Category Archives: Health and Welfare Benefits

Look Out St. Paul Employers: Here Comes the ESST!

Minnesota Employers operating in the East Metro need to be aware of the impending deadlines in the St. Paul Earned Sick and Safe Time Ordinance (“ESST”) which requires employers with St. Paul-based employees to provide paid sick leave and safe time to those employees. For employers with 24 or more full or part-time St. Paul area-based employees, the ESST is effective July 1, 2017 and for smaller employers the effective date is Jan. 1, 2018. A good summary of the ordinance and its impact on St. Paul employers is available at the St. Paul Chamber of Commerce website.

While there is currently litigation contesting the legality of the similar Minneapolis ordinance, that litigation does not directly affect the St. Paul ESST. St. Paul area employers should assume it will come into being. The Minneapolis ordinance has similar effective dates and there is no current injunction (more about the Minneapolis ordinance in an upcoming Minnesota Employer Blog post).

The implementation of the St. Paul ESST raises corollary questions about uniformity of company-wide PTO policies for employers with employees inside and outside St. Paul proper. It may be easier to administer a uniform rather than a fractured PTO policy for such employers.

Takeaway: The impending ESST Ordinance effective dates require employer action and, perhaps, a broader review of PTO policies with legal counsel. ESST is going to happen so affected employers should prepare!

2016 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 21, 2015, the Internal Revenue Service announced the 2016 cost-of-living adjusted amounts for certain retirement plan and fringe benefit limitations. Earlier in 2015, the Internal Revenue Service announced the 2016 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 15, 2015, the Social Security Administration announced the 2016 cost-of-living adjustments related to Social Security benefits.

A list of the cost-of-living adjusted amounts that most commonly affect employer-sponsored benefit plans is available here.

The Eighth Circuit Pushes the Supreme Court’s Hobby Lobby Decision One Step Further

The Eighth Circuit Court of Appeals recently published a decision holding that the accommodation process for religious organizations regarding the contraceptive mandate of the Affordable Care Act (ACA) may itself violate religious freedom. The decision contributes to a growing split among federal courts, which will likely end up before the U.S. Supreme Court.

In Sharpe Holdings, Inc. et al. v. U.S. Department of Health and Human Services, a number of nonprofit religious organizations argued that the accommodation process for the ACA’s contraceptive mandate violated their First Amendment religious freedoms as well as the Religious Freedom Restoration Act (RFRA). No. 14-1507 (8th Cir. Sep. 17, 2015). Under the ACA, covered employers are generally required to provide health insurance to their employees, including insurance for approved contraceptive methods. However, the ACA also creates an accommodation process, which allows religious organizations to notify the third-party administrators of their health insurance plans of their religious objections. The third-party administrator is then obligated to provide the contraceptive coverage for employees instead of the religious organization.

The intended purpose of the ACA’s contraceptive-mandate accommodation was to allow religious organizations to avoid providing contraceptive coverage in violation of their religious beliefs. But the Plaintiffs in Sharpe Holdings, Inc. argued that even the accommodation process made them complicit in providing contraception and, therefore, violated their religious beliefs.

A number of circuit courts – including the Second, Fifth, Tenth, and D.C. Circuits – have rejected the argument that complying with the ACA’s accommodation process makes a religious employer complicit in providing contraception. These courts primarily reasoned that it was federal law, rather than the accommodation process, that triggered the third-party administrator’s duty to provide contraception. These courts also determined that it was the courts’ role to determine whether the asserted burden on religious liberty was sufficiently substantial to trigger the protections of RFRA and that the challenger’s assertions were too attenuated to meet that standard.

The Eighth Circuit disagreed. Relying heavily on the U.S. Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., the Eighth Circuit reasoned that it was required to accept the sincerity of the Plaintiffs’ contention that the accommodation process would substantially violate their religious beliefs. The court explained that:

The question here is not whether CNS and HCC have correctly interpreted the law, but whether they have a sincere religious belief that their participation in the accommodation process makes them morally and spiritually complicit in providing abortifacient coverage. Their affirmative answer is not for us to dispute.

