Compliance Corner

Federal Updates

HHS Issues Guidance on Audio-Only Telehealth and HIPAA Compliance

June 22, 2022

On June 13, 2022, the Office of Civil Rights (OCR) updated its website with guidance related to audio-only telehealth and HIPAA Privacy and Security Rules. The OCR stated the guidance was in direct response to Executive Order 14058, which was issued in December 2021 and ordered the federal government agencies to design and deliver services in a more equitable and effective manner, especially for those who have been historically underserved. The guidance notes that telehealth that includes video may be difficult for certain populations to access because of various factors, including financial resources, limited English proficiency, disability, internet access, availability of sufficient broadband and cell coverage in the geographic area.

In March 2020, the OCR issued a notification and guidance related to the use of telehealth services during the COVID-19 public health emergency. Importantly, this new guidance will apply in situations where those rules do not and will remain in effect even after the public health emergency is declared to be over.

The HIPAA Privacy rules specifically provide for telehealth services, including audio-only services. Covered entities, including healthcare providers and health plans, must take steps to verify the identity of the individual. There are no prescribed methods of identification. Covered entities must apply reasonable safeguards to protect the privacy of protected health information (PHI) and avoid incidental uses or disclosures of PHI. Examples include not using speakerphones, using a lowered voice and providing the services in a private setting.

Regarding the HIPAA Security rules, a traditional landline telephone is not considered electronic communication. Thus, the rules would not apply to such communication. However, if the covered entity uses voice over internet protocol (VoIP), a cell phone, Wi-Fi, a smartphone application or technology to transcribe or record the communication, the HIPAA Security rules would apply. In that case, the covered entity must identify, assess and address the potential risks and vulnerabilities (such as the transmission being intercepted by an unauthorized third party) and whether the communication method is encrypted.

If the telecommunications service provider (TSP) is only a conduit for the communication and does not create, receive or maintain any PHI from the session, no business associate agreement is required. An example would be a cell phone or internet provider if the session is conducted with a cell phone over Wi-Fi. However, if the TSP maintains the PHI after the session, an agreement would be required. An example would be a smart phone application that records the session and stores it in the cloud.

No action is required of employer plan sponsors as a result of the new guidance. However, it is welcome news for plans with underserved populations, as those participants may be able to better access health services due to the updated rules.

OCR Audio-only Guidance »

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Seventh Circuit Reminds Employers: Don’t Discourage FMLA Leave

June 22, 2022

On June 1, 2022, the US Court of Appeals for the Seventh Circuit held in Zicarrelli v. Dart et al. that an employee’s FMLA rights may be violated without an actual denial of leave — simply interfering with an employee’s attempt to exercise those rights can violate the law.

Plaintiff Salvatore Zicarrelli worked for the Cook County Sheriff’s Office for over 27 years. During that time, he periodically took FMLA leave. In September 2016, he called the Sheriff’s Office FMLA manager to discuss taking more FMLA leave. According to Mr. Zicarrelli, when he asked to take FMLA leave, the FMLA manager responded by saying “don’t take any more FMLA. If you do so, you will be disciplined.” Though the contents of this conversation are hotly disputed, Mr. Zicarrelli retired from the Sheriff’s Office soon thereafter, a decision that he claims was based on the conversation.

Mr. Zicarrelli then sued his former employer, alleging violations of FMLA and discrimination under the ADEA, the ADA, and Title VII of the Civil Rights Act. The lower district court ruled in favor of the Sheriff’s Office on all claims. Specifically, the district court denied the FMLA interference claim because there was no denial of FMLA benefits. Mr. Zicarrelli appealed to the Seventh Circuit, but only as to his FMLA claims.

The Seventh Circuit ruled that threatening to discipline an employee for seeking FMLA leave to which the employee is entitled clearly qualifies as an unlawful interference with FMLA rights. In reaching this ruling, the Court found no ambiguity in the statute or regulations nor any conflicting interpretations among its sister circuit courts. First, the Court parsed the relevant section of the statute, which makes it unlawful for a covered employer to “interfere with, restrain, or deny” an eligible employee’s attempt to exercise FMLA rights. The Court zeroed in on the disjunctive phrasing (i.e., “or” not “and”), which signified that interfere with can stand alone as unlawful without an actual denial of FMLA leave. Second, the inclusion of “attempt to exercise” within the Act’s description of protected rights suggests that actual denial is not necessary. Third, the Court found that interpreting FMLA to allow employers to actively discourage the use of FMLA rights if no unlawful denial occurs would significantly diminish the rights granted. While FMLA was designed to accommodate employer’s legitimate interests, the Court found no legitimate interest in impeding access to FMLA benefits through intimidation, deception or concealment. Finally, the Court looked to DOL regulations, which state that interfering with an employee’s exercise of FMLA rights includes discouraging an employee from using such leave.

