying the program’s requirements and voluntarily paying a reduced penalty amount. To increase incentives for delinquent plan administrators to voluntarily comply with ERISA’s annual reporting requirements, the DOL further reduced penalties under the DFVC program and simplified the rules for participation in the program.
Eligibility. Eligibility for the DFVC Program is limited to plans with filing obligations under ERISA's reporting requirements who comply with the provisions of the program and who have not been notified in writing by the DOL of a failure to file a timely annual report. Participation in the program is a two-part process. The first step is electronically filing with EFAST2 a complete Form 5500 or, if eligible, Form 5500-SF, Annual Return/Report, including any required schedules and attachments, for each year relief is requested. To ensure proper processing, box "D" on Form 5500 or Form 5500-SF must be marked. Special simplified rules apply to “top hat” plans and apprenticeship and training plans. The second step is electronically submitting the filing information and payment to the DFVC Program using the DFVC Calculator at http://www.dol.gov/ebsa. However, employers may also submit their payment and filing information to the DFVC Program through the mail. The plan administrator is personally liable for the penalty. Therefore, amounts paid under the DFVC Program may not be paid from the assets of an employee benefit plan.
Penalties. The basic penalty under the program is $10 per day for delinquent filings. The maximum penalty for a single late annual report is $750 for a small plan (generally a plan with fewer than 100 participants at the beginning of the plan year) and $2,000 for a large plan. The DFVC Program also includes a “per plan” cap designed to encourage reporting compliance by plan administrators who have failed to file an annual report for multiple years. The “per plan” cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed at the same time. There is no “per administrator” or “per sponsor” cap.
A special “per plan” cap of $750 applies to a small plan sponsored by an organization that is tax exempt under IRC Sec. 501(c)(3), which applies regardless of the number of late annual reports filed for the plan at the same time. It is not available, however, if, as of the date the plan files under the DFVC Program, there is a delinquent annual report for a plan year during which the plan was a large plan.
The penalty amount for “top hat” plans and apprenticeship and training plans is $750.
For more information on the DFVC Program, visit http://www.dol.gov/ebsa/newsroom/0302fact_sheet.html (Fact Sheet) and/or http://www.dol.gov/ebsa/FAQs/faq_DFVC.html (FAQs).
Benefit plans covered by ERISA must have a reasonable claims procedure that must be set out in the plan's SPD (29 CFR 2560.503-1). The description of the claims procedure must include the circumstances that might result in the loss or denial of benefits and the procedure for making a claim for benefits, including the procedures for appealing a claim denial. ERISA requires that claim denials must be in writing and must include a clear explanation of the specific reasons for the denial. The plan document and the SPD must provide a procedure for appealing a denial to an authorized plan official or committee for a full and fair review.
ACA requirements. In addition, the ACA added a new requirement that health plans and insurers implement effective internal and external claims and appeals processes. The new requirements do not apply to grandfathered health plans. The DOL, HHS, and the IRS have issued regulations (29 CFR 2590.715-2719) implementing this requirement. These regulations build on the existing ERISA claims procedure regulations for group health plans described below.
The regulations set out notice requirements for internal claims and appeals and external review processes. The regulations also provide that the external review processes in operation on March 23, 2010, may either permanently or temporarily be deemed to be in compliance with the new requirements. The requirements to implement effective internal and external claims and appeals processes apply for plan years of nongrandfathered group health plans that begin on or after September 23, 2010.
For pension benefit plans and welfare plans other than health and disability plans, initial benefit claims have to be answered in 90 days, with a possible extension of another 90 days (29 CFR 2560.503-1(f)(1)). Appeals must be filed within 60 days of a denial (29 CFR 2560.503-1(h)).
Shorter time limits for health plans. Claims of health plans must be processed much more quickly. The time limits for claims decisions depend on the type of claim. For claims involving urgent care, the decision must be made within 72 hours after the claim is received (29 CFR 2560.503-1(f)(2)). Claimants must be informed within 24 hours if an urgent claim is incomplete. They then will have 48 hours to provide the needed information, and the plan must respond within 48 additional hours.
Decisions on claims where receipt of the benefit depends on approval before receiving medical care must be made within 15 days. These claims are called "preservice" claims. The decision period may be extended for 15 days for reasons beyond the plan's control. If the extension is needed because of lack of information submitted with the claim, the claimant must be informed that the claim is defective and be given at least 45 days to provide the necessary information.
Decisions on post-service claims (where no prior approval is needed) have to be provided within 30 days, subject to the same 15-day extension provision.
Appeals. Claimants will have 180 days to appeal a denied claim (29 CFR 2560.503-1(h)(3)). A plan may require that such requests be in writing except for urgent care claims.
If a group health plan decides to reduce or terminate a previously approved course of treatment before it was scheduled to end, there is an adverse benefit determination that triggers the claimant's appeals rights (29 CFR 2560.503-1(f)(2)). The plan must give the claimant a reasonable amount of notice of the reduction or termination to allow an appeal.
Urgent care definition. A claim is an urgent care claim if application of the time limits for non-urgent care could seriously jeopardize the life or health of the claimant or if delay in treatment would subject the claimant to severe pain (29 CFR 2560.503-1(m)(1)). In determining whether a claim involves urgent care, a plan must apply the judgment of a prudent layperson who possesses an average knowledge of health and medicine. However, if a physician with knowledge of the claimant's condition asserts that a claim is an urgent care claim, the claim must be so treated.
A request to extend a previously approved course of treatment, by either increasing the number of treatments or the period of time for treatment, that is determined by the treating physician to involve urgent care must be decided as soon as possible after it is made (29 CFR 2560.503-1(f)(2)). If the request is made at least 24 hours before the previous expiration date, the claimant must be notified within 24 hours of receipt of the claim. If the request is made less than 24 hours before the expiration date, the regular urgent care time frame applies.
Shorter time limits for disability plans. Disability plan claims must generally be decided in 45 days, with the possibility of two 30-day extensions for circumstances beyond the plan's control (29 CFR 2560.503-1(f)(3)).
A claims procedure may not include any provision that unduly inhibits or hampers the filing or processing of a claim (29 CFR 2560.503-1(b)(3)). ERISA imposes a strict time frame on plan administrator decisions on claims for benefits. The clock starts when a participant makes a claim for benefits in accordance with the plan’s procedures (29 CFR 2560.503-1(e)).
The DOL has issued a series of questions and answers that clarify what requests for determinations and other questions directed at a plan are benefit claims covered by the claims procedure. These questions can be located at http://www.dol.gov/ebsa.
Claims-processing requirements. The claims procedure regulations set out the following rules for processing benefit claims:
• Plans must have administrative processes and safeguards designed to ensure that claims decisions are made in accordance with plan documents and are made in a consistent manner (29 CFR 2560.503-1(b)(5)).
• A claimant must be provided with written or electronic notification of any adverse benefit determination that includes the specific reason or reasons for the adverse determination, reference to the specific plan provisions on which the determination is based, a description of any additional material or information needed to get the claim approved and an explanation of why such material or information is necessary, and a description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to sue (29 CFR 2560.503-1(g)).
• Claimants must be given the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits (29 CFR 2560.503-1(h)(2)).
• Claimants must be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits.
• The review must consider all comments, documents, records, and other information submitted by the claimant even if they were not submitted or considered in the initial benefit determination and must not give deference to the initial determination.
• Notice of an appeal denial must specify why the appeal was rejected, including reference to the specific plan provisions relied upon, and inform the claimant that he or she is entitled to receive free copies of all documents, records, and information that were considered in making the decision (29 CFR 2560.503-1(j)).
• An appeal denial must include a statement describing any voluntary appeal procedures offered by the plan and the claimant's right to obtain the information about these procedures and a statement of the claimant's right to sue for benefits.
Health claim procedures. Additional requirements may apply to health plans, including, for example:
• If a specific internal rule guideline, protocol, or similar criterion is relied on in making an adverse benefit determination, the notification must either set forth that provision or indicate that an internal rule, etc., was relied on and that the specific provision will be provided free of charge on request (29 CFR 2560.503-1(g)).
• The notice that a claim is denied on the basis of a medical necessity or experimental treatment or similar exclusion or limit must include either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge on request.
• The review of a health claim must not give any deference to the initial determination and must be done by an individual who is not the same as, or a subordinate of, the individual who made the initial determination (29 CFR 2560.503-1(h)(3)).
• When deciding an appeal of a health claim that is based in whole or in part on a medical judgment, a healthcare professional who has appropriate training and experience must be consulted.
• Health plans must identify medical or vocational experts who were consulted if a claim is denied if so requested by the claimant, even if their particular advice was not used in making the decision.
• Health plans may require no more than two levels of appeals of a benefit denial before a claimant may sue (29 CFR 2560.503-1(c)(2)).
• Mandatory arbitration is allowed in health plans as one of the two appeals if it meets all the requirements for such appeals and if the claimant is not barred from challenging the results of the arbitration in court (29 CFR 2560.503-1(c)(4)).
• Voluntary additional levels of appeal (including binding arbitration) are permitted in health plans (29 CFR 2560.503-1(c)(3)). However, all of the following must apply:
--The plan won't assert a failure to exhaust administrative remedies if a claimant elects to pursue a claim in court rather than through the voluntary appeal process;
--The statute of limitation for suing is tolled during the voluntary appeal process;
--The voluntary appeal process is available only after the required appeals;
--The plan provides the claimant with sufficient information to make an informed decision whether to use the voluntary level of appeal, including a statement that using or not using the voluntary level of appeal will have no effect on the claimant's rights to any other benefits under the plan and information about the applicable rules, the right to representation, the process for selecting the decision maker, and the circumstances, if any, that may affect the impartiality of the decision maker, such as any financial or personal interests in the result or any past or present relationship with any party to the review process; and
--No fees or costs are charged to the claimants.
Interaction with state laws. The required claims procedures do not supersede any applicable state insurance review process unless that process prevents the application of the required procedures (29 CFR 2560.503-1(k)). It is not necessary to utilize the state procedures before suing for benefits.
