Compliance Corner


FAQ: What are the Medicare prescription drug (Part D) disclosure requirements? How does an employer comply?

September 27, 2022

To comply with Medicare Part D, an employer that sponsors a group health plan offering prescription drug coverage must satisfy two basic disclosure requirements.

First, the plan must notify all Medicare Part D eligible individuals whether or not the prescription drug coverage is creditable, meaning it is expected to pay on average as much as the standard Medicare Part D coverage. The creditable status of the coverage can be determined through actuarial analysis or via the CMS Creditable Coverage Simplified Determination. If a plan has several benefit options (e.g., PPO and HMO), the creditable coverage status must be determined separately for each option. However, generally, an employer can provide a single notice for an HRA integrated with a major medical plan.

CMS has provided Model Disclosure Notices (in English and Spanish) that an employer may use to meet this requirement. The notice must be provided annually prior to October 15, which is the beginning of the annual enrollment period for Medicare Part D. The notice must also be provided when a Medicare Part D eligible individual joins the plan, when the creditable coverage status changes, or upon request.

Medicare Part D eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents. Because an employer cannot always identify these individuals (particularly if eligibility is not based on age), a practical approach is to provide notices to all enrolled in or eligible to enroll in the prescription drug coverage. Generally, a single disclosure notice may be provided to the employee and any dependents residing at the same address; the employee should be instructed to share the notice with any Medicare Part D eligible dependents. The Medicare Part D notice may be provided separately or combined with other benefit materials, such as enrollment packets, provided the notice is “conspicuous and prominently presented” in accordance with specific CMS instructions.

An employer may distribute the Medicare Part D notice by hand, by mail or by electronic delivery (in accordance with the DOL electronic disclosure safe harbor). Under this safe harbor, employees with integral access to the employer’s computer system at work can be defaulted to electronic delivery, with the option to opt out. For this population, if the employer posts the notice on the intranet, the employer must notify employees (e.g., via email) of the notice availability and significance, and the right to request a paper copy. Those without integral access to the employer’s computer system as part of their job would need to affirmatively consent to electronic delivery in accordance with the DOL guidance.

The purpose of the disclosure is to enable Medicare Part D eligible individuals to make informed decisions regarding their coverage and compare the available options. The notice is important because individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for Medicare Part D are subject to late enrollment penalties. The penalties are based on the duration of the lapse in creditable coverage and continue for the duration of the Part D coverage. Although there are no specific employer penalties associated with this notice requirement, failing to provide the notice may be considered a breach of an employer’s fiduciary obligations to the plan.

The second requirement is that an employer must disclose the plan’s creditable coverage status to CMS within 60 days of the start of each plan year. A disclosure to CMS must also be made within 30 days of any change in the creditable coverage status or the termination of the plan. The process involves completion of a disclosure form on the CMS Creditable Coverage Disclosure webpage, which must be signed electronically by an individual authorized by the plan. For access to the form and related CMS guidance and instructions, please see: Disclosure to CMS Form  and Disclosure to CMS Guidance and Instructions | CMS

For more information, please ask your broker or consultant for a copy of our “Medicare Part D Disclosures: A Guide for Employers” white paper.

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FAQ: We are a large employer subject to the employer mandate. One of our employees just switched from full-time to part-time. When should we terminate coverage?

September 13, 2022

There are specific rules related to eligibility and changes of status related to the employer mandate. A change in status means that the employee has had a bona fide change in employment status from part-time (PT) or variable hour to full-time (FT) or vice versa. It does not include an employee who has not experienced a bona fide change in employment and whose hours are simply trending lower or higher.

As a reminder, an applicable large employer subject to the employer mandate has two methods for determining FT employees: monthly measurement and look-back measurement. An employer must use the same method for all employees in the same category. For this purpose, there are only four identified categories: collectively bargained and non-collectively bargained employees, employees covered by different collective bargaining agreements, salaried and hourly employees, and employees whose primary places of employment are in different states.