Concluding that the court had no authority to question the Plaintiffs’ conclusion that the accommodation process substantially burdened their religious beliefs, the Eighth Circuit then proceeded to analyze whether there were less restrictive alternatives to accomplishing the government’s objectives in providing contraceptive care. The Eight Circuit held that the Plaintiffs were likely to prevail on their argument that less restrictive alternatives existed.

Specifically, the Eighth Circuit agreed with the Plaintiffs’ arguments that the government could accomplish the same objectives by assuming the costs of providing contraceptive coverage itself, by providing subsidies, reimbursements, or tax credits to employees for contraceptive care, or by paying for the distribution of contraceptives at community health centers, public clinics, or hospitals with income-based support. Because less restrictive alternatives were likely available, the court held that the Plaintiffs were likely to prevail on their claims. As a result, the Eighth Circuit affirmed the lower court’s entry of an injunction prohibiting the government from imposing monetary penalties against the Plaintiffs for refusing to either provide contraceptive coverage or participate in the ACA’s accommodation process.

Takeaway: Given the split among federal circuit courts, the issue of whether the ACA’s accommodation process for the contraceptive mandate violates religious freedom is likely headed to the U.S. Supreme Court.

EEOC Issues Proposed Rules For Employer Wellness Programs

On April 20, 2015, the EEOC issued a notice of proposed revisions to its regulations under the Americans with Disabilities Act concerning employer wellness programs. The new regulations will not become effective until after the notice period ends on June 19, 2015, and a final rule is published. In the meantime, here’s what employers should know about the EEOC’s proposed rules for wellness programs:

  1. Wellness programs must be reasonably designed to promote health and prevent disease. The proposed regulations explained that a program satisfies this standard “if it has a reasonable chance of improving the health of, or preventing disease in, participating employees, and it is not overly burdensome, is not a subterfuge for violating the ADA or other laws prohibiting employment discrimination, and is not highly suspect in the method chosen to promote health or prevent disease.”
  2. Wellness programs must be voluntary. An employer may not require employees to participate in a wellness program, nor may an employer deny health insurance coverage or other benefits to employees for refusing to participate, except as part of an authorized, limited incentive that complies with the proposed regulations.
  3. Wellness incentives must be limited. The proposed regulations state that an incentive, whether in the form of a reward or a penalty, so long as the “maximum allowable incentive available under the program . . . does not exceed 30 percent of the total cost of employee-only coverage.” For example, if the total cost of coverage paid by both the employer and employee for self-only coverage is $5,000, the maximum incentive for an employee under that plan must be $1,500.
  4. Medical information must be kept confidential. Medical information obtained through a wellness program must be maintained as confidential, except as authorized by the ADA or as may be necessary to administer the health plan.
  5. Employers must offer reasonable accommodations for wellness programs. Absent undue hardship, employers are required to provide reasonable accommodations to enable disabled employees to enjoy equal benefits and privileges of employment, including participation in wellness programs. This includes reasonable accommodations that may be necessary to enable employees with disabilities to earn whatever financial incentive an employer wellness program offers.

Takeaway: Employers who offer wellness programs should review the EEOC’s notice of proposed rulemaking and provide comments on it before June 19, 2015, if they wish to do so. Because the proposed rules will likely be similar, if not identical, to the final rule that eventually will take effect, employers should also review their wellness programs to determine whether any changes may be necessary.

What Does the Anthem Breach Mean For You?

In early February 2015, Anthem, Inc. reported that on January 29, 2015, it had discovered that it was the target of “a very sophisticated external cyber attack.”  Anthem believes the attack happened over the course of several weeks, starting on December 10, 2014.  Accessed information may have included the names, dates of birth, social security numbers, home addresses, email addresses, and income data of current or former members of one of Anthem’s affiliated health plans, or one of the health plans that Anthem provides administrative services to.  Anthem is one of the largest health insurance companies in the United States, and one of the largest service provider to self-funded group health plans and Blue Cross and Blue Shield plans across the country.  Over 300,000 Minnesotans may have been affected by this breach.