The ACA also set new requirements in addition to those in the ERISA claims procedure regulations (29 CFR 2590.715-2719):
Broader definition of adverse benefit determination. First, a broader definition of an adverse benefit determination applies that includes any rescission of coverage (whether or not the rescission has an adverse effect on any particular benefit at that time).
Full and fair review requirement. A plan and insurer must allow a claimant to review the claim file and to present evidence and testimony as part of the internal claims and appeals process. In addition to complying with the current claims procedure requirements:
• The plan or insurer must provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan or insurer (or at the direction of the plan or insurer) in connection with the claim; this evidence must be provided as soon as possible and sufficiently before the date on which the notice of final internal adverse benefit determination is required to be provided to give the claimant a reasonable opportunity to respond; and
• Before the plan or insurer can issue a final internal adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently before the date on which the notice of final internal adverse benefit determination is required to be provided to give the claimant a reasonable opportunity to respond.
Requirement for avoiding conflicts of interest. A plan must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Decisions on hiring, compensation, termination, promotion, or other similar matters of any individual (such as a claims adjudicator or medical expert) must not be made based on the likelihood that the individual will support the denial of benefits.
Notice requirements. Plans and insurers must provide notice to individuals, in a culturally and linguistically appropriate manner and must also comply with the following additional requirements:
• The plan and insurer must ensure that any notice of adverse benefit determination or final internal adverse benefit determination includes information sufficient to identify the claim involved (including the date of service, the healthcare provider, and the claim amount (if applicable). The notice must state that the diagnosis and treatment codes and their meanings will be provided on request.
• The plan and insurer must provide to participants and beneficiaries, as soon as practicable, on request, the diagnosis code and its corresponding meaning, and the treatment code and its corresponding meaning, associated with any adverse benefit determination or final internal adverse benefit determination. Additionally, the plan or insurer cannot consider a request for such diagnosis and treatment information, in itself, to be a request for an internal appeal or an external review.
• The plan and insurer must ensure that the reason or reasons for the adverse benefit determination or final internal adverse benefit determination includes the denial code and its corresponding meaning, as well as a description of the plan's or insurer's standard, if any, that was used in denying the claim. In the case of a notice of final internal adverse benefit determination, this description must include a discussion of the decision.
• The plan and insurer must provide a description of available internal appeals and external review processes, including information on how to initiate an appeal.
• The plan and insurer must disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman established under Public Health Services Act (PHSA) Sec. 2793 to assist individuals with the internal claims and appeals and external review processes.
Culturally and linguistically appropriate notice requirement. Notices of available internal claims and appeals and external review processes must be provided in a culturally and linguistically appropriate manner. Plans and insurers are considered to satisfy this requirement if notices are provided in a non-English language when there are a threshold number of people who are literate in the same non-English language.
Specific requirements. The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals (including external review) in any applicable non-English language. The plan must provide, on request, a notice in any applicable non-English language and must include, in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan or issuer.
Applicable non-English language threshold. For an address in any U.S. county to which a notice is sent, a non-English language is an applicable non-English language if 10 percent or more of the population residing in the county is literate only in the same non-English language.
Deemed exhaustion of internal claims and appeals processes. In the case of a plan or insurer that fails to strictly adhere to all the claims procedure requirements, the claimant is deemed to have exhausted the internal claims and appeals process and may seek immediate external review or court action, as applicable, unless the violation was:
De minimis;
• Nonprejudicial;
• Attributable to good cause or matters beyond the plan’s or issuer's control;
• In the context of an ongoing good-faith exchange of information; and
• Not reflective of a pattern or practice of noncompliance.
In addition, the claimant would be entitled, on written request, to an explanation of the plan’s basis for asserting that it meets this standard so that the claimant can make an informed decision whether to seek immediate review. If the external reviewer or the court rejects the claimant’s request for immediate review on the basis that the plan met this standard, the claimant may resubmit and pursue the internal appeal of the claim.
The claimant is also entitled to pursue any available remedies under ERISA or under state law, as applicable, on the basis that the plan or insurer has failed to provide a reasonable internal claims and appeals process that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under ERISA Sec. 502(a), the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.
Continued coverage pending the outcome of an appeal. A plan and insurer are required to provide continued coverage pending the outcome of an appeal. Benefits for an ongoing course of treatment cannot be reduced or terminated without providing advance notice and an opportunity for advance review.
PHSA Sec. 2719 provides that either a state external review process or a federal external review process must apply for health plans and insurers. This requirement is specifically incorporated into ERISA and the IRC. The ACA regulations provide rules for determining which process applies, as well as guidance on each process.
Determining whether a state or federal external review process applies. The regulations set when plans must comply with an applicable state external review process and when they must comply with the federal external review process. If a state external review process that applies and is binding on the insurer includes, at a minimum, the consumer protections in the National Association of Insurance Commissioners (NAIC) Uniform Model Act, the state external review process and not the federal external review process applies.
To the extent that a group health plan provides benefits other than through health insurance coverage (i.e., the plan is self-insured) and is subject to a state external review process that applies to and is binding on the plan (e.g., is not preempted by ERISA) and the state external review process includes at a minimum the consumer protections in the NAIC Uniform Model Act, then the plan must comply with the applicable state external review process and is not required to comply with the federal external review process.
Any plan not subject to a state external review process must comply with the federal external review process.
Minimum state external appeals process requirements. An applicable state external review process must meet certain minimum consumer protections, and the HHS will determine whether state external review processes meet these requirements. For example, such state external review processes must:
• Provide for the external review of adverse benefit determinations (and final internal adverse benefit determinations) that are based on medical necessity, appropriateness, healthcare setting, level of care, or effectiveness of a covered benefit;
• Require insurers to provide effective written notice to claimants of their rights in connection with an external review for an adverse benefit determination;
• To the extent the state process requires exhaustion of an internal claims and appeals process, make exhaustion unnecessary if the insurer has waived the exhaustion requirement, the insurer has exhausted (or is considered to have exhausted) the internal claims and appeals process under applicable law, or the claimant has applied for expedited external review at the same time as applying for an expedited internal appeal;
• Provide that the insurer against which a request for external review is filed must pay the cost of an independent review organization (IRO) for conducting the external review;
• Not impose a restriction on the minimum dollar amount of a claim for it to be eligible for external review;
• Allow at least 4 months after the receipt of a notice of an adverse benefit determination or final internal adverse benefit determination to file a request for an external review;
• Provide that an IRO will be assigned on a random basis or another method of assignment that ensures the independence and impartiality of the assignment process;
• Provide for a list of approved IROs qualified to conduct the review based on the nature of the healthcare service that is the subject of the review;
• Provide that any approved IRO has no conflicts of interest that will influence its independence;
• Allow the claimant to submit to the IRO, in writing, additional information that the IRO must consider when conducting the external review and require that the claimant is notified of such right to do so;
• Provide that the decision is binding on the plan or insurer, as well as the claimant, except to the extent that other remedies are available under state or federal law. (The plan or insurer must provide benefits (including by making payment on the claim) pursuant to the final external review decision without delay, regardless of whether the plan or insurer intends to seek judicial review of the external review decision and unless or until there is a judicial decision otherwise);
• Provide for a written decision not more than 45 days after the receipt of the request for external review by the IRO in the case of a standard external review;
• Provide for an expedited external review in certain circumstances with a decision not later than 72 hours after the receipt of the request;
• Require that insurers include a description of the external review process in the SPD, policy, certificate, membership booklet, outline of coverage, or other evidence of coverage they provide to claimants;
• Require that IROs maintain written records and make them available on request to the state; and
• Follow procedures for external review of adverse benefit determinations involving experimental or investigational treatment, substantially similar to what is set forth in Section 10 of the NAIC Uniform Model Act.
The federal external review process. The federal standards are intended to be similar to the state requirements. The federal external review process initially applies to claims that involve:
• Medical judgment (excluding those that involve only contractual or legal interpretation without any use of medical judgment), as determined by the external reviewer; or
• A rescission of coverage.
Expedited reviews. The federal external review process, like the state external review process, provides for expedited external review and additional consumer protections for external review for claims involving experimental or investigational treatment.
Model notices. A revised model notice of adverse benefit determination, a revised model notice of final internal adverse benefit determination, and a revised model notice of final external adverse benefit determination can be located at http://www.dol.gov/ebsa.
The reporting and filing requirements for employee pension, profit-sharing, and welfare benefit plans are detailed and numerous, and they tend to change with little notice. For updated information, visit http://www.dol.gov/ebsa.
Additionally, helpful charts summarizing the reporting and disclosure requirements can be found at http://www.irs.gov.
Last updated on June 1, 2017.
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National
What do employers need to consider regarding benefits recordkeeping and disclosures? The Employee Retirement Income Security Act (ERISA) provides extensive reporting and disclosure and other administrative requirements for employee benefit plans. The law and regulations also provide for numerous exemptions from the various requirements.
Additional disclosure requirements apply to health plans. The Affordable Care Act (ACA) added many additional reporting, disclosure, and notice requirements for health plans and insurers, including additional internal and external appeal requirements for health insurers and group health plans.
Employers must also consider the Medicare Part D prescription drug coverage provisions that impose reporting and disclosure requirements on health plans that cover Medicare-eligible individuals. Additionally, the Pension Protection Act of 2006 (PPA) imposes reporting and notice requirements.
ERISA has extensive reporting and disclosure requirements for pension, profit-sharing, stock bonus plans, and most “welfare plans” (i.e., health care, life insurance, prepaid legal services, disability insurance). Forms and documents may have to be filed with the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Pension Benefit Guarantee Corporation (PBGC). Others go directly to plan participants.
In general, ERISA “preempts” (i.e., overrides) state law. However, there are a few exceptions to this rule. ERISA does not supersede state insurance laws, so group health and life insurance plans are subject to state insurance mandates. Self-insured plans are exempt from state regulation.
The DOL is authorized to grant partial and complete exemptions from ERISA's reporting and disclosure requirements. For example, welfare plans with fewer than 100 participants that are unfunded (paid out of general company funds and not a separate trust fund) or paid through insurance contracts are exempted from most filing and reporting requirements (but not the summary plan description (SPD) requirement) (29 CFR 2520.104-20 and 29 CFR 2520.104-44). There is also an alternative method of compliance available for unfunded or insured pension plans that are established to provide benefits for a select group of highly paid or management employees (29 CFR 2520.104-23).