If an employer is using the monthly measurement method, then eligibility is determined on a monthly basis. If an employee had a bona fide change from FT to PT, the employee would lose eligibility at the end of the month when the change in status occurred. COBRA would be offered for a reduction of hours. If an employee has a change from PT to FT, the employee would be offered coverage the first of the month following the change.

If the employer is using the look-back measurement method, there are different rules for new employees versus ongoing employees. An ongoing employee is defined as one who has been employed for an entire standard measurement period.

Let’s first consider an ongoing employee determined to be FT upon hire and initially offered coverage following the plan’s waiting period. If that FT employee has a change in status to PT, the employer may terminate eligibility on the first day of the fourth month following the change (assuming the employee has indeed worked PT hours during the interim three months). If an employer terminates eligibility prior to this date, there is risk of an employer mandate penalty. Again, COBRA would be offered for a reduction in hours.

If an ongoing employee was determined to be PT during the most recent measurement period and experiences a change to FT, their ineligibility may remain through the corresponding stability period. An employer may be more generous and offer coverage earlier. For example, the employer may offer coverage following the waiting period or the first of the fourth month following the change.

Next, let’s discuss new employees under the look-back measurement method. If a new employee is determined to be FT upon hire, offered coverage following the waiting period and then experiences a change in status to PT, the employer may terminate eligibility at the end of the month when the change occurred. If the new employee was determined to be PT (or variable hour) upon hire, placed in an initial measurement period and then has a change in status to FT, the employee must be offered coverage by the first day of the fourth month following the change (or the first day of the initial stability period, whichever is earlier).

As one can see, these rules are very complex. NFP has a whitepaper and chart that can assist you in reviewing and applying these rules. Please ask your consultant for a copy of “ACA Look-Back Measurement Method: Offers of Coverage and Changes in Status.”

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FAQ: If an employee doesn’t return to work following FMLA or state law leave, when should benefits terminate?

August 30, 2022

Following the expiration of any federal FMLA or state protected leave, an employee may stay on health benefits for as long as the eligibility terms of the plan allow. The Summary Plan Description, any employee handbooks or other communication describing benefit eligibility during leaves of absence should be consistent with the plan terms and approved by the carrier (stop-loss carrier if self-insured). In addition to ERISA’s fiduciary requirement to follow the terms of the plan, if a group unilaterally allows an employee to stay on the plan for longer than the carrier allows, then they risk having to self-insure claims incurred during the extended period.

A solid leave policy can support consistent and predictable benefits administration during extended employee absences. However, deciding an employee’s benefit eligibility while on leave as a one-off or promising more than what’s allowed in the plan document further risks setting a precedent or inadvertent discrimination, even if intended as generosity. For example, the ADA could be implicated if an employer has an informal practice of allowing only nondisabled employees on sabbaticals to remain on the plan longer than disabled employees on medical leave.

Applicable large employers (ALEs) also need to consider the employer mandate. If an ALE uses the look-back measurement method to determine health plan eligibility, an employee who earned full-time status in the most recent measurement period would remain eligible throughout the stability period regardless of the number of hours worked. The chosen measurement method should be incorporated into the health plan’s eligibility terms consistent with the SPD, employee handbook and other benefits communications. Note that when employment ends during a stability period, the individual is no longer an active employee under the terms of the health plan or for employer mandate penalty purposes.

A COBRA qualifying event occurs when benefits (but not necessarily employment) are terminated consistent with the plan’s eligibility requirements and any employer leave policy. That is, a reduction in hours (extended leave of absence) has caused a loss of coverage.

The right to continue those coverages during leave for other, non-health benefits (e.g., disability, life) is similarly governed by the eligibility terms of each respective plan document. Employers should review their disability and life plans and carrier contracts to determine whether they hold any administrative responsibilities for providing conversion notices or paperwork when coverage terminates.

Administering benefits during leaves can be complicated. There are different state and federal laws at play depending on a given employee’s reason for leave and work location. Employers should work with their legal counsel and HR experts to set up solid leave policies and ensure compliance with all applicable laws. Employment termination for those who do not return from FMLA or state protected leave is a separate issue for which employers should consult with employment law counsel.