What this means for you:

  • If you are one of the individuals that were directly affected by this breach, you should take advantage of the credit monitoring protection offered by Anthem and continue to watch your banking and other financial accounts for any potential suspicious activity. Anthem will contact affected individuals.  However, if you have not yet been contacted by Anthem, but believe you may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan insured or administered by Anthem, you may need to provide notice to the participants in your plan, and may need to provide notice of the breach to the Department of Health and Human Services (HHS), as required by the Privacy Rule under the Health Insurance Portability and Accountability Act (HIPAA). Some state laws also require notifications in these types of instances.  As a result, you should contact your company’s employee benefits counsel to determine specifically what notice requirements apply in this case.  Anthem may take the lead in fulfilling any notice requirements that apply to your plan, especially if Anthem fully insures the plan.  However, as the plan sponsor, your company is generally ultimately responsible for making sure all HIPAA requirements are met, especially if the plan is self-insured and Anthem only serves as the claims administrator. In addition, you should consult your plan’s HIPAA privacy and security policies to determine if further actions are required due to this breach.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.  Anthem will contact affected plan sponsors.  However, if you have not yet been contacted by Anthem, but believe your plan may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan that is not insured or administered by Anthem, you should still familiarize yourself with this breach for two reasons. First, you still may get questions from employees wondering if they are affected.  Second, it can serve as a good test of your HIPAA privacy and security policies and procedures.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  If you do not have such policies and procedures, this serves as a good reminder to implement such policies and procedures as soon as possible.  You can be thankful that your plan was not affected this time.  But you may not be so lucky next time.  In addition, even if your plan is never affected by a breach, HHS has the authority, and regularly exercises such authority, to audit group health plans for HIPAA compliance, and to assess significant fines for noncompliance.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.
  • If your company provides services to another company, and in the course of providing such services, your company receives, transmits, stores, or otherwise has access to certain health information of individuals, your company may be considered a “business associate” under HIPAA. In that case, HIPAA imposes direct liability on your company for certain HIPAA requirements, and your clients will also expect your company to be HIPAA compliant.  As a result of the Anthem breach, your clients may be more interested in your HIPAA policies and procedures, since they do not want to risk being responsible for a HIPAA violation that was caused by your company.  Therefore, you should also make sure you have HIPAA compliant policies and procedures in place for your company, and that you are following them.

Takeaway:  Clearly if you were directly affected by the Anthem breach, either as an individual whose personal data may have been compromised, or as the representative of a company that sponsors a group health plan insured or administered by Anthem, you should take immediate action to obtain credit monitoring (in the case of an individual) or consult with your company’s employee benefits counsel regarding HIPAA notification requirements.  However, even if you were not directly affected by this data breach,  if you represent a company that sponsors a group health plan and/or your company is a “business associate,” this data breach serves as a good reminder to make sure you are in compliance with HIPAA.  At a minimum you should have, and be following, HIPAA compliant policies and procedures.  Two of the most important policies are to conduct a comprehensive security risk assessment and to conduct on-going employee training.  If you do not currently have HIPAA compliant policies and procedures, or you are not sure if they are HIPAA compliant, you should contact your company’s employee benefits counsel as soon as possible.

EEOC Challenge To Wellness Programs Becomes Political Issue

A leading group of chief executives is threatening political repercussions for the EEOC’s recent challenge to employer wellness programs.

The EEOC has several pending lawsuits challenging aspects of employer wellness programs. A federal court in Minnesota recently denied the EEOC’s motion for a preliminary injunction against surcharges imposed by Honeywell for employees who do not participate in certain biometric screenings. In denying the motion, the court cited a provision of the Affordable Care Act (ACA) that expressly states that  “the absence of a surcharge” may be used as a reward in a wellness program.