Even if DOL regulations exempt a plan from reporting and disclosure requirements, the IRS may require it to file tax returns and other reports.
SPDs, summaries of material changes to the plan, summary annual reports, changes to information included in the SPD of group health plans, benefit statements, and other documents that must be distributed to plan participants and beneficiaries generally may be distributed electronically under final regulations issued by the DOL (29 CFR 2520.104b-1(c)).
Electronic distribution system requirements. Before using electronic distribution, the plan administrator must take steps to ensure that the distribution system:
• Results in actual receipt by participants (e.g., through the use of a return-receipt or notice of undelivered electronic mail feature or periodic reviews or surveys by the plan administrator to confirm the integrity of the delivery system); and
• Protects the confidentiality of personal information relating to the individual’s accounts and benefits (e.g., by incorporating into the system measures designed to preclude unauthorized receipt of or access to such information by individuals other than the individual for whom the information is intended).
Electronic document requirements. The electronically distributed documents must be prepared and furnished in a manner that is consistent with the style, format, and content requirements applicable to the particular document. In addition, notice must be provided to each participant or beneficiary to whom an electronic document is being delivered that apprises the recipient of a document's particular significance and of the participant's right to request and receive, free of charge, a paper copy of the document from the plan administrator. This notice must be provided at the time a document is furnished electronically, but may be provided in electronic or nonelectronic form.
Electronic distribution without prior consent. Benefit plan documents may be provided electronically without prior consent to plan participants:
• Who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee; and
• For whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties.
Electronic distribution requiring prior consent. Participants, beneficiaries, or any other persons entitled to receive benefit plan documents may affirmatively consent, in electronic or nonelectronic form, to receiving documents through electronic media. If the documents are to be furnished through the Internet or other electronic communication network, the individual must have affirmatively consented or confirmed consent electronically, in a manner that reasonably demonstrates the individual’s ability to access information in the electronic form that will be used to provide the information that is the subject of the consent and has provided an address for the receipt of electronically furnished documents.
Before consenting, the individual must be provided, in electronic or nonelectronic form, a clear and conspicuous statement indicating:
• The types of documents to which the consent would apply;
• That consent can be withdrawn at any time without charge;
• The procedures for withdrawing consent and for updating the participants’, beneficiaries’, or other individuals’ address for receipt of electronically furnished documents or other information;
• The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and
• Any hardware and software requirements for accessing and retaining the documents.
Summary of benefits and coverage requirement.The Department of Health and Human Services (HHS), the IRS, and the DOL have issued national standards for providing a summary of benefits and coverage (SBC) explanation that accurately describes the benefits and coverage under group health plans and group or individual health insurance coverage as required by the ACA. The SBC is to be provided to applicants, enrollees, reenrollees, and policyholders or certificate holders. The regulations include a uniform glossary of terms.
The following documents, available online at http://www.dol.gov/ebsa, are provided to assist in preparing an SBC:
• An SBC template;
• A sample completed SBC;
• Instructions;
• “Why This Matters” language;
• Coverage examples; and
• A uniform glossary.
Standardized comparison tool. Regulations provide that an SBC include a new, standardized health plan comparison tool for consumers known as “coverage examples.” The tool uses a format modeled on the nutrition facts label required for packaged foods. The coverage examples illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for common medical situations. These examples are intended to help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when he or she may need the coverage.
Uniform glossary. Health insurance companies and group health plans are required to make available a uniform glossary of health coverage and medical terms commonly used in plan documents, such as “deductible” and “copay”. The uniform glossary is intended to help consumers understand some of the most common, and sometimes confusing, language used in health insurance documents.
SBC format and appearance. Regulations provide that an SBC may be provided either as a stand-alone document or in combination with other summary materials (for example, an SPD) if the SBC information is intact and prominently displayed at the beginning of the materials (such as immediately after the table of contents in an SPD).
SBC template requirement. Group health plans and health insurance issuers in the group and individual markets are required to use the full SBC template. To the extent a plan’s terms that are required to be described in the SBC template cannot reasonably be described in a manner consistent with the template and instructions, the plan must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as is reasonably possible.
Language requirements. The ACA requires group health plans and health insurers to provide the SBC in a culturally and linguistically appropriate manner. The regulations provide that a plan satisfies this requirement by following the rules for providing claims and appeals notices in a culturally and linguistically appropriate manner. Under those rules, plans and issuers must provide notices in a culturally and linguistically appropriate manner when 10 percent or more of the population residing in the claimant’s county are literate only in the same non-English language, as determined based on American Community Survey data published by the U.S. Census Bureau. The HHS will provide translations of the SBC template, sample language, and a uniform glossary in Spanish, Tagalog, Chinese, and Navajo at http://www.cms.gov. The HHS may also make these materials available in other languages to facilitate voluntary distribution of SBCs to other individuals with limited English proficiency.
Template content. The template is based on the statutory requirement that the SBC be presented in a uniform format that does not exceed four pages in length and does not include print smaller than 12-point font; be presented in a culturally and linguistically appropriate manner using terminology understandable by the average plan enrollee; and include the following:
• Uniform definitions of standard insurance terms and medical terms so that consumers may compare health insurance coverage and understand the terms of coverage (or exception to such coverage);
• A description of the coverage, including cost sharing, for each of the categories of the essential health benefits that must be provided and other benefits identified by the HHS;
• The exceptions, reductions, and limitations on coverage;
• The cost-sharing provisions, including deductible, coinsurance, and copayment obligations;
• The renewability and continuation of coverage provisions;
• Coverage examples;
• A statement of whether the plan or coverage provides minimum essential coverage (as defined under Internal Revenue Code (IRC) Sec. 5000A(f)) and whether the plan's or coverage's share of the total allowed costs of benefits provided under the plan or coverage meets applicable requirements;
• A statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted to determine the governing contractual provisions of the coverage;
• Contact information for questions;
• For issuers, an Internet Web address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
• For plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of network providers;
• For plans and issuers that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage; and
• An Internet address for obtaining the uniform glossary, as well as a contact phone number to obtain a paper copy of the uniform glossary and a disclosure that paper copies are available.
Benefits summary distribution. An SBC may be provided in paper or electronic form. The regulations provide flexibility to plans and insurers for distribution. Assuming certain consumer safeguards are met, in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by e-mail. Additionally, the regulations provide flexibility in the instructions for completing the SBC in recognition of unique plan designs.
Entities that must provide an SBC include the health insurance issuer (including a group health plan that is not a self-insured plan) offering health insurance coverage within the United States and, in the case of a self-insured group health plan, the plan sponsor or designated administrator of the plan.
Notice of modifications. If a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for ERISA Sec. 102) that is not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification will become effective.
Preemption. The national SBC standard will preempt any related state standards that require a summary of benefits and coverage that provides less information to consumers than the national standard.
Penalty for failure to provide. An entity that willfully fails to provide an SBC may be fined not more than $1,000 for each failure. A failure with respect to each individual enrollee is a separate offense.
Informing employees of the cost of coverage reporting on W-2 forms. Employers are required to report on Form W-2 the total cost of group health coverage, including the portion paid by the employer and the portion paid by the employee. However, this reporting requirement does not mean such coverage is taxable. It is only meant for informational purposes and is designed to provide employees with useful and comparable consumer information regarding the cost of their healthcare coverage.
Quality-of-care reporting. Group health plans and health insurance issuers offering group or individual health insurance coverage are required to report information on benefits and healthcare provider reimbursement structures that improve health outcomes through the implementation of certain activities (42 USC 300gg-17). Examples of the categories of activities to be reported include:
• Quality reporting, effective case management, care coordination, chronic disease management, and medication and care compliance initiatives;
• Activities to prevent hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and postdischarge reinforcement by an appropriate healthcare professional;
• Activities to improve patient safety and reduce medical errors through the appropriate use of best clinical practices, evidence-based medicine, and health information technology under the plan or coverage; and
• Wellness and health promotion activities.
Plans and insurers must annually report to the HHS whether the benefits under the plan or coverage satisfy these elements. The report must be made available to plan enrollees during each open enrollment period. The HHS is to make the reports available to the public on an Internet site.
Notice to employees of coverage options. Employers are to provide existing employees and new employees at the time of hiring with a written notice informing them of the following:
• The existence of an exchange, including a description of the services provided by such an exchange and how the employee may contact the exchange to request assistance;
• That if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under IRC Sec. 36B if the employee purchases a qualified health plan through the exchange; and
• That if the employee purchases a qualified health plan through the exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes (29 USC 218b).
Model notices can be found at http://www.dol.gov/ebsa.
IRC Sections 6055 and 6056 reporting. Section 6056, enacted by the ACA, concerns information reporting by applicable large employers on health insurance coverage offered under employer-sponsored plans. The same “applicable large employers” that are subject to the “play or pay” provision (generally, employers with 50 or more full-time employees, including full-time equivalent employees) are also subject to these reporting requirements. Such employers must report certain information to the IRS, including details about the healthcare coverage (if any) they offer to full-time employees. This reporting is designed to help the IRS administer the play or pay provision. Section 6055 concerns information reporting requirements for providers of minimum essential health coverage. Although Section 6055 is mainly geared toward health insurers, it does concern certain employers.
The most important of the ERISA reports is the SPD, which is a basic information package provided to participants and beneficiaries (29 USC 1022 ). Often, much of the information that is to be given to participants is provided by the insurance carrier that ultimately pays the benefits.
The plan administrator must automatically furnish the SPD to participants covered under the plan within 90 days of the participant becoming covered under the plan, or within 90 days of a beneficiary first receiving benefits (29 USC 1024(b)(1)(A)). For a new plan, the SPD must be furnished within 120 days after the plan becomes subject to ERISA (29 USC 1024(b)(1)(B)). After a participant has received the SPD initially, the plan administrator must furnish an updated SPD every 5 years if changes are made to the SPD or plan. In the unlikely event that no changes are made to the SPD or plan, the plan administrator must furnish the SPD every 10 years after the SPD is initially furnished.