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FAQ: The time has come again for MLR rebates. Could you provide a refresher on what we can do with those rebates?

August 16, 2022

The ACA requires medical insurance companies to pay annual Medical Loss Ratio (MLR) rebates to policyholders by September 30, 2022, if the insurer spent less than a specified minimum percentage of the premium on medical claims and certain healthcare quality improvement initiatives in the prior calendar year.

Depending on the employer and plan type, insurers will issue MLR rebates in the form of a premium credit or reduction (sometimes through a so-called “premium holiday”), or a lump-sum premium refund (via cash or check). Employers are then tasked with determining the proper use of an MLR rebate, which often requires distribution of a pro-rata share of the rebate to eligible plan participants within three months of the employer’s receipt of the rebate from the insurer.

Plan documents often include rules for treating these rebates, so it is a good idea to consult those documents when determining how to distribute them. When it comes to plans subject to ERISA, in which the employer’s contributions towards coverage comes from general assets (i.e., most plans), applicable guidance provides four steps to follow to determine how to use the rebate.

The first is that the employer must determine the plan(s) to which the MLR rebate applies. MLR rebates generally apply only to a specific plan option (such as an HMO, PPO or an HDHP). The insurer’s MLR rebate notice will specify the plan(s) to which it applies, and only the participants who contribute to the cost of the named plan option(s) should benefit from the rebate. If a rebate relates to two or more separate plan options with different MLR rebate factors, then the rebate should be applied separately by the employer based on the separate plan-specific calculations of the insurer. Remember that using an MLR rebate generated by one plan for the benefit of another plan’s participants or for the benefit of nonparticipants is likely a breach of fiduciary duty.

Second, the employer must determine the portion of the rebate that relates to employee contributions versus employer contributions toward the plan’s premium. The portion of the MLR rebate that relates to employee contributions is generally considered an ERISA “plan asset,” which may only be used for the benefit of plan participants (and any related administrative expenses). For example, if plan participants contribute 30% of the premium, then 30% of the rebate must be used for the benefit of plan participants. The employer may keep the portion of the rebate that relates to employer contributions; the employer portion of the rebate is simply returned to the employer’s general assets. However, if the plan pays benefits through a trust and the plan or trust is the policyholder, the entire refund amount would be considered plan assets and must be used for the benefit of participants.

Third, the employer must determine the participants to whom it will distribute the rebate. This is often the step that generates the most controversy. Note that DOL guidance gives employers some discretion when allocating the rebate among plan participants, provided employers follow ERISA’s general standards of fiduciary conduct. In determining whether to distribute the MLR rebate to all participants who contributed to the plan during the reporting year or only to current plan participants, and whether to weight the rebate ratably according to each participant’s actual contribution amount or to distribute the rebate in equal dollar amounts to all eligible plan participants, employers can follow these general guidelines:

  • The allocation method must be reasonable, fair and objective (but does not have to reflect each participant’s actual contribution cost). This means that the employer could choose to provide a flat amount rebate to each participant or a percentage of each participant’s actual contribution, so long as the method is reasonable, fair and objective.
  • If the administrative cost of distributing rebates to former participants approximates or exceeds the amount of the rebate, the employer may limit rebates to current participants only. The DOL guidelines do not specify what constitutes an administrative cost. It is generally accepted that these costs include only “hard costs” (such as the cost of producing a check and the related postage and handling) and do not include the effort to track down former participants. Note that the opportunity to exclude participants from MLR rebate actions based on a cost/benefit analysis pertains only to former participants and does not also apply to current participants.

Finally, the employer must determine the method for distributing the rebate to plan participants. MLR regulations provide four possible methods for distributing the rebate to plan participants:

  • Premium reductions for plan participants.
  • Benefit enhancements to the plan (adding a benefit or service).
  • A refund back to plan participants, either through cash or check.
  • A premium holiday (either by the employer passing along the insurer’s premium holiday or creating its own).