Now, a group of chief executives are using political pressure to push back against the EEOC’s challenges to wellness programs. Business Roundtable, a group that represents chief executives of 200 large U.S. corporations, intends to meet with President Obama about the issue soon. According to CNBC, the group is upset that the EEOC is challenging wellness programs that are authorized by the ACA. Potential options that members of the Business Roundtable group have for increasing political pressure regarding this issue include: (i) supporting legal challenges to the ACA; (ii) making executives available for hearings about potential changes to or repeal of the ACA; or (iii) ceasing to offer employer-provided healthcare plans and, instead, provide subsidies for employees to buy healthcare elsewhere.

Takeaway: In addition to the legal problems with the EEOC’s challenge to wellness programs noted by the court in the recent Honeywell decision, political pressure from leading executives may provide another headwind for the EEOC’s new initiative.

Court Denies EEOC’s Motion For Preliminary Injunction Against Honeywell’s Wellness Program

The U.S. District Court for the District of Minnesota recently denied a motion for a preliminary injunction against aspects of Honeywell’s wellness program.

In EEOC v. Honeywell International, Inc., the EEOC challenged certain surcharges that Honeywell imposes on employees who participate in the Company’s High Deductible Health Plan and do not participate in a wellness program with required biometric screenings. No. 14-4517 ADM/TNL (D. Minn., Nov. 6, 2014). In order to be eligible for a Health Savings Account, employees who participate in the wellness program are required to be screened for blood pressure, height, weight, waist circumference, and cholesterol, glucose and nicotine levels. Employees who do not participate are subject to a $500 annual surcharge. Employees and their spouses may also be subject to $1,000 annual surcharge if they are tobacco users. Employees and spouses who refuse to be screened are presumed to be tobacco users, unless they establish that they are tobacco free in another way. When employees agree to the testing, Honeywell receives the data in aggregate form, but does not receive individual results.

The EEOC alleges that Honeywell’s wellness program violates the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) and sought a preliminary injunction against the imposition of surcharges while the case is pending. The court denied the motion for a preliminary injunction.

In order to obtain a preliminary injunction, the EEOC needed to show four things: (1) the threat of irreparable harm; (2) that the balance of harms favored the injunction; (3) the likelihood of success on the merits; and (4) that the public interest favored the injunction. The court found that the EEOC failed to prove irreparable harm, explaining that the three employees represented by the EEOC had already agreed to the biometric testing and did not demonstrate any potential violation of their privacy. The court also found that the balance of harms did not favor the injunction because the injunction would likely result in increased costs for Honeywell’s healthcare program and would create problems for the administration of the health plan.

With respect to likelihood of success on the merits, the court did not analyze the issue in-depth, but identified some potential problems for the EEOC’s case. First, the Court noted that Honeywell’s wellness program may qualify for the safe harbor provision of the ADA, which allows companies to establish or administer “the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law.” 42 U.S.C. § 12201(c)(2). Second, the court noted that Congress specifically approved of surcharges in a provision of the Affordable Care Act, which provides that “the absence of a surcharge” may be used as a reward in a wellness program. Third, the court noted that the biometric screening may not constitute a “genetic test” for purposes of GINA, which is defined as “analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detects genotypes, mutations, or chromosomal changes.” 29 U.S.C. § 1191b(d)(7).

The court concluded by stating that “great uncertainty persists in regard to how the ACA, ADA and other federal statutes such as GINA are intended to interact.” As a result, the Court refused to issue a preliminary injunction against Honeywell’s wellness program.

Takeaway: The Honeywell case is an important test case regarding the viability of wellness programs with financial surcharges. The Court’s initial denial of the EEOC’s motion for a preliminary injunction is a positive sign that the practice may be permissible, but it is not a final decision on the merits.

2015 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 23, 2014, the Internal Revenue Service announced the 2015 cost-of-living adjusted amounts for certain retirement plan limitations. Earlier in 2014, the Internal Revenue Service announced the 2015 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 22, 2014, the Social Security Administration announced the 2015 cost-of-living adjustments related to Social Security benefits.

A list of the most significant of these cost-of-living adjusted amounts is available here.