Having found Mr. Zicarrelli’s FMLA interference claim legally viable, the Seventh Circuit sent the case back down to the lower court for a jury to decide whether to believe Mr. Zicarrelli’s or the FMLA manager’s version of the leave conversation in dispute.

The Zicarrelli case serves as a good reminder to employers to not discourage eligible employees from taking FMLA leave. Doing so is a clear violation of FMLA-protected rights. Supervisors, managers or other agents designated by employers to handle FMLA requests must be trained to not interfere with an employee’s right to seek FMLA leave. Beginning with an employee’s initial inquiry, communications regarding leave should be documented in a way that prevents any misunderstanding between employer and employee. Similarly, written leave policies must be carefully drafted to not include any terms that could be interpreted as discouragement or limitation on eligible FMLA leave.

Zicarrelli v. Dart et al. »

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Departments Release Federal Independent Dispute Resolution Process Checklist

June 22, 2022

On June 3, 2022, the IRS, DOL and HHS (the “departments”) released a federal independent dispute resolution (IDR) process checklist of requirements for group health plans and insurers. The checklist was designed to help plans and insurers understand their obligations when processing claims for items and services covered by the No Surprises Act (NSA) balance billing protections.

The NSA provisions protect participants from surprise bills for out-of-network (OON) emergency and air ambulance services and certain OON services received at in-network (INN) facilities. Participant cost-sharing for covered items and services is limited to the INN cost-sharing amount. The plan or insurer must address the remainder of the bill with the provider. If the parties cannot agree on the OON payment amount after a 30-day negotiation period, the federal IDR process can be initiated.

According to the departments, the checklist addresses common questions and complaints received by the No Surprises Help Desk. First, the guidance emphasizes that a plan or insurer must process claims within a 30-calendar-day timeframe after receiving an OON bill for covered items and services and make an initial payment or send a notice of payment denial. The 30-calendar-day period begins on the date the plan or insurer receives the information necessary to decide the claim. The initial payment should be an amount that the plan or insurer reasonably intends to be payment in full based on the relevant facts and circumstances and as required under the terms of the plan, prior to the beginning of any open negotiation period or initiation of the federal IDR process.

Second, the checklist outlines the information that a plan or insurer must provide in writing to a provider with each initial payment or notice of payment denial. Such items include the qualifying payment amount, which is the median contracted rate for the item or service for the geographic region, if participant cost-sharing was based on this amount. The plan or insurer must also provide the phone and email address for the appropriate contact person or office, in the event the provider wishes to initiate a 30-day open negotiation period to determine the total payment amount.

Third, the guidance explains that the 30-day open negotiation period can be initiated by one party providing the standard open negotiation notice to the other party. In such an event, the open negotiation period begins on the day that the initiating party sends the notice. An extension of the negotiation period can be requested in certain extenuating circumstances.

Finally, the guidance details the information that must be included if a party initiates the federal IDR process. The process must be initiated within four business days after the close of the open negotiation period by submission of a Notice of IDR Initiation to the other party and to the departments.

Group health plan sponsors and their service providers may want to review this practical checklist to ensure compliance with the federal IDR process requirements.

Federal IDR Process Checklist »

For further information on the federal IDR process, please also see our April 26, 2022, article, February 15, 2022, article and February 1, 2022, article.

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IRS Revises Optional Standard Mileage Rates

June 22, 2022

On June 9, 2022, the IRS released Announcement 2022-13, in which the agency increased the optional standard mileage rate for computing the deductible costs of operating an automobile for business to 62.5 cents per mile. The optional standard mileage rate for medical and moving expenses is increased to 22 cents per mile. These increases are effective starting on July 1, 2022, and were increased in part due to higher fuel costs. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business, medical and moving purposes in lieu of tracking actual costs. These rates are also used by many businesses as benchmarks for reimbursing employees for mileage.

Employers who use these rates as benchmarks should be aware of and account for this increase.