If it is not cost effective to distribute refunds to participants (both current and former) because the refund amounts approximate the distribution costs or would result in a taxable event to the participants, the employer may use the plan asset portion of the MLR rebate for other permissible plan purposes, such as making near-future premium reductions, premium holidays or benefit enhancements to the plan. Note that any such benefit plan enhancements must be implemented in full within the three-month time limit for using MLR rebates.

In any event, the employer should document the method it used for administering an MLR rebate according to the four steps outlined above or per the controlling ERISA plan document, as applicable. It should maintain records of all per-participant premium reductions or refunds according to its record retention policy. In general, records related to ERISA plans should be retained for eight years.

For more information on MLR rebates, such as how church plans should handle them and the tax treatment of MLR rebates, please reach out to your broker or consultant for a copy of our white paper on this topic.

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FAQ: Can an employer vary group health plan benefits and contributions by class?

August 02, 2022

Generally, an employer can vary benefits and contributions by bona fide employment classifications.

However, even where such classifications exist, the employer should ensure that the variations comply with the applicable nondiscrimination rules. Section 125 nondiscrimination rules apply to benefits and contributions made through a cafeteria plan. Section 105 rules apply to self-insured plans, including HRAs. Both sets of rules are designed to prohibit discrimination in benefits and contributions that disproportionately favor key or highly compensated employees (HCEs).
Under these rules, variances by class are allowed, provided the distinctions are based upon employment classifications consistent with the employer’s usual business practice (and not made solely for the benefit offerings). Examples of permitted classifications include, but are not limited to, those based on occupation, geographic location, business lines, job titles or hourly work expectations.

Therefore, the first step is to determine whether the class distinction is based upon a bona fide employment grouping. The idea is not to handpick individuals but to apply criteria used for other business purposes as well. For example, an executive class based on job title would normally be allowed. A distinction for a business unit located in another state would also generally be permitted.

If the distinctions are determined to be based on legitimate employment-based reasons, then the next step is to assess whether the variances disproportionately benefit the HCEs. Under §125, an HCE is defined as an officer, more-than-5% shareholder, employee who earned at least $130,000 in 2021 or if in the first year of employment, $135,000 in 2022. (These salary thresholds are indexed annually.) Under the Section 105 rules, an HCE includes one of the highest five paid officers, a more than 10% shareholder or owner and those amongst the highest-paid 25% of all employees. Where two or more employers are under common ownership, individuals of all employers must be included in determining the highly compensated group and in performing certain nondiscrimination tests.

At a high level, the nondiscrimination tests consider eligibility, benefits and contributions and, in certain cases, utilization (i.e., who is actually benefiting). If an employer offers richer benefits or pays more of the contributions for the HCEs versus the non-HCEs, this could raise potential nondiscrimination concerns. Therefore, particularly after a change in contribution or benefit structures or a business reorganization, the employer should consider having midyear testing performed to ensure the changes will not cause test failures. Test failures may result in adverse tax consequences for the HCEs. If the tests are not performed until the year-end, then it is normally too late for an employer to make any necessary adjustments to correct such failures.

Additionally, whenever there are changes to contributions and benefits, the plan documents and employee communications should be reviewed and updated to clearly outline the eligibility requirements, benefit offerings and contribution structures, so there is no confusion as to the applicability.

For more information on the nondiscrimination rules applicable to group health plan benefits and contributions, please reach out to your broker or consultant for a copy of our white paper on this topic.

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FAQ: What Is an ICHRA?

July 19, 2022

An ICHRA is an Individual Coverage Health Reimbursement Arrangement. It is the only way an employer may reimburse an employee or directly pay the cost of an employee’s individual health insurance policy on a tax-advantaged basis. To do so outside of an ICHRA, an employer risks an excise penalty of up to $100 per day per employee for an impermissible employer payment plan.

An ICHRA can only be offered to a classification of employees who are not eligible for the employer's major medical plan. For example, an employer could offer a group health plan to employees in one location and an ICHRA to those in another. There are rules regarding minimum class size; however, they do not apply if the class is based on state. Thus, an employer could offer an ICHRA to those working in other states — even if that is only one employee in a state.