A Quick Primer on the Supreme Court’s Hobby Lobby Case

On the last day of its term, the Supreme Court issued its decision in Burwell v. Hobby Lobby Stores, Inc., No. 13-354 (June 30, 2014) – a highly contentious case about whether closely-held for-profit corporations can be required to provide insurance coverage for certain contraceptives.  Here’s a high-level overview of what employers should know about the case:

The Religious Freedom Restoration Act (RFRA):  The Hobby Lobby case was not a First Amendment freedom of religion case.  Instead, it involved RFRA, a federal statute that prohibits the Government from substantially burdening “a person’s exercise of religion even if the burden results from a rule of general applicability,” unless the Government demonstrates it:  “(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”  42 U.S.C. § 2000bb-1(a-b).

The Contraceptive Mandate:  In Hobby Lobby, the plaintiffs challenged the application of a mandate to cover certain contraceptives arising under the Affordable Care Act, which requires certain employers’ group health plans to provide “preventive care and screenings” for women without “any cost sharing requirements.”  42 U.S.C. § 300gg-13(a)(4).  Regulations implemented by the Department of Health and Human Services (HHS) specify that this generally requires employers to provide 20 contraceptives.  The plaintiffs in Hobby Lobby objected to four of those contraceptives on the grounds that they prevented fertilized eggs from developing further by inhibiting attachment to the uterus.

Does RFRA Apply to Closely-Held Corporations?  Justice Alito, writing for the majority, held that RFRA’s use of the term “person” applied to closely-held for-profit corporations and that it was intended to extend rights to corporations to protect the rights of shareholders, officers, and employees.  Justice Ginsburg, writing for the dissent, argued strongly against this interpretation and questioned how the majority could confine its reasoning to closely-held corporations only.

Does the Contraceptive Mandate Substantially Burden Religion?  The majority said yes, reasoning that the contraceptive mandate required the plaintiffs to cover contraceptives that violated their sincerely held beliefs or pay substantial fines.  In dissent, Justice Ginsburg argued that the majority confused the sincerity of the plaintiffs’ belief with the substantiality of the alleged burden.  Justice Ginsburg argued that requiring the plaintiffs to fund general health insurance policies, which may or may not be used for contraceptives based on decisions made by others, was “too attenuated to rank as substantial.”

Does the Contraceptive Mandate Further a Compelling Governmental Interest?  The majority assumed, without deciding, that the contraceptive mandate furthered a compelling governmental interest.  The dissent agreed that it did.

Is There a Least Restrictive Alternative To the Contraceptive Mandate?  This is the issue where the plaintiffs won their case.  The majority held that there was a less restrictive alternative available – specifically, HHS already created an alternative system for non-profit religious organizations, like churches, to opt-out of the contraceptive mandate.  The system allows a non-profit religious organization to self-certify that it religiously objects to certain contraceptives.  If this certification is made, the insurer must then cover the costs of those contraceptives.  See 45 C.F.R. § 147.131.  The majority held that there was no reason the government could not make this option available to closely-held for-profit corporations with religious objections.  Accordingly, imposing the contraceptive mandate on closely-held for-profit corporations violated RFRA because it was not the least restrictive alternative.

Writing for the dissent, Justice Ginsburg argued that there was a valid basis for distinguishing between non-profit religious organizations, which are designed to serve a community of believers, and for-profit corporations, which are not.  Justice Ginsburg further argued that the alternative made available for religious organizations does not accomplish the ACA’s goals of providing employer-based health insurance and minimizing the administrative obstacles that employees may face in getting health insurance from another source.  Justice Ginsburg also worried about the “stopping point” for the majority’s reasoning and whether it would apply to other issues, such as health coverage for vaccines or application of the minimum wage.

Takeaway:  The Supreme Court held in Hobby Lobby that applying the ACA’s contraceptive mandate to closely-held for-profit-corporations violates RFRA.  Given the reasoning employed by the court, it is likely that HHS will issue new regulations allowing closely-held for-profit corporations to self-certify their religious objections to the contraceptive mandate, similar to the current regulations for non-profit religious organizations.  It is also likely that there will be more RFRA lawsuits involving for-profit corporations that will seek to extend the reasoning adopted by the Court in Hobby Lobby to other areas.