IRS Announcement 2022-13 »

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June 07, 2022

On May 25, 2022, the Department of Labor’s (DOL) Wage and Hour Division released a Fact Sheet and series of FAQs on FMLA leaves taken for mental health-related reasons. The new guidance does not change existing law. Rather, it serves to emphasize that mental health conditions should not be treated any differently than physical health conditions in FMLA administration.

Under FMLA, eligible employees working for covered employers may take job- and benefits-protected unpaid leave for their own serious mental or physical health condition, or to care for a spouse, child, or parent’s serious mental or physical health condition. A serious mental health condition is one that requires either: 1) inpatient care in a hospital or treatment center; 2) continuing treatment by a healthcare provider for an incapacitating condition lasting more than three consecutive days; or 3) treatment at least twice a year for a chronic condition that causes occasional periods of incapacitation. Employers may require a healthcare provider’s certification supporting FMLA leave but cannot require a diagnosis.

The Fact Sheet provides the following examples of FMLA leaves that may be taken for the employee’s own mental health condition or as caregiver leave for certain family members:

  • Leave for the employee’s mental health condition.
    Example: Karen is occasionally unable to work due to severe anxiety. She sees a doctor monthly to manage her symptoms. Karen uses FMLA leave to take time off when she is unable to work unexpectedly due to her condition and when she has a regularly scheduled appointment to see her doctor during her work shift.
  • Caregiver leave for family member (spouse, child or parent) with a mental health condition.
    Example: Wyatt uses one day of FMLA leave to travel to an inpatient facility and attend an after-care meeting for his fifteen-year-old son who has completed a 60-day inpatient drug rehabilitation treatment program.
  • Caregiver leave for disabled adult child with a mental health condition.
    Example: Anastasia uses FMLA leave to care for her daughter, Alex. Alex is 24 years old and was recently released from several days of inpatient treatment for a mental health condition. She is unable to work or go to school and needs help with cooking, cleaning, shopping, and other daily activities as a result of the condition.
  • Military caregiver leave for mental health conditions.
    Example: Gordon’s spouse began to have symptoms of PTSD three years after she was honorably discharged from military service overseas. Gordon uses FMLA leave for two weeks to transport his spouse to and from outpatient treatment at a Veteran’s Administration hospital and to assist her with day-to-day needs while she is incapacitated.

The FAQs elaborated on these examples. Specifically, as to caregiver leave for a disabled adult child with a mental health condition, “disability” is defined by the ADA; that is, a mental or physical condition that substantially limits one or more major life activity, such as working. The FAQs further note that caregiver leave includes participating in a spouse’s, child’s, or parent’s treatment program in addition to providing physical and psychological care.

The Fact Sheet and FAQs stress two final points related to FMLA administration. First, employers must maintain employee medical (including mental health) records confidential and separate from routine personnel files. However, an employee’s manager may be informed of the employee’s need for leave and any work duty restrictions or accommodations. Second, employers must not discourage leave by threatening to disclose an employee’s or family member’s mental health condition or otherwise interfere with an employee exercising their FMLA rights.

Again, this latest DOL guidance does not change existing FMLA rules in any way. It simply reiterates that mental health conditions should be treated no differently than physical health conditions in administering FMLA leaves.

Fact Sheet #280: Mental Health Conditions and the FMLA »
FAQs: Mental Health and the FMLA »

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IRS Addresses Qualified Transportation Fringe Benefit Requirements

June 07, 2022

The IRS recently updated its descriptions of the tax rules applicable to the employer-provided parking benefit. Employer paid parking that is a “qualified transportation fringe” (QTF) is excluded from employees’ gross income up to the statutory limit (e.g., $280 per month in 2022) under IRC Code Section 132(f). A QTF includes qualified parking, which is on or near the employer’s business premises or at a location from which the employee commutes to work by mass transit facilities, commuter highway vehicle, carpool or car service.

The value of employer-provided parking is its fair market value (FMV), determined based on all the facts and circumstances, including the cost that an individual would incur in an arm’s length transaction for parking at the same site or in a comparable lot in the same general location.

Employers providing qualified parking benefits should review the IRS website at the link provided below and document how they determine the value of the parking benefit in case of an audit. The updated IRS page also includes a key checklist for auditors to review an employer’s parking benefit that may be helpful for employers to prepare their documents and keep their records relating to their parking benefit.