The following conditions must be met by an ICHRA.

  • The employer cannot offer any group health plan to the same classification of employees being offered the ICHRA. However, an employer could also offer a dental-only or vision-only plan to those employees. Classifications include full-time, part-time, salaried, hourly, temporary staffing agency workers, seasonal, collectively bargained and different locations.
  • The minimum class size is 10 for an employer with fewer than 100 employees; a number (rounded down to a whole number) equal to 10% of the total number of employees for an employer with 100 to 200 employees; and 20 for an employer with more than 200 employees.
  • An ICHRA is subject to ERISA, which means it is subject to the summary plan description, Form 5500 and fiduciary requirements.
  • An ICHRA is also subject to COBRA, including the Initial COBRA Notice, COBRA Election Notice and continued employer contributions.
  • Expenses must be substantiated before each reimbursement. Thus, before each reimbursement or payment, the employer must confirm that the individual policy is still in effect and the premium amount.
  • The same terms and reimbursements must apply within the same classification, though the employer may increase the maximum reimbursement based on family size and age.
  • A notice must be provided to eligible employees at least 90 days before the beginning of each plan year or no later than the date an employee is first eligible to participate in the ICHRA. A model notice is available here.

An example of an impermissible design would be an employer reimbursing the cost of an individual health insurance policy for an executive working at the employer headquarters. This would not meet the classification requirements.

An ICHRA may be used by an applicable large employer to satisfy the employer mandate obligation. An ICHRA is considered minimum essential coverage for Penalty A. It will also satisfy Penalty B if the employee’s required contribution after the employer’s monthly ICHRA contribution is less than 9.61% (2022) of the employee’s earnings. The employer may use the lowest cost silver plan available in the worksite rating area based on the employee’s age as a safe harbor (rather than each residential area). That difference between the employer’s contribution and the premium cost is what would be reported on Line 15 of the Form 1095-C.

For more information on ICHRAs or to implement one, please contact your consultant.

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FAQ: Who is responsible for sending life plan conversion notices when an employee goes on leave or terminates employment?

July 06, 2022

Typically, group life insurance coverage ends when active employment ends. But there is often a right to convert group coverage to an individual policy built into the plan. Conversion rights and the process of converting a group life plan to an individual policy are controlled by the specific plan terms. Note that some state laws require that carriers and/or employers provide certain conversion rights and notices to employees. A carrier agreement may require employers to assist with this. It may come as a surprise that required notices are not always handled by the carrier, sometimes leaving the employer legally responsible. Employers sponsoring group life insurance plans should take care to understand applicable conversion terms and their administrative obligations.

First, employers need to know who is responsible for distributing conversion notices and when and how those notices should be sent. In addition to the plan documents, the carrier agreement may address this. Conversion notice responsibilities will vary by carrier. When notice responsibility falls on the employer, it is best practice to keep documentation of mailing and delivery of conversion notices (e.g., first-class mail return receipt requested). As to what documentation needs to be provided to satisfy notice, employers should look to the plan terms. When an employee's employment terminates, the SPD, plan document, and any leave policies that address conversion rights should be provided.

Second, even where the carrier is responsible for providing conversion notices, employers should have consistent procedures to respond to conversion information requests from employees. Steps should be taken to ensure conversion rights are clearly, completely, accurately and timely communicated to employees. A description of conversion rights with reference to applicable plan terms should be included with any leave policies, leave communications and offboarding materials. Anyone designated to respond to life coverage inquiries must be trained in when and how a group plan can be converted to an individual policy. This includes whether coverage continues during leave and when coverage otherwise terminates, including deadlines to convert. Importantly, an employer's response to inquiries should not be limited to answering precise questions because employees may not know which specific questions to ask. Meaning, there should be no potentially harmful omissions.