SPDs must include the following information, if applicable:
• The name of the plan (and if different, the name by which it is commonly known by participants and beneficiaries);
• The name and address of the sponsoring employer or organization (along with other information depending on the entity);
• The sponsor's IRS employer identification number (EIN) and the plan number assigned by the sponsor;
• The type of plan (e.g., pension, 401(k), health, disability);
• The type of administration of the plan (e.g., control administration, insurer administration);
• The name, business address, and business telephone number of the plan administrator;
• The name of the person designated as agent for service of legal process and the address at which process may be served on such person, plus a statement that service may be made upon a plan trustee or the plan administrator;
• The name, title, and address of the principal place of business of each trustee of the plan;
• If the plan is maintained pursuant to one or more collective bargaining agreements (CBAs), a statement that the plan is maintained pursuant to a CBA, that a copy of the CBA may be obtained by any participant or beneficiary upon written request to the plan administrator, and that the CBA is available for examination by participants and beneficiaries;
• The plan's eligibility requirements for participation and for benefits;
• For pension plans, a statement describing any applicable joint and survivor annuity requirements;
• A statement identifying circumstances that might result in a disqualification, ineligibility, or denial, loss, forfeiture, suspension, offset, reduction, or recovery of benefits;
• For pension plans, information about pension insurance or the lack thereof;
• In the case of a pension plan, a description and explanation of the plan provisions for determining years of service for eligibility to participate, vesting, breaks in service, and years of participation for benefit accrual;
• In the case of a group health plan, a description of the rights and obligations of participants and beneficiaries with respect to continuation coverage, including, among other things, information concerning qualifying events and qualified beneficiaries, premiums, notice and election requirements and procedures, and duration of coverage;
• The sources of contributions to the plan (e.g., employer, employee organization, employees) and the method by which the amount of contribution is calculated;
• The identity of any funding medium used for the accumulation of assets for paying benefits, including any insurance company, trust fund, or any other institution, organization, or entity that maintains a fund for paying plan benefits;
• The plan's fiscal year;
• The plan's claims procedures, including time limits; remedies available under the plan; procedures for filing claims forms, for providing notifications of benefit determinations, and for reviewing denied claims; and (in the case of health plans) procedures for obtaining preauthorizations, approvals, or utilization reviews;
• The plan sponsor's authority to terminate the plan or amend or eliminate benefits under the plan;
• Information on coverage by the PBGC; and
• A statement of ERISA rights (29 CFR 2520.102-3).
Health benefit information. The SPD of a group health plan must also often contain more items, including the following, as appropriate:
• The plan’s requirements for eligibility for participation in the plan and eligibility to receive benefits;
• If the plan provides an extensive schedule of benefits, a general description of the plan benefits if reference is made to the detailed schedule of benefits and the schedule of benefits is available without cost to any participant or beneficiary who requests it;
• The procedures regarding qualified medical child support orders (QMCSOs);
• In the case of a plan covered by the continuation requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA), a description of COBRA rights;
• A description of any cost-sharing provisions, including premiums, deductibles, coinsurance, and copayment amounts;
• Any annual or lifetime caps or other limits on benefits under the plan;
• The extent to which preventive services are covered under the plan;
• How existing and new drugs are covered under the plan;
• How coverage is provided for medical tests, devices, and procedures;
• Provisions governing the use of network providers, the composition of the provider network, and how coverage is provided for out-of-network services;
• Conditions or limits on the selection of primary care providers or specialists and on obtaining emergency medical care;
• Requirements for preauthorizations or utilization review;
• A statement clearly identifying the circumstances that may result in disqualification, ineligibility, or denial, loss, forfeiture, rescission, suspension, offset, reduction, or recovery (e.g., by exercise of subrogation or reimbursement rights) of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits in the SPD;
• For group health plans that provide maternity or newborn infant coverage, a statement describing any requirements under federal or state law applicable to the plan and any health insurance coverage under the plan relating to hospital length of stay in connection with childbirth for the mother or newborn child;
• An explanation of the plan’s wellness program and the availability of a reasonable alternative standard, if applicable;
• A statement, if applicable, that a plan is grandfathered for purposes of complying with the requirements of the ACA; and
• A description of the patient protection rights applicable to plans that require or allow the designation of a primary care physician, including a primary care physician for children, and a statement regarding the right to access obstetric or gynecological care for women without prior authorization.
Note: The claims procedure may be provided as a separate document if the SPD itself so states. The listing of providers may be furnished as a separate document that accompanies the plan's SPD if the SPD contains a general description of the provider network and states that the provider lists are furnished automatically, without charge, as a separate document.
Avoid litigation. Lack of care in the wording of SPDs can give rise to unintended liability and, if misleading, could also subject an employer to legal penalties. Courts will interpret ambiguous language in an SPD in favor of plan participants. If there is a conflict between the content of the plan document and the SPD, courts will generally apply the provision that is most favorable to the participant. For this reason, the SPD should be formulated in consultation with an attorney, accountant, or benefits specialist and should be frequently reviewed.
If your plan covers a certain percentage of participants who are literate only in the same non-English language, the plan administrator does not need to issue an SPD in a non-English language. However, the SPD must include a prominent notice written in the non-English language common to these participants that notifies the participants that assistance with the SPD is available in their own language (29 CFR 2520.102-2(c)). The notice must clearly explain in the same non-English language the procedures that must be followed in order to obtain assistance with the SPD.
This foreign language assistance applies in the cases of:
• A plan covering fewer than 100 participants at the beginning of the plan year and in which 25 percent or more of all participants are literate only in the same non-English language; or
• A plan covering 100 or more participants at the beginning of the plan year and in which the lesser of (1) 500 or more participants, or (2) 10 percent or more of all plan participants are literate only in the same non-English language.
Many self-funded group health plan sponsors have adopted, or are considering adopting, a wrap document. In some cases, the "wrap" approach is used to combine otherwise unrelated welfare plan benefits into a single, integrated welfare benefit plan (i.e., the unrelated benefits are "wrapped" together). In other cases, separate benefits are not "wrapped"; rather, the plan document consists of a "shell" that "wraps around" the benefit provisions contained in an SPD to comprise the formal ERISA plan.
The touted advantages of taking a "wrap" approach include easier document administration and maintenance, reduction in potential litigation attributable to discrepancies between the plan and the SPD, and a possible reduction in the number of required Form 5500 filings. Disadvantages include ERISA compliance headaches (such as Form 5500, audit, and trust requirements) that may arise when previously unrelated ERISA plans are "wrapped" imprudently.
An SMM describes material modifications to a plan and changes in the information required to be in the SPD (29 CFR 2520.104b-3). When a plan is amended or an SPD is changed, participants must be informed of the change through an SMM. Distributing an updated SPD satisfies the SMM requirement. An SMM must be distributed automatically to participants and pension plan beneficiaries receiving benefits no later than 210 days after the end of the plan year in which the change is adopted.
An SAR is a narrative summary of Form 5500 (29 CFR 2520.104b-10). Plan sponsors must automatically distribute the SAR to participants and pension plan beneficiaries receiving benefits within 9 months after end of plan year or 2 months after due date for filing Form 5500 (if there is an approved extension).
ERISA and the IRC allow participants in certain individual account plans that hold publicly traded employer stock to divest these investments (26 USC 401(a)(35)). The requirements do not apply to an employee stock ownership plan (ESOP) if there are no elective, employee, or matching contributions to the plan, and the plan is separate from any other defined benefit plan or individual account plan maintained by the same employer. A participant must be allowed to direct the plan to immediately divest any employer securities attributable to employee contributions and elective deferrals and to reinvest an equivalent amount in other specified investment options. In the case of the portion of the account attributable to employer contributions other than elective deferrals, which is invested in employer securities, a participant who has completed at least 3 years of service must be allowed to direct the plan to divest any such securities and to reinvest an equivalent amount in other specified investment options. Please see the Retirement Savings and Pension Plans section.
No later than 30 days before the first date on which a participant is eligible to divest employer securities, the plan administrator must provide that participant with a notice that explains the right to divest and describes the importance of diversifying the investment of retirement account assets. The IRS has issued a model notice, which is included in IRS Notice 2006-107 and can be found at http://www.irs.gov.
ERISA requires that the administrator of an individual account plan furnish benefit statements at least once each calendar quarter if participants or beneficiaries have the right to direct the investment of assets in their plan accounts (29 USC 1025). The statement is required at least once each calendar year to participants or beneficiaries who have their own accounts under the plan but do not have the right to direct the investment of assets in that account. The statements must also be furnished upon written request to a plan beneficiary not listed above. Active, vested participants in a defined benefit plan must be provided with a statement at least once every 3 years or a notice describing the availability of the statement. The statement must be written in a manner calculated to be understood by the average plan participant and may be delivered in written, electronic, or other appropriate form to the extent the form is reasonably accessible to the participant or beneficiary.
Content of the statement. The statement is to indicate, on the basis of the latest available information, the total benefits accrued and the vested benefits, if any, that have accrued, or the earliest date on which benefits will become vested. The statement must also include an explanation of any permitted disparity under IRC Sec. 401(l) or any floor-offset arrangement that may be applied in determining the amount of accrued benefits.
In the case of individual account plans, the statement must include the value of each investment to which assets in the participant's account have been allocated, determined as of the most recent valuation date under the plan, including the value of any assets held in the form of employer securities, whether the securities were contributed by the plan sponsor or acquired at the direction of the plan or of the participant or beneficiary.
In the case of pension benefit statements to participants and beneficiaries who can direct investments, the statement must also include the following:
• An explanation of any limitations or restrictions on any right of the participant or beneficiary to direct an investment;
• An explanation, written in a manner calculated to be understood by the average plan participant, of the importance, for the long-term retirement security of participants and beneficiaries, of a well-balanced and diversified investment portfolio, including a statement that holding more than 20 percent of a portfolio in the security of one entity (such as employer securities) creates the risk that the account investments may not be adequately diversified; and
• Notice directing the participant or beneficiary to DOL's Internet website for sources of information on individual investing and diversification.