IRS Webpage: Qualified Parking Fringe Benefit (April 25, 2022) »

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Sixth Circuit Upholds Plan Reimbursement Rights

June 07, 2022

On May 23, 2022, in Zahuranec v. Cigna Healthcare, Inc., et al., the Sixth Circuit Court of Appeals affirmed a district court decision that upheld a self-funded plan’s subrogation and reimbursement rights.

The plaintiff-appellant, Lisa Zahuranec, was a plan participant who suffered serious complications after undergoing bariatric surgery. The plan approved and paid for the surgery, although it did not meet medical necessity criteria. Zahuranec received a settlement from a medical malpractice suit brought against the physicians who performed the surgery. She then brought ERISA claims against Cigna in an effort to avoid reimbursing the plan from her settlement proceeds. (Cigna, the claims administrator, had sought to enforce the plan’s subrogation and reimbursement provisions.)

In Zahuranec’s first ERISA claim, she sought enforcement of the plan terms. She asserted that the surgery was not a “benefit” under the plan because it did not meet medical necessity criteria. Therefore, the procedure was not subject to the plan’s subrogation and reimbursement provisions. Next, in her ERISA breach of fiduciary duty claims, she argued that Cigna made a material representation that the procedure was medically necessary by approving the surgery. Finally, she brought an equitable estoppel claim, seeking to estop Cigna from seeking subrogation.

The Sixth Circuit rejected all these arguments and affirmed the district court’s decision to dismiss all claims. In the court’s view, the plan had the right to seek subrogation and reimbursement because Zahuranec had received payment for a covered expense (as defined by the plan terms) that had been paid as a plan benefit. Additionally, Cigna did not breach a fiduciary duty by deciding the plan would pay for the surgery; this determination was a coverage decision that the plan language made clear was neither a recommendation nor guideline for treatment. Finally, Zahuranec’s equitable estoppel claim failed. Here, the court noted that she had not demonstrated the element of detrimental reliance on Cigna’s promise that the surgery was medically necessary since the surgery was paid for by the plan.

The case reinforces a plan’s right to pursue subrogation and reimbursement rights, as specified in the plan language, for benefits paid by the plan. It also serves as a reminder that plans should pay attention to what benefits are payable under plan terms.

Zahuranec v. Cigna Healthcare, Inc., et al. »

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Eighth Circuit Affirms Life Insurer Breached ERISA Fiduciary Duties with Broken Enrollment System

May 24, 2022

On May 6, 2022, the US Court of Appeals for the Eighth Circuit ruled in Skelton v. Radisson Hotel Bloomington, et al. that a life insurer, when assuming a fiduciary role to determine eligibility and enrollment, must maintain an effective enrollment system. Specifically, the system must sync lists of eligible enrolled participants maintained by the insurer and employer.

The plaintiff in this case, Corey Skelton, sued his late wife Beth Skelton’s employer, Radisson Hotel Bloomington (“Radisson”), and the group life insurance carrier, Reliance Standard Life Insurance Company (“Reliance”), for mishandling the family’s supplemental life insurance enrollment. Radisson served as life plan administrator with Reliance designated as claims review fiduciary. After initially waiving supplemental coverage at the time of her hire, Ms. Skelton enrolled in the maximum supplemental life insurance offered under the plan, $238,000. The life plan provides that when an employee requests supplemental life insurance after her initial hire period, an Evidence of Insurability (EOI) form is required. Reliance must then approve the request before the insurance becomes effective. The parties disputed whether Ms. Skelton ever completed an EOI form. Regardless, Radisson sent Ms. Skelton a benefit verification document and began charging her supplemental life premiums. Thereafter, while she was on medical leave, Reliance approved Ms. Skelton’s life waiver of premium claim, relieving her of paying premiums while unable to work.

Following Ms. Skelton’s passing, Reliance denied her supplemental life benefit asserting the required EOI was not received. Radisson acknowledged that Ms. Skelton was incorrectly charged premiums for supplemental coverage that Reliance had not approved. Reliance’s “bulk billing” system, whereby Radisson collected premiums from employees and remitted them in one monthly check along with only the total number of employees insured, contributed to this error. Reliance’s system did not collect information that would allow it to assess whether Radisson sent any mistakenly billed premiums to Reliance.