While most employers are very familiar with COBRA and state continuation rights and notice requirements when group health plan coverage ends, compliance obligations related to group life plan coverage are often overlooked. Without ensuring proper procedures are in place to provide notices and respond to coverage inquiries, employers may find themselves liable for claims under lapsed group coverage that was deprived of adequate conversion notice. We reported on two such cases in previous editions of Compliance Corner: Chelf v. Prudential, et al. and Estate of Foster v. Am. Marine Servs. Group Benefit Plan, et al.

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FAQ: Is there guidance concerning a recent requirement that health plans must disclose certain rate and billing information on a public website?

June 22, 2022

New transparency requirements include a mandate that health plans and health insurance issuers must disclose, on a public website, information regarding in-network rates and out-of-network allowed amounts and billed charges for covered items and services in two separate machine-readable files (MRFs).

The regulations define MRFs as files presented in a digital format that can be imported or read by a computer system for further processing without human intervention, while ensuring no semantic meaning is lost (such as JSON). Based on language in the final regulations, there is an expectation that researchers, legislators, regulators and application developers will compile the information into reports, studies and internet tools, so that it can more readily be used for price comparison purposes. In other words, the information provided may not be immediately understandable by the average layperson, but others may take that data and present it in ways that the average layperson can understand.

The requirement to publicly post the MRFs applies to the group health plan level. The plan sponsor must be sure that the files are on a site available to the general public, meaning not just employees, but regulators, industry groups, application developers, etc. Additionally, the files must be accessible and free of charge without having to establish a user account, password or other credentials, and without having to submit any personal identifying information such as a name, email address or telephone number. Beyond those requirements, the regulations state the sponsor has discretion as to the exact location on the public website, since they are in the best position to determine where the files will be most easily accessible by the intended users.

The regulations allow an insured plan to enter into a written agreement with the insurer to assume liability for the disclosures. Under such an agreement, the carrier would provide the required information and assume responsibility for maintaining and updating it as required under the regulations. Note that the regulations allow either a group health plan or an issuer to enter into an agreement with a third party (such as a TPA) to provide and maintain the required information; however, the responsibility remains with the group health plan or the issuer if the third party fails to perform.

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FAQ: We are considering offering fertility benefits. Are there any special compliance considerations?

June 07, 2022

Employers are increasingly choosing to offer fertility benefits to employees. However, it is important to ensure that such a benefit offering is properly structured.

To the extent the fertility benefits program provides medical care, it would generally be considered a group health plan and thus subject to the ACA, ERISA, COBRA and other laws. “Medical care” for this purpose is broadly defined to include amounts paid for “the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.”

Under the ACA, group health plans are subject to specific requirements (e.g., coverage of preventive services without cost-sharing). ERISA imposes fiduciary obligations, claims review procedures, plan document and Form 5500 filing requirements. COBRA requires continuation of medical coverage for a minimum of eighteen months following certain losses of eligibility.

A stand-alone program typically cannot satisfy these group health plan requirements independently. Accordingly, perhaps the simplest way to offer fertility benefits is to amend/expand the coverage provided directly under the group major medical plan, which is already satisfying ACA, ERISA, COBRA and other requirements. This approach would be coordinated with the insurer or stop-loss carrier.

Alternatively, the fertility benefits could be offered through an integrated HRA, made available to only those employees enrolled in the employer’s major medical plan (or confirmed to be enrolled in another group medical plan, such as a spouse’s, although this adds administrative complexities). The employer could determine the types of fertility expenses and dollar amounts of the HRA reimbursements.

Generally, to be eligible for tax-free HRA reimbursement, the expense must be for medical care (as defined by Code §213(d)) for the employee or their spouse or dependent (but not a surrogate). Infertility expenses eligible for tax-free HRA reimbursement may include procedures such as IVF (including temporary storage of eggs or sperm) to overcome an inability to have children. However, expenses related to the long-term storage (typically greater than one year) of eggs and sperm would not qualify. Furthermore, medical expenses must be for services incurred during the coverage period and not just prepayment for such services.

Please see IRS Publication 502, “Fertility Enhancement,” and our June 8, 2021, Compliance Corner article.