Alternative notice. The requirements to provide notice of the vested pension benefits, if any, that have accrued, or the earliest date on which benefits will become vested are met if, at least annually, the plan updates this information and provides in a separate statement the information needed to enable a participant or beneficiary to determine their vested benefits. In the case of a defined benefit plan, the requirement to provide a statement every 3 years is met if at least once each year the plan administrator provides the participant a notice of the availability of the pension benefit statement and the ways in which the participant may obtain such statement. This notice may be delivered in written, electronic, or other appropriate form to the extent such form is reasonably accessible to the participant.
Until further guidance is issued, the DOL will treat plan administrators as satisfying the benefit statement requirements if the administrator has acted in good faith with a reasonable interpretation of the requirements. The DOL has provided an explanation of what it views as good-faith compliance with certain requirements of ERISA Sec. 105 (DOL Field Assistance Bulletin No. 2006-03), which can be located at http://www.dol.gov/ebsa/regs/fab_2006-3.html.
Several special notice requirements apply to group healthcare plans, including, for example:
• The Initial COBRA Notice;
• The COBRA Election Notice;
• The Notice of Unavailability of COBRA;
• The Notice of Early Termination of COBRA Coverage;
• The Medical Child Support Order (MCSO) Notice;
• The Notice of Special Enrollment Rights;
• The Employer Children’s Health Insurance Program Reauthorization Act (CHIP) Notice;
• The Newborns’ Act Description of Rights; and
• The Women’s Health and Cancer Rights Act (WHCRA) Notices.
Group health plans must provide participants and beneficiaries with a summary of any material reduction in covered services or benefits within 60 days after such a plan modification is adopted (29 CFR 2520.104b-3). Alternatively, plan sponsors may provide such descriptions at regular intervals of no more than 90 days. The requirement may be satisfied by an insert in a union newspaper or company publication that is regularly furnished to participants at intervals of not more than 90 days. Participants and beneficiaries who do not receive these publications must be notified within 60 days after the date of adoption.
To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to participants or beneficiaries describing the benefits provided under the plan or health insurance coverage, that the plan or health insurance coverage believes that it is a grandfathered health plan within the meaning of Section 1251 of the ACA, and provide contact information for questions and complaints (29 CFR 2590.715-1251).
Employers are required to report on Form W-2 the total cost of group health coverage, including the portion paid by the employer and the portion paid by the employee.
The HHS, the IRS, and the DOL have issued national standards for providing an SBC explanation that accurately describes the benefits and coverage under group health plans and group or individual health insurance coverage as required by the ACA (29 CFR 2590.715-2715). The SBC is to be provided to applicants, enrollees, reenrollees, and policyholders or certificate holders. The regulations include a uniform glossary of terms. Additional SBC information and guidance is available above and at https://www.dol.gov.
If a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for ERISA Sec. 102) that is not reflected in the most recently provided SBC, the plan or issuer must provide notice of the modification to enrollees at least 60 days before the modification will become effective (29 CFR 2590.715-2715).
Employers are to provide to each employee written notice informing the employee about insurance exchanges and financial assistance at the time of hiring.
If a group health plan or insurer requires the designation of a primary care provider, the plan or insurer must provide a notice informing each participant of the provision on naming a primary care provider and the participant's rights in this regard (29 CFR 2590.715-2719A). The notice must be included whenever the plan or insurer provides a participant with an SPD or other similar description of benefits under the plan or coverage.
Group health plans and health insurance issuers offering group or individual health insurance coverage are required to report information on benefits and healthcare provider reimbursement structures that improve health outcomes through the implementation of certain activities (42 USC 300gg-17). Plans and insurers must annually report to the HHS whether the benefits under the plan or coverage satisfy these elements. The report must be made available to plan enrollees during each open enrollment period. The HHS is to make the reports available to the public on an Internet site.
Section 6056, enacted by the ACA, concerns information reporting by applicable large employers on health insurance coverage offered under employer-sponsored plans. The same “applicable large employers” that are subject to the “play or pay” provision (generally, employers with 50 or more full-time employees, including full-time equivalent employees) are also subject to these reporting requirements. Such employers must report certain information to the IRS, including details about the healthcare coverage (if any) they offer to full-time employees. This reporting is designed to help the IRS administer the play or pay provision. Section 6055 concerns information reporting requirements for providers of minimum essential health coverage. Although Section 6055 is mainly geared toward health insurers, it does concern certain employers.
IRC Sec. 4375(a) imposes a fee on the issuers of specified health insurance policies (including self-insured plans) for each policy/plan year ending on or after October 1, 2012, and before October 1, 2019. The Comparative Effectiveness Research (CER) Fee is a certain amount determined annually multiplied by the average number of lives covered under the policy/plan. The money collected will fund the Patient-Centered Outcomes Research Institute. The Institute's research will assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine by publicizing comparative clinical effectiveness research findings.
Reporting and paying the fee. Form 720, Quarterly Federal Excise Tax Return, which reports liability for the CER Fee, must be filed by July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Issuers and plan sponsors that are required to pay the fee but are not required to report any other liabilities on Form 720 will be required to file Form 720 only once a year (i.e., they will not have to file Form 720 for the first, third, or fourth quarters of the year). Instructions for how to fill out Form 720 and calculate the fee are located at http://www.irs.gov/pub/irs-pdf/i720.pdf.
Covered policies and plans. Final IRS regulations define the term “specified health insurance policy” to include only accident and health insurance policies that are issued for individuals residing in the United States. More specifically, the following types of insurance coverage or arrangements are subject to the fee:
• Accident and health coverage or major medical insurance;
• Retiree-only health or major medical coverage;
• Health or major medical coverage under multiple policies or plans;
• COBRA coverage;
• Health reimbursement accounts (HRAs), unless the arrangement satisfies the requirements for being treated as an excepted benefit;
• Flexible spending accounts (FSAs), unless the arrangement satisfies the requirements for being treated as an excepted benefit; and
• State and local government health or major medical plans for employees and/or retirees.
However, the following types of insurance coverage or arrangements are not subject to the fee:
• Stand-alone dental or vision coverage;
• Group insurance policies designed and issued specifically to cover primarily employees working and residing outside the United States;
• Self-insured health plans designed specifically to cover primarily employees who are working and residing outside the United States;
• Medicare;
• Medicaid;
• The Children’s Health Insurance Program (CHIP);
• Military health plans (programs established by federal law for providing medical care (other than through insurance policies) to individuals (spouses or dependents) by reason of the individual being (or having been) a member of the Armed Forces of the United States);
• Certain Indian tribal government health plans;
• Health savings accounts (HSAs);
• Archer medical savings accounts (MSAs);
• Hospital indemnity or specified illness benefits;
• Stop-loss or indemnity reinsurance;
• Employee assistance programs, disease management programs, or wellness programs (provided the program does not provide significant benefits in the nature of medical care or treatment);
• Accident-only coverage (including accidental death and dismemberment);
• Disability income coverage;
• Automobile medical payment coverage;
• Workers’ compensation or similar coverage; and
• On-site medical clinics.
There is a special rule for coverage under multiple applicable self-insured health plans. Generally, separate fees apply for lives covered by each specified health insurance policy or applicable self-insured health plan. However, two or more applicable self-insured health plans may be combined and treated as a single applicable self-insured health plan for purposes of calculating the fee if the plans have the same plan sponsor and the same plan year.
For example, if amounts in an HRA may be used to pay deductibles and copays under a specified health insurance policy, the HRA (an applicable self-insured health plan) and the policy would be subject to separate fees. But, an HRA that may be used to pay deductibles and copays under the applicable self-insured health plan is not subject to a separate fee (and the fee will apply only to the applicable self-insured health plan) if both the HRA and the applicable self-insured health plan have the same plan sponsor and the same plan year.
Because it is often difficult for an FSA or HRA sponsor to know how many dependents are covered, a special rule permits the plan sponsor to assume one covered life for each employee with an HRA and for each employee with a health FSA that is not an excepted benefit.
Fee calculation. The fee must be calculated using the applicable dollar amount in effect for the plan year and one of the permitted methods for determining the average number of lives covered under the plan during the plan year.
For specified health insurance policies, the permitted methods for determining the number of covered lives are:
• The actual count method;
• The snapshot method;
• The member months method; or
• The state form method.
For applicable self-insured plans, the permitted methods are:
• The actual count method;
• The snapshot method; or
• The Form 5500 method.
The Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule requires that individuals be provided with adequate notice of the uses and disclosures of their protected health information that may be made by a covered entity and of their privacy rights and the covered entity's legal duties with respect to protected health information. Please see the national Health Information Privacy (HIPAA) section.
The Medicare Modernization Act (MMA) created Medicare Part D, the retiree drug benefit. The MMA mandates that entities that provide prescription drug coverage to Medicare beneficiaries, including employer-sponsored health plans, disclose to all Part D-eligible individuals who are covered under, or who apply for, the plan's prescription drug coverage whether or not the coverage is "creditable prescription drug coverage" (42 USC 1395w-113(b)(6) and 42 CFR 423.56). This requirement applies whether or not the employer-sponsored coverage is primary or secondary to Part D coverage. Thus, the notice must be provided to Medicare-eligible retirees and their Medicare-eligible dependents who are covered under an employer-sponsored plan and Medicare-eligible active employees and Medicare-eligible dependents of active employees who are covered under the plan.
Employers must notify Medicare-eligible individuals about the status of the employer’s drug coverage at the following times:
• Annually before the Annual Coordinated Election Period begins;
• Before an individual’s Medicare Part D initial enrollment period;
• Before the effective date of the employer-provided prescription drug coverage (for any Medicare-eligible individual who chooses to join the employer’s plan);
• Whenever there is a status change in the employer-provided coverage (i.e., from creditable to noncreditable coverage or noncreditable to creditable coverage); and
• Whenever a Medicare-eligible individual requests the information (42 CFR 423.56(f)).