Is the IRS’s New “Use It or Lose It” Rule a Trick or a Treat?

On October 31, 2013, the Internal Revenue Service got into the Halloween spirit by giving what at first appears to be nothing but a treat to health flexible spending account participants.  The IRS, in Notice 2013-71, modified the “use it or lose it” rule that applies to health flexible spending accounts.  While this change may appear at first to be nothing but good news, an employer must review and understand the new “use it or lose it” rule, to avoid being tricked.

Under the new rule, an employer’s health flexible spending account may allow up to $500 of a participant’s health FSA to be carried over into the next year.  A plan may allow a carryover limit of less than $500, or may not allow any carryover at all.  But if an employer wants to add a carryover feature to its health FSA, there are a few rules that must be followed, including:

  • The carryover cannot exceed $500;
  • The carryover only applies to a health FSA (i.e., not to a dependent care FSA);
  • The carryover does not reduce the maximum amount that generally applies to health FSAs ($2,500 for 2013 and 2014);
  • A carryover may not be permitted with a grace period; a plan may have a carryover feature, or a grace period, but not both;
  • Amounts carried over must be used in the subsequent plan year, or forfeited by the end of the subsequent year;
  • A plan must be amended to allow the carryover before the end of the first year in which the carryover will be allowed, except an employer can administer the plan with a carryover for the 2013 plan year without having to formally amend the plan until 2014; and
  • A carryover in a general-purpose FSA may result in an individual being ineligible to contribute to a health savings account for the entire year that the amounts are carried over to.

Takeaway: The new carryover feature will certainly be welcome news to many employers.  However, considering that the IRS announcement did not occur until most employers were in, or near, their annual enrollment period, it may make sense for an employer to wait until 2014 to implement the new feature, especially if the employer’s plan already has a grace period, which would need to be eliminated if the carryover feature is adopted.  Nonetheless, it is a new feature that every employer with a health FSA should at least consider.

2014 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 31, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjusted amounts for certain retirement plan limitations and limitations affecting certain fringe benefits.  On May 2, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjustments affecting health savings accounts, and on October 31, 2013, the Social Security Administration announced the 2014 cost-of-living adjustments related to Social Security benefits.

A list of the most significant of these cost-of-living adjusted amounts is available here.

Hold Everything: ACA Play or Pay Effective Date is Delayed

Ok, employers don’t need to hold everything.  They should continue to prepare for the August 1 effective date of Minnesota’s new same-sex marriage law, and the September 23 effective date of new requirements under the HIPAA Omnibus Rule.  And employers still need to make sure their wellness programs comply with final regulations issued earlier this year, and still need to make sure they are compliant with many of the other requirements under the Affordable Care Act (ACA) that are effective between now and January 1, 2014.  But at least employers can “put down their pencils” with regard to their planning on how they will comply with the Employer Shared Responsibility mandate (aka the “Play or Pay” mandate), at least for one year.

On July 2, 2013, the U.S. Treasury announced that the Obama Administration will provide an additional year before the Employer Shared Responsibility mandate will be effective.  The Treasury expects to publish formal guidance within the next week or so describing the details of this delayed effective date.  Also, during the summer of 2014, the Treasury expects to issue additional proposed rules on how the various information reporting requirements on the mandate are to be met.  Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015.

Takeaway:  Since penalties under the Employer Shared Responsibility mandate will not apply in 2014, employers can put on hold any changes they were intending to make to their medical plan or business hiring practices, as a result of the mandate, without having to worry about any penalties under the mandate before 2015.  During this 2014 transition period, employers will need to watch for further guidance issued by the Treasury on this issue.  In addition, employers can focus their benefit plan compliance efforts on more immediate concerns, such as the affect on their benefit plans of the partial repeal of DOMA, and the new HIPAA Omnibus Rule.