If the employer offers an HSA-qualified HDHP, the fertility HRA would need to be designed as a post-deductible HRA to preserve the employees’ HSA eligibility. The HRA could not pay any benefits until the HDHP annual statutory minimum deductible ($1,400 self-only/$2,800 family in 2022) was satisfied.

The HRA would need to satisfy applicable compliance requirements. As a self-funded plan, these obligations would include, but not be limited to, Section 105 nondiscrimination testing and the PCORI fee filing and Form 720 reporting (although simplified reporting may apply).

Additionally, the employer should recognize that a fertility benefit vendor typically receives protected health information from covered entities (e.g., healthcare providers and/or the health plan) that are directly subject to regulation under the HIPAA Privacy Rule. So, a business associate agreement should be in place between the vendor and the covered entity.

Finally, given all the compliance considerations, it is always advisable for an employer to review the fertility benefits offering, structure and any related contracts with their counsel to ensure all legal requirements are satisfied.

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FAQ: If an employee is injured on the job and goes out on workers’ compensation, must we continue their group health insurance coverage?

May 24, 2022

Before discussing an employer’s health insurance obligations for an employee on workers’ compensation, it is important to note that workplace injuries and the state requirements surrounding them are employment issues that are outside of our benefits compliance scope. Employers should continue to work within their state’s rules for administering workers’ compensation for an employee that is injured on the job. Those rules may even involve requirements for the employer to provide medical care to address the workplace injury.

We can, however, address the question of what should be done regarding the employee’s group health plan benefits. Specifically, the continuation of group health plan benefits during workers’ compensation depends on whether FMLA must be offered or the terms of the plan.

FMLA applies to private employers with 50 or more employees for each working day in 20 or more workweeks in the current or preceding calendar year. It also applies to all public agencies and local educational agencies no matter the size (including public school boards, as well as public and private elementary and secondary schools). An eligible employee who is absent due to their own serious health condition is eligible for up to 12 weeks of unpaid leave. An eligible employee is one who has worked for the employer for at least 12 months, has worked at least 1,250 hours in the last 12 months, works within a 75-mile radius of 49 other employees, and has suffered a serious health condition. Note that an employee’s location for purposes of the 75-mile radius rule is the office to which the employee reports (which is an important distinction given the number of employees currently working remotely).

Importantly, FMLA applies any time an eligible employee is absent from work due to a serious health condition — even if that condition is work-related. This means that an employee who takes leave under workers’ compensation would be eligible for FMLA if the injury for which they are taking leave is a serious health condition, and they work for an employer that is subject to FMLA and are otherwise eligible under FMLA’s eligibility rules.

While on FMLA, the employer must give the employee an opportunity to continue benefits under the same conditions as if the employee were still actively at work. An employee only must pay their normal contribution amount. If active employees contribute to the cost of coverage, an employee on FMLA would as well. If the FMLA leave is paid, then the deduction would be taken as normal. If the leave is unpaid, other arrangements must be made for the premium. For employees who continue their coverage during an unpaid FMLA leave, the following payment options may be provided: prepay, pay-as-you-go and catch-up. The employee may also choose to discontinue coverage during FMLA.

Plans should be mindful of COBRA requirements too. For an FMLA leave, the qualifying event for COBRA would be a reduction of hours and would be triggered if the employee does not return at the end of the 12-week FMLA leave period. The event date would be the last day of the FMLA leave. Even if the coverage was terminated during the leave (for failure to pay premiums), COBRA is still not offered until the end of the 12-week leave period.

If FMLA does not apply (either because the employer is not subject to it or the employee is not eligible), then coverage should be terminated according to the employer’s and carrier’s policy for inactive employees on unpaid leave (typically 30-60 days). If active employees must work a certain number of hours per week to remain eligible, and there is no special provision for inactive employees on non-FMLA leave, then an employee on leave due to a work-related injury should be terminated from coverage if that threshold is not met. Then, depending on the circumstances, COBRA or state continuation would be offered for the reduction of hours.

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