This requirement was created because a penalty applies to individuals who do not enroll in Medicare Plan D when first eligible to do so unless the individual has had creditable coverage following their initial enrollment period with no breaks of longer than 63 days until he or she does eventually enroll in Part D. Thus, knowing whether he or she has creditable coverage is a key factor in a Medicare-eligible individual's decision whether or not to enroll in a Part D plan.
Definition of “creditable coverage.” Coverage is "creditable" if its actuarial value equals or exceeds the actuarial value of standard prescription drug coverage under the Medicare prescription drug benefit, in effect at the start of such plan year, not taking into account the value of any discount or coverage provided during the coverage gap, and demonstrated through the use of generally accepted actuarial principles and in accordance with Centers for Medicare & Medicaid Services (CMS) guidelines.
Notice to the CMS. In addition to the disclosure to Part D-eligible individuals, a plan must also provide a disclosure of creditable coverage status to the CMS on an annual basis (42 CFR 423.56). This disclosure must be made whether or not the prescription drug coverage offered to Medicare Part D-eligible individuals is creditable. Disclosure forms are posted athttp://www.cms.hhs.gov. Because a plan sponsor that has applied for the Retiree Drug Subsidy (RDS) must provide an attestation that its prescription drug coverage is at least actuarially equivalent to the standard prescription drug coverage under Part D and because the actuarial equivalence standard includes the creditable coverage standard, a sponsor that has been approved for the RDS is exempt from filing the Disclosure Notice with the CMS for those qualified covered retirees for which the sponsor is claiming the RDS.
When to provide notice to the CMS. The Disclosure Notice must be made to CMS annually, and upon any change that affects whether the drug coverage is creditable. At a minimum, disclosure to the CMS must be made at the following times:
• Within 60 days after the beginning date of the plan year for which the entity is providing the disclosure to the CMS;
• Within 30 days after the termination of the prescription drug plan; and
• Within 30 days after any change in the creditable coverage status of the prescription drug plan.
Sample notices. Sample Creditable Coverage Model Notice Letters are available at http://www.cms.hhs.gov.
The Medicare secondary payer (MSP) provisions of the Social Security Act require mandatory reporting to CMS by group health plan arrangements, liability insurers, workers' compensation insurers, and no-fault insurers of information needed to enforce the secondary payer requirements (42 USC 1395y(b)(7) and 42 USC 1395y(b)(8)).
Group health plan reporting. If you are an employer that offers group health plan coverage to your employees, your group health plan insurer or third-party administrator must report certain health insurance information about your employees to the CMS (42 USC 1395y(b)(7)). If you have a self-insured group health plan that is self-administered, you will be directly responsible for reporting information to the CMS. As an employer, you may need to cooperate with your insurer or third-party administrator so they can provide the required information.
There are several things you may be asked to do, such as to help the insurer or third-party administrator gather information to determine the entitlement of your employees or their spouses to Medicare. For example, you may have to provide the Medicare ID numbers or Social Security numbers of your employees and their spouses. Your insurer or third-party administrator may also ask you for the number of full-time and part-time employees in your organization.
Other reporting. If an employer has purchased commercial liability, no-fault, or workers’ compensation insurance, the insurer must report certain information (42 USC 1395y(b)(8)). If an employer has a self-funded plan for these types of insurance, the employer must report the required information. Information that must be reported includes information on claims, such as the claimant involved, claim payments, the ongoing responsibility for medical treatment, and information on settlements, judgments, etc.
Notice to employees. An employer that maintains a group health plan must annually provide to each employee residing in a state that provides premium assistance for the purchase of group health plan coverage through a Medicaid plan or CHIP a written notice informing the employee of potential opportunities currently available in the employee’s home state. The DOL maintains a list of states offering the required assistance, which is included in the model Employer CHIP Notice at http://savingmatters.dol.gov.
Employers subject to the employer CHIP Notice requirement. If a group health plan provides benefits for medical care directly (such as through a health maintenance organization) or through insurance, reimbursement, or in some other way to participants, beneficiaries, or providers in any state listed by the DOL, the plan is required to provide the Employer CHIP Notice, regardless of the employer’s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer, or any other service provider affiliated with the employer or the plan).
Employees who must be provided with the Employer CHIP Notice requirement. An Employer CHIP Notice must inform each employee, regardless of enrollment status, of potential opportunities for premium assistance in the state in which the employee resides. Thus, the notice must go to all employees who reside in one of the states listed by the DOL. The state in which the employee resides may or may not be the same as the state in which the employer, the employer’s principal place of business, the health plan, its insurer, or other service providers are located.
Notice to state Medicaid and CHIP agencies. The plan administrator of a group health plan that has participants or beneficiaries who are covered under a state Medicaid plan or a CHIP plan must disclose to the relevant agency, on request, information about the benefits available under the group health plan. This disclosure is to allow the agency to make a determination concerning the cost-effectiveness to the agency of providing medical or child health assistance by subsidizing premiums for the purchase of coverage under the employer's group health plan or to provide supplemental benefits instead. The CHIP Coverage Coordination Disclosure Form that is to be used for this purpose may be downloaded at https://www.cms.gov.
The Form 5500 Annual Return/ Report of Employee Benefit Plan and the Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan are used by plan administrators to satisfy various annual reporting obligations under ERISA and the IRC.
Filing. Plan administrators must file all 5500 and 5500-SF forms electronically using the ERISA Filing Acceptance System (EFAST2). Filers may file online using EFAST2’s Web-based IFILE filing system, or they may file through an EFAST2-approved vendor. Additionally, all delinquent and amended filings of Title I plans must also be submitted electronically through EFAST2. More information about electronic filing under EFAST2 can be located at efast.dol.gov.
The Form 5500 filing requirements vary according to the type of filer. There are three general types of Form 5500 filers:
• Small plans (generally plans with fewer than 100 participants as of the beginning of the plan year);
• Large plans (generally plans with 100 or more participants as of the beginning of the plan year); and
• Direct filing entities (DFEs).
Form 5500-SF. Form 5500-SF is a simplified version of Form 5500 that certain small plans may be eligible to file instead of the Form 5500. More specifically, pension plans and welfare plans with fewer than 100 participants at the beginning of the plan year that are not exempt from filing an annual return/report may be eligible to file Form 5500-SF. In addition to the limitation on the number of participants, Form 5500-SF may be filed only for a plan that:
• Is exempt from the requirement that the plan’s books and records be audited by an independent qualified public accountant (but not by reason of enhanced bonding);
• Has 100 percent of its assets invested in certain secure investments with a readily determinable fair market value;
• Holds no employer securities; and
• Is not a multiemployer plan.
Filing deadline. Form 5500 and Form 5500-SF filed by plan administrators are due by the last day of the seventh calendar month after the end of the plan year (not to exceed 12 months in length). Extensions may be allowed in certain circumstances.
Filing assistance. Individuals can receive assistance with completing Form 5500 or Form 5500-SF and answers to their questions about the forms by calling the DOL EFAST2 Help Line at 866-GO-EFAST (866-463-3278) or by going online to efast.dol.gov.
Form 5500 reporting. Form 5500 filing consists of Form 5500 itself along with any necessary schedules and attachments. Forms and instructions are located at http://www.dol.gov/ebsa/5500main.html.
Form 5500 asks basic questions about a plan, such as:
• The type of plan (e.g., single-employer or multiemployer plan);
• Whether the plan is a collectively bargained plan;
• The name of the plan and plan number;
• The name, address, and EIN for the plan sponsor and plan administrator;
• The number of participants broken down by active, retired, or other status;
• The plan funding arrangement;
• The plan benefit arrangement; and
• The schedules that are attached to Form 5500.
Form 5500 schedules. There are nine schedules for Form 5500, but some apply only to pension plans. The pension plan schedules include:
• Schedule MB (Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information);
• Schedule R (Retirement Plan Information); and
• Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information).
The other general schedules include:
• Schedule A (Insurance Information);
• Schedule C (Service Provider Information);
• Schedule D (DFE/Participating Plan Information);
• Schedule G (Financial Transaction Schedules);
• Schedule H (Financial Information); and
• Schedule I (Financial Information–Small Plan).
For a quick reference chart that describes the basic Form 5500 filing requirements, visit https://www.dol.gov/ebsa/pdf/rdguide.pdf.
Pension benefit plans. The following pension benefit plans are not required to file, and should not file, a Form 5500:
• Unfunded excess benefit plans as defined in ERISA Sec. 4(b)(5);
• Annuity or custodial account arrangements under IRC Sec. 403(b)(1) or (7) not established or maintained by an employer (DOL Reg. 29 CFR 2510.3-2(f));
• Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) that involve SIMPLE IRAs under IRC Sec. 408(p);
• Simplified employee pensions (SEPs) or salary reduction SEPs under IRC Sec. 408(k) that conform to the alternative method of compliance in DOL Reg. 29 CFR 2520.104-48 or 2520.104-49;
• Church plans not electing coverage under IRC Sec. 410(d);
• Pension plans that are maintained outside the United States primarily for the benefit of persons substantially all of whom are nonresident aliens (however, certain foreign plans are required to file the Form 5500-EZ with the IRS);
• Unfunded pension plans for select groups of management or highly compensated employees that meet the requirements of DOL Reg. 29 CFR 2520.104-23, including timely filing of registration statements with the DOL;
• Unfunded dues-financed pension benefit plans that meet the alternative method of compliance provided by 29 CFR 2520.104-27;
• Individual retirement accounts or annuities not considered as pension plans under DOL Reg. 29 CFR 2510.3-2(d);
• Governmental plans; and
• Certain “one-participant plans” (Instructions for Form 5500).