After settling with Radisson, Mr. Skelton proceeded to judgment against Reliance in federal district court. He was successful, with the court finding Reliance breached its ERISA fiduciary duty to ensure premiums were not collected until coverage was effective. On appeal by Reliance, the Eighth Circuit agreed with the district court, describing Reliance’s enrollment administration as “a haphazard system of ships passing in the night.” Reliance failed to communicate with Radisson which employees sought coverage but still needed to submit an EOI. Combined with Radisson’s anonymous bulk checks, neither entity learned which employees the other one thought were or were not enrolled. Reliance could not be willfully blind to its faulty enrollment system, which allowed Reliance to profit on a broken promise to Ms. Skelton that she would not pay premiums until her application was approved. The Eighth Circuit found that as an ERISA fiduciary, Reliance had a duty to verify that premiums came only from properly enrolled, eligible participants.

The Skelton case serves as another illustration of how plan fiduciaries can set themselves up for failure in administering life insurance coverage. Employers should work with their life insurance carriers to maintain a safeguarded system for verifying enrollment and collecting premiums. Life plans using bulk billing should consider conducting an eligibility audit with their carrier and legal counsel.

Skelton v. Radisson Hotel Bloomington, et al. »

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Fifth Circuit Grants Stay of Surprise Billing Appeal

May 24, 2022

The IRS, DOL and HHS recently asked the Fifth Circuit to stay an appeal they had filed on the Texas federal court case vacating key parts of the independent dispute resolution (IDR) process in the No Surprises Act (NSA) interim final rule. The court granted the hold to pause the legal challenge on May 3.

In the Texas federal court case, the plaintiffs challenged the rule’s presumption that the qualifying payment amount (QPA), which is the median contracted rate for an item or service for a geographic region, is the correct out-of-network (OON) payment amount. Specifically, they argued that such a presumption is inconsistent with the NSA statutory language, which allows for equal consideration of the QPA and other factors (e.g., the provider’s level of training and experience, patient acuity, case complexity) when determining the OON payment rate. Furthermore, the plaintiffs asserted that the defendants improperly circumvented the required notice and comment process when issuing the rule. (For more information on the court ruling, please see our prior article.)

The NSA provisions apply to both insured and self-funded group health plans and are effective for plan years beginning on or after January 1, 2022. Amongst other items, NSA provisions protect participants from surprise bills for OON emergency and air ambulance services, as well as certain OON services received at in-network facilities. The NSA limits participant cost-sharing for covered OON services, leaving plans and insurers to address the balance of the bill from an OON provider. In states with an applicable All-Payer Model Agreement or specified state law, the OON provider rate is determined by the Model Agreement or state law. (For more information on the rule, please see our prior article in the October 12, 2021, edition of Compliance Corner.)

Until the agencies issue future IDR rulemaking, employers should keep in mind that the agencies have already revised their IDR process guides because of the Texas federal court’s decision to require the certified IDR entity to consider additional credible information in addition to the QPA. Further, the Federal IDR Portal is already live (For more information on the revised IDR process guides, please see our prior article in the April 26, 2022, edition of Compliance Corner.)

Texas Med. Assoc. v. HHS, 2022 WL 542879 (E.D. Tex. 2022); on appeal to 5th Cir., No. 22-40264, Doc. 00516304229 (May 3, 2022) »

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IRS Addresses Treatment of Qualified Employer Leave-Based Donation Payments

May 24, 2022

On May 19, 2022, the IRS released Notice 2022-28. This notice provides guidance concerning the tax treatment of PTO donated by employees (through their employers) to charities assisting Ukraine.

Under employer leave-based donation programs, employees can elect to donate vacation, sick or personal leave in exchange for their employers making cash payments to charitable organizations described in section 170(c) of the Internal Revenue Code. Any such payments made by an employer before January 1, 2023, will not be treated as gross income or wages (or compensation, as applicable) of the employees of the employer. Employees whose leave funds the qualified employer leave-based donation payments will not be treated as having constructively received gross income or wages (or compensation, as applicable). Accordingly, employers should not include the amount of qualified employer leave based donation payments in Box 1, 3 (if applicable) or 5 of the electing employees’ Form W-2. Employees donating leave under these circumstances cannot claim that donation as a charitable donation.

Employers may deduct qualified employer leave-based donation payments under the rules of section 170 or the rules of section 162 of the IRC if the employer otherwise meets the respective requirements of either section of the Code.

Employers with leave-based donation programs should be aware of this notice.

IRS Notice 2022-28 »

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