Employers will need to update health, cafeteria and flexible spending plans before the end of 2009 to reflect many recent changes in the law. We previously addressed many of these changes in prior client alerts. This alert summarizes some major changes and actions that employers need to consider taking before the end of 2009 and, in some cases, in connection with enrollment for the 2010 plan year.
Summary of Key Changes Effective by the End of the Year
- HITECH - The new HITECH Act is effective in 2010 and makes major changes to HIPAA privacy and security. For more information, please see "New HITECH Changes to HIPAA Require Action by Group Health Plans: September 23, 2009 Effective Date."
- Michelle's Law - Effective January 1, 2010 for calendar year plans. For plans that provide for coverage for dependents, Michelle's Law gives dependents in college the right to continue coverage during a medically necessary leave of absence from college for the earlier of (i) one year after the date the leave began or (ii) the date the coverage would otherwise have ceased.
- GINA (Genetic Information and Non-discrimination Act) - Effective January 1, 2010 for calendar year plans. GINA prohibits group health plans from collecting genetic information and discriminating in enrollment and cost of coverage based on an individual's genetic information - which includes family medical information. Recent interim final regulations have applied GINA's rules to wellness programs so that health plans violate GINA regulations if the health-risk assessment form (which may be part of a wellness program) offers a financial reward (for example, lower deductible, lower co-pay) for completing a form which asks for family medical information. In addition, HRAs that request family medical information cannot be required before the employee enrolls in the group health plan. Employers will need to review wellness programs in light of these rules and EEOC guidance.
- COBRA Subsidy Rules - Although these complex subsidy rules have been in effect since February 2009, employers should make sure that their plan documents and materials are consistent with these changes to COBRA. For more information, please see "New COBRA Rules Under Stimulus Bill Require Immediate Attention by Employers, Insurers and Third Party Administrators" and "Congressional Leaders Move Quickly to Address Executive Compensation Issues."
- Mental Health Parity and Addiction Equity Act of 2008 - Effective for plan years beginning after October 3, 2009 (with a delayed effective date for union plans). Currently, a plan cannot impose an annual or lifetime limit on mental health benefits if it does not apply an annual or lifetime limit on medical and surgical benefits. The law is expanded to provide that financial requirements (for example, deductibles, co-pays, coinsurance and out-of-pocket expenses) and treatment limitations (for example, limits on number of visits, days of coverage) applicable to mental health or substance use disorder benefits can be no more restrictive than the predominant requirements applicable to substantially all medical and surgical benefits covered by the plan. Group health plans subject to the new law must be reviewed and revised to ensure that all impermissible limitations are removed.
- Heroes Earnings Assistance and Relief Tax Act of 2008 (HEROES) - Optional provision effective for 2009 plan year. HEROES permits an employer to provide distributions of all or part of an individual's health FSA to reserve members who are called up. Any employer with a flexible benefit plan which made the decision to provide that reservists who were called up could receive distributions from their accounts under HEROES will need to update their plan documents. For information, please see "HEROES Act Imposes New Employee Benefit Mandates and Tax Benefits for U.S. Veterans." If an employer chooses to do this, the plan must be amended by December 31, 2009.
- Special enrollment right added by SCHIP to HIPAA. For more information, please see "April 1 Deadline to Accommodate Special Enrollment Rights Under New SCHIP Provisions." This requires two changes effective April 1, 2009: (1) an employee or dependent who is covered under Medicare or CHIP and whose coverage is terminated may request coverage under the group health plan no later than 60 days after termination of coverage and (2) an employee or dependent who becomes eligible for premium assistance under Medicaid or CHIP with respect to group health coverage may request coverage under the group health plan within 60 days after the eligibility is determined.
- State Laws. Individual states are becoming increasingly more active in adopting laws that affect fully insured health plans - for example, stricter mini-COBRA and laws similar to Michelle's Act - as well as increasing protection for uninsured dependents over the age of 25. Employers maintaining insured plans should be sure that they are aware of laws affecting them and their employees.
- New Disability Laws - Effective January 1, 2009. Amendments to the Americans with Disabilities Act expand the definition of "disability" to more broadly encompass impairments that substantially limit a major life activity. In addition, the Act provides that mitigating measures, other than "ordinary eyeglasses or contact lenses," may not be considered in assessing whether an individual has a disability. These changes call into question whether some common group health plan exclusions, such as exclusions for hearing aids or fertility services, may now violate the ADA. The EEOC has not yet issued guidance on how this law impacts group health plans. Although it may be premature to modify plans, sponsors need to be aware of this issue and watch for further guidance.
What to do now? These laws may affect each plan differently, depending on its provisions and coverage. As employers start to put in order their plan documents, summary plan descriptions, summaries of material modification and enrollment forms for the 2010 plan year, this is the time to:
- Review plans to make sure they are not inconsistent with these plan rules. Update group health plan documents and cafeteria plans and flexible spending accounts to reflect changes and employer's compliance with new legal requirements.
- Update SPDs and/or issue SMMs to describe increased protection and rights of employees. For example, these documents will need to disclose and explain the possibility of expanded coverage for college students under Michelle's Law.
- For open enrollment, make sure that forms reflect the new laws. For example, the forms will need to describe the special enrollment periods and new notice provision for SCHIPS and Michelle's Law.
Training for new HIPAA rules - update training materials and supplement training for Human Resource officers and other key employees with access to protected information and employee data. It is important for employers to have a record that they offer updated training as the laws change, and that employees responsible for HIPAA understand the increased penalties and visibility of a breach of HIPAA procedures under the new HITECH rules.