Welfare benefit plans. The following welfare benefit plans are not required to file, and should not file, a Form 5500:
• Welfare benefit plans that covered fewer than 100 participants as of the beginning of the plan year and are unfunded, fully insured, or a combination of insured and unfunded;
• Welfare benefit plans maintained outside the United States primarily for persons substantially all of whom are nonresident aliens;
• Governmental plans;
• Unfunded or insured welfare plans for a select group of top management or highly compensated employees that meet the requirements of DOL Reg. 29 CFR 2520.104-24;
• Employee benefit plans maintained only to comply with workers’ compensation, unemployment compensation, or disability insurance laws;
• Welfare benefit plans that participate in group insurance arrangements that file a Form 5500 on behalf of the welfare benefit plans as specified in DOL Reg. 29 CFR 2520.103-2;
• Apprenticeship or training plans meeting all of the conditions specified in 29 CFR 2520.104-22;
• Unfunded dues-financed welfare benefit plans exempted by DOL Reg. 29 CFR 2520.104-26;
• Church plans under ERISA Section 3(33); and
• Welfare benefit plans solely for (1) individuals, or individuals and their spouses, who wholly own a trade or business, whether incorporated or unincorporated, or (2) partners or the partners and the partners’ spouses in partnerships (Instructions for Form 5500).
In July 2016, the DOL issued a 777-page notice of proposed revisions and other guidance outlining several changes to Form 5500 aimed at keeping annual reporting by employee benefit plans in line with technical, legal, and regulatory changes. The proposed changes to Form 5500—which were issued along with a Notice of Proposed Rulemaking (NPRM) on updates to DOL’s regulations implementing the changes—would likely be effective for the 2019 plan year, for which report filing starts January 1, 2020. The DOL is joined by the IRS and the PBGC in issuing the planned revisions.
The DOL established the Delinquent Filer Voluntary Compliance (DFVC) Program to encourage voluntary compliance with the annual reporting requirements of ERISA. The DFVC Program gives delinquent plan administrators a way to avoid potentially higher civil penalty assessments by satisfying the program’s requirements and voluntarily paying a reduced penalty amount. To increase incentives for delinquent plan administrators to voluntarily comply with ERISA’s annual reporting requirements, the DOL further reduced penalties under the DFVC program and simplified the rules for participation in the program.
Eligibility. Eligibility for the DFVC Program is limited to plans with filing obligations under ERISA's reporting requirements who comply with the provisions of the program and who have not been notified in writing by the DOL of a failure to file a timely annual report. Participation in the program is a two-part process. The first step is electronically filing with EFAST2 a complete Form 5500 or, if eligible, Form 5500-SF, Annual Return/Report, including any required schedules and attachments, for each year relief is requested. To ensure proper processing, box "D" on Form 5500 or Form 5500-SF must be marked. Special simplified rules apply to “top hat” plans and apprenticeship and training plans. The second step is electronically submitting the filing information and payment to the DFVC Program using the DFVC Calculator at http://www.dol.gov/ebsa. However, employers may also submit their payment and filing information to the DFVC Program through the mail. The plan administrator is personally liable for the penalty. Therefore, amounts paid under the DFVC Program may not be paid from the assets of an employee benefit plan.
Penalties. The basic penalty under the program is $10 per day for delinquent filings. The maximum penalty for a single late annual report is $750 for a small plan (generally a plan with fewer than 100 participants at the beginning of the plan year) and $2,000 for a large plan. The DFVC Program also includes a “per plan” cap designed to encourage reporting compliance by plan administrators who have failed to file an annual report for multiple years. The “per plan” cap limits the penalty to $1,500 for a small plan and $4,000 for a large plan regardless of the number of late annual reports filed at the same time. There is no “per administrator” or “per sponsor” cap.
A special “per plan” cap of $750 applies to a small plan sponsored by an organization that is tax exempt under IRC Sec. 501(c)(3), which applies regardless of the number of late annual reports filed for the plan at the same time. It is not available, however, if, as of the date the plan files under the DFVC Program, there is a delinquent annual report for a plan year during which the plan was a large plan.
The penalty amount for “top hat” plans and apprenticeship and training plans is $750.
For more information on the DFVC Program, visit http://www.dol.gov/ebsa/newsroom/0302fact_sheet.html (Fact Sheet) and/or http://www.dol.gov/ebsa/FAQs/faq_DFVC.html (FAQs).
Benefit plans covered by ERISA must have a reasonable claims procedure that must be set out in the plan's SPD (29 CFR 2560.503-1). The description of the claims procedure must include the circumstances that might result in the loss or denial of benefits and the procedure for making a claim for benefits, including the procedures for appealing a claim denial. ERISA requires that claim denials must be in writing and must include a clear explanation of the specific reasons for the denial. The plan document and the SPD must provide a procedure for appealing a denial to an authorized plan official or committee for a full and fair review.
ACA requirements. In addition, the ACA added a new requirement that health plans and insurers implement effective internal and external claims and appeals processes. The new requirements do not apply to grandfathered health plans. The DOL, HHS, and the IRS have issued regulations (29 CFR 2590.715-2719) implementing this requirement. These regulations build on the existing ERISA claims procedure regulations for group health plans described below.
The regulations set out notice requirements for internal claims and appeals and external review processes. The regulations also provide that the external review processes in operation on March 23, 2010, may either permanently or temporarily be deemed to be in compliance with the new requirements. The requirements to implement effective internal and external claims and appeals processes apply for plan years of nongrandfathered group health plans that begin on or after September 23, 2010.
For pension benefit plans and welfare plans other than health and disability plans, initial benefit claims have to be answered in 90 days, with a possible extension of another 90 days (29 CFR 2560.503-1(f)(1)). Appeals must be filed within 60 days of a denial (29 CFR 2560.503-1(h)).
Shorter time limits for health plans. Claims of health plans must be processed much more quickly. The time limits for claims decisions depend on the type of claim. For claims involving urgent care, the decision must be made within 72 hours after the claim is received (29 CFR 2560.503-1(f)(2)). Claimants must be informed within 24 hours if an urgent claim is incomplete. They then will have 48 hours to provide the needed information, and the plan must respond within 48 additional hours.
Decisions on claims where receipt of the benefit depends on approval before receiving medical care must be made within 15 days. These claims are called "preservice" claims. The decision period may be extended for 15 days for reasons beyond the plan's control. If the extension is needed because of lack of information submitted with the claim, the claimant must be informed that the claim is defective and be given at least 45 days to provide the necessary information.
Decisions on post-service claims (where no prior approval is needed) have to be provided within 30 days, subject to the same 15-day extension provision.
Appeals. Claimants will have 180 days to appeal a denied claim (29 CFR 2560.503-1(h)(3)). A plan may require that such requests be in writing except for urgent care claims.
If a group health plan decides to reduce or terminate a previously approved course of treatment before it was scheduled to end, there is an adverse benefit determination that triggers the claimant's appeals rights (29 CFR 2560.503-1(f)(2)). The plan must give the claimant a reasonable amount of notice of the reduction or termination to allow an appeal.
Urgent care definition. A claim is an urgent care claim if application of the time limits for non-urgent care could seriously jeopardize the life or health of the claimant or if delay in treatment would subject the claimant to severe pain (29 CFR 2560.503-1(m)(1)). In determining whether a claim involves urgent care, a plan must apply the judgment of a prudent layperson who possesses an average knowledge of health and medicine. However, if a physician with knowledge of the claimant's condition asserts that a claim is an urgent care claim, the claim must be so treated.
A request to extend a previously approved course of treatment, by either increasing the number of treatments or the period of time for treatment, that is determined by the treating physician to involve urgent care must be decided as soon as possible after it is made (29 CFR 2560.503-1(f)(2)). If the request is made at least 24 hours before the previous expiration date, the claimant must be notified within 24 hours of receipt of the claim. If the request is made less than 24 hours before the expiration date, the regular urgent care time frame applies.
Shorter time limits for disability plans. Disability plan claims must generally be decided in 45 days, with the possibility of two 30-day extensions for circumstances beyond the plan's control (29 CFR 2560.503-1(f)(3)).
A claims procedure may not include any provision that unduly inhibits or hampers the filing or processing of a claim (29 CFR 2560.503-1(b)(3)). ERISA imposes a strict time frame on plan administrator decisions on claims for benefits. The clock starts when a participant makes a claim for benefits in accordance with the plan’s procedures (29 CFR 2560.503-1(e)).
The DOL has issued a series of questions and answers that clarify what requests for determinations and other questions directed at a plan are benefit claims covered by the claims procedure. These questions can be located at http://www.dol.gov/ebsa.
Claims-processing requirements. The claims procedure regulations set out the following rules for processing benefit claims:
• Plans must have administrative processes and safeguards designed to ensure that claims decisions are made in accordance with plan documents and are made in a consistent manner (29 CFR 2560.503-1(b)(5)).
• A claimant must be provided with written or electronic notification of any adverse benefit determination that includes the specific reason or reasons for the adverse determination, reference to the specific plan provisions on which the determination is based, a description of any additional material or information needed to get the claim approved and an explanation of why such material or information is necessary, and a description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to sue (29 CFR 2560.503-1(g)).
• Claimants must be given the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits (29 CFR 2560.503-1(h)(2)).
• Claimants must be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits.
• The review must consider all comments, documents, records, and other information submitted by the claimant even if they were not submitted or considered in the initial benefit determination and must not give deference to the initial determination.
• Notice of an appeal denial must specify why the appeal was rejected, including reference to the specific plan provisions relied upon, and inform the claimant that he or she is entitled to receive free copies of all documents, records, and information that were considered in making the decision (29 CFR 2560.503-1(j)).
• An appeal denial must include a statement describing any voluntary appeal procedures offered by the plan and the claimant's right to obtain the information about these procedures and a statement of the claimant's right to sue for benefits.
Health claim procedures. Additional requirements may apply to health plans, including, for example:
• If a specific internal rule guideline, protocol, or similar criterion is relied on in making an adverse benefit determination, the notification must either set forth that provision or indicate that an internal rule, etc., was relied on and that the specific provision will be provided free of charge on request (29 CFR 2560.503-1(g)).
• The notice that a claim is denied on the basis of a medical necessity or experimental treatment or similar exclusion or limit must include either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant's medical circumstances, or a statement that such explanation will be provided free of charge on request.
• The review of a health claim must not give any deference to the initial determination and must be done by an individual who is not the same as, or a subordinate of, the individual who made the initial determination (29 CFR 2560.503-1(h)(3)).
• When deciding an appeal of a health claim that is based in whole or in part on a medical judgment, a healthcare professional who has appropriate training and experience must be consulted.
• Health plans must identify medical or vocational experts who were consulted if a claim is denied if so requested by the claimant, even if their particular advice was not used in making the decision.
• Health plans may require no more than two levels of appeals of a benefit denial before a claimant may sue (29 CFR 2560.503-1(c)(2)).
• Mandatory arbitration is allowed in health plans as one of the two appeals if it meets all the requirements for such appeals and if the claimant is not barred from challenging the results of the arbitration in court (29 CFR 2560.503-1(c)(4)).
• Voluntary additional levels of appeal (including binding arbitration) are permitted in health plans (29 CFR 2560.503-1(c)(3)). However, all of the following must apply:
--The plan won't assert a failure to exhaust administrative remedies if a claimant elects to pursue a claim in court rather than through the voluntary appeal process;
--The statute of limitation for suing is tolled during the voluntary appeal process;
--The voluntary appeal process is available only after the required appeals;
--The plan provides the claimant with sufficient information to make an informed decision whether to use the voluntary level of appeal, including a statement that using or not using the voluntary level of appeal will have no effect on the claimant's rights to any other benefits under the plan and information about the applicable rules, the right to representation, the process for selecting the decision maker, and the circumstances, if any, that may affect the impartiality of the decision maker, such as any financial or personal interests in the result or any past or present relationship with any party to the review process; and
--No fees or costs are charged to the claimants.
Interaction with state laws. The required claims procedures do not supersede any applicable state insurance review process unless that process prevents the application of the required procedures (29 CFR 2560.503-1(k)). It is not necessary to utilize the state procedures before suing for benefits.
The ACA also set new requirements in addition to those in the ERISA claims procedure regulations (29 CFR 2590.715-2719):
Broader definition of adverse benefit determination. First, a broader definition of an adverse benefit determination applies that includes any rescission of coverage (whether or not the rescission has an adverse effect on any particular benefit at that time).
Full and fair review requirement. A plan and insurer must allow a claimant to review the claim file and to present evidence and testimony as part of the internal claims and appeals process. In addition to complying with the current claims procedure requirements:
• The plan or insurer must provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan or insurer (or at the direction of the plan or insurer) in connection with the claim; this evidence must be provided as soon as possible and sufficiently before the date on which the notice of final internal adverse benefit determination is required to be provided to give the claimant a reasonable opportunity to respond; and
• Before the plan or insurer can issue a final internal adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently before the date on which the notice of final internal adverse benefit determination is required to be provided to give the claimant a reasonable opportunity to respond.
Requirement for avoiding conflicts of interest. A plan must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Decisions on hiring, compensation, termination, promotion, or other similar matters of any individual (such as a claims adjudicator or medical expert) must not be made based on the likelihood that the individual will support the denial of benefits.
Notice requirements. Plans and insurers must provide notice to individuals, in a culturally and linguistically appropriate manner and must also comply with the following additional requirements:
• The plan and insurer must ensure that any notice of adverse benefit determination or final internal adverse benefit determination includes information sufficient to identify the claim involved (including the date of service, the healthcare provider, and the claim amount (if applicable). The notice must state that the diagnosis and treatment codes and their meanings will be provided on request.
• The plan and insurer must provide to participants and beneficiaries, as soon as practicable, on request, the diagnosis code and its corresponding meaning, and the treatment code and its corresponding meaning, associated with any adverse benefit determination or final internal adverse benefit determination. Additionally, the plan or insurer cannot consider a request for such diagnosis and treatment information, in itself, to be a request for an internal appeal or an external review.
• The plan and insurer must ensure that the reason or reasons for the adverse benefit determination or final internal adverse benefit determination includes the denial code and its corresponding meaning, as well as a description of the plan's or insurer's standard, if any, that was used in denying the claim. In the case of a notice of final internal adverse benefit determination, this description must include a discussion of the decision.
• The plan and insurer must provide a description of available internal appeals and external review processes, including information on how to initiate an appeal.
• The plan and insurer must disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman established under Public Health Services Act (PHSA) Sec. 2793 to assist individuals with the internal claims and appeals and external review processes.
Culturally and linguistically appropriate notice requirement. Notices of available internal claims and appeals and external review processes must be provided in a culturally and linguistically appropriate manner. Plans and insurers are considered to satisfy this requirement if notices are provided in a non-English language when there are a threshold number of people who are literate in the same non-English language.
Specific requirements. The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals (including external review) in any applicable non-English language. The plan must provide, on request, a notice in any applicable non-English language and must include, in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan or issuer.
Applicable non-English language threshold. For an address in any U.S. county to which a notice is sent, a non-English language is an applicable non-English language if 10 percent or more of the population residing in the county is literate only in the same non-English language.
Deemed exhaustion of internal claims and appeals processes. In the case of a plan or insurer that fails to strictly adhere to all the claims procedure requirements, the claimant is deemed to have exhausted the internal claims and appeals process and may seek immediate external review or court action, as applicable, unless the violation was:
De minimis;
• Nonprejudicial;
• Attributable to good cause or matters beyond the plan’s or issuer's control;
• In the context of an ongoing good-faith exchange of information; and
• Not reflective of a pattern or practice of noncompliance.
In addition, the claimant would be entitled, on written request, to an explanation of the plan’s basis for asserting that it meets this standard so that the claimant can make an informed decision whether to seek immediate review. If the external reviewer or the court rejects the claimant’s request for immediate review on the basis that the plan met this standard, the claimant may resubmit and pursue the internal appeal of the claim.
The claimant is also entitled to pursue any available remedies under ERISA or under state law, as applicable, on the basis that the plan or insurer has failed to provide a reasonable internal claims and appeals process that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under ERISA Sec. 502(a), the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.
Continued coverage pending the outcome of an appeal. A plan and insurer are required to provide continued coverage pending the outcome of an appeal. Benefits for an ongoing course of treatment cannot be reduced or terminated without providing advance notice and an opportunity for advance review.
PHSA Sec. 2719 provides that either a state external review process or a federal external review process must apply for health plans and insurers. This requirement is specifically incorporated into ERISA and the IRC. The ACA regulations provide rules for determining which process applies, as well as guidance on each process.
Determining whether a state or federal external review process applies. The regulations set when plans must comply with an applicable state external review process and when they must comply with the federal external review process. If a state external review process that applies and is binding on the insurer includes, at a minimum, the consumer protections in the National Association of Insurance Commissioners (NAIC) Uniform Model Act, the state external review process and not the federal external review process applies.
To the extent that a group health plan provides benefits other than through health insurance coverage (i.e., the plan is self-insured) and is subject to a state external review process that applies to and is binding on the plan (e.g., is not preempted by ERISA) and the state external review process includes at a minimum the consumer protections in the NAIC Uniform Model Act, then the plan must comply with the applicable state external review process and is not required to comply with the federal external review process.
Any plan not subject to a state external review process must comply with the federal external review process.
Minimum state external appeals process requirements. An applicable state external review process must meet certain minimum consumer protections, and the HHS will determine whether state external review processes meet these requirements. For example, such state external review processes must:
• Provide for the external review of adverse benefit determinations (and final internal adverse benefit determinations) that are based on medical necessity, appropriateness, healthcare setting, level of care, or effectiveness of a covered benefit;
• Require insurers to provide effective written notice to claimants of their rights in connection with an external review for an adverse benefit determination;
• To the extent the state process requires exhaustion of an internal claims and appeals process, make exhaustion unnecessary if the insurer has waived the exhaustion requirement, the insurer has exhausted (or is considered to have exhausted) the internal claims and appeals process under applicable law, or the claimant has applied for expedited external review at the same time as applying for an expedited internal appeal;
• Provide that the insurer against which a request for external review is filed must pay the cost of an independent review organization (IRO) for conducting the external review;
• Not impose a restriction on the minimum dollar amount of a claim for it to be eligible for external review;
• Allow at least 4 months after the receipt of a notice of an adverse benefit determination or final internal adverse benefit determination to file a request for an external review;
• Provide that an IRO will be assigned on a random basis or another method of assignment that ensures the independence and impartiality of the assignment process;
• Provide for a list of approved IROs qualified to conduct the review based on the nature of the healthcare service that is the subject of the review;
• Provide that any approved IRO has no conflicts of interest that will influence its independence;
• Allow the claimant to submit to the IRO, in writing, additional information that the IRO must consider when conducting the external review and require that the claimant is notified of such right to do so;
• Provide that the decision is binding on the plan or insurer, as well as the claimant, except to the extent that other remedies are available under state or federal law. (The plan or insurer must provide benefits (including by making payment on the claim) pursuant to the final external review decision without delay, regardless of whether the plan or insurer intends to seek judicial review of the external review decision and unless or until there is a judicial decision otherwise);
• Provide for a written decision not more than 45 days after the receipt of the request for external review by the IRO in the case of a standard external review;
• Provide for an expedited external review in certain circumstances with a decision not later than 72 hours after the receipt of the request;
• Require that insurers include a description of the external review process in the SPD, policy, certificate, membership booklet, outline of coverage, or other evidence of coverage they provide to claimants;
• Require that IROs maintain written records and make them available on request to the state; and
• Follow procedures for external review of adverse benefit determinations involving experimental or investigational treatment, substantially similar to what is set forth in Section 10 of the NAIC Uniform Model Act.
The federal external review process. The federal standards are intended to be similar to the state requirements. The federal external review process initially applies to claims that involve:
• Medical judgment (excluding those that involve only contractual or legal interpretation without any use of medical judgment), as determined by the external reviewer; or
• A rescission of coverage.
Expedited reviews. The federal external review process, like the state external review process, provides for expedited external review and additional consumer protections for external review for claims involving experimental or investigational treatment.
Model notices. A revised model notice of adverse benefit determination, a revised model notice of final internal adverse benefit determination, and a revised model notice of final external adverse benefit determination can be located at http://www.dol.gov/ebsa.
The reporting and filing requirements for employee pension, profit-sharing, and welfare benefit plans are detailed and numerous, and they tend to change with little notice. For updated information, visit http://www.dol.gov/ebsa.
Additionally, helpful charts summarizing the reporting and disclosure requirements can be found at http://www.irs.gov.
Last updated on June 1, 2017.
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