HIPAA Settlement Warns Health Plans, Sponsoring Employers & Business Associates To Manage HIPAA Risks

July 11, 2015

Health plans, insurers and other health plan industry service providers widespread use and reliance on internet applications to access and share protected health information when performing online enrollment, claims administration and payment, reporting, member and provider communications and a host of other key health plan functions makes it particularly important for health plans, their employer or other sponsors, fiduciaries, insurers and other vendors and their management to respond quickly to a warning from Department of Health & Human Services (HHS) Office of Civil Rights (OCR) warning to ensure applications and systems properly safeguard protected health information (PHI) as required by the Health Insurance Portability & Accountability (HIPAA) Privacy, Security & Breach Notification Rules (HIPAA Rules) and other laws made in its July 10, 2015 announcement of its latest HIPAA settlement.

The new Resolution Agreement with the Massachusetts based hospital system, St. Elizabeth’s Medical Center (SEMC) settles charges OCR made that SEMC reached HIPAA by failing to protect the security of PHI when using internet applications to access and share PHI. The Resolution Agreement also shows how complaints filed with OCR by workforce members can create additional compliance headaches for Covered Entities or their business associates while the “robust corrective action plan” imposed under the Resolution Agreement shares examples of ladder reporting and management oversight and documentation Covered Entities and business associates can expect to need to prove their organizations maintains the “culture of compliance” with HIPAA OCR expects in the event of an OCR audit or investigation.

With recent reports on massive health plan HIPAA and other data breaches fueling widespread participant and regulatory concern over identity theft and other data security, Covered Entities and their business associates should prepare to defend the adequacy of their own HIPAA and other data security practices in the event of an OCR breach investigation or audit. Accordingly, health plans and their employer or other sponsors, health plan fiduciaries, health plan vendors acting as business associates and others dealing with health plans and their management should contact legal counsel experienced in these matters for advice within the scope of attorney-client privilege about how to respond to the OCR warning and other developments to manage their HIPAA and other privacy and data security legal and operational risks and liabilities.

SEMC Resolution Agreement Overview

The SEMC Resolution Agreement settles OCR charges that SEMC violated HIPAA stemming from an OCR investigation of a November 16, 2012 complaint by SEMC workforce members and a separate data breach report SEMC separately made to OCR of a breach of unsecured electronic PHI (ePHI) stored on a former SEMC workforce member’s personal laptop and USB flash drive affecting 595 individuals. In their complaint, SEMC workers complained SEMC violated HIPAA by allowing workforce members to use an internet-based document sharing application to share and store documents containing electronic protected health information (ePHI) of at least 498 individuals without adequately analyzing the risks. OCR says its investigation of the complaint and breach report revealed among other things that:

  • SEMC improperly disclosed the PHI of at least 1,093 individuals;
  • SEMC failed to implement sufficient security measures regarding the transmission of and storage of ePHI to reduce risks and vulnerabilities to a reasonable and appropriate level; and
  • SEMC failed to timely identify and respond to a known security incident, mitigate the harmful effects of the security incident, and document the security incident and its outcome.

To resolve OCR’s charges, SMCS agreed to pay $218,400 to OCR and implement a “robust corrective action plan” to correct these alleged HIPAA violations. While the required settlement payment is relatively small, the Resolution Agreement’s focus security requirements for internet application and data use and sharing activities engaged in by virtually every Covered Entity and business associate make the Resolution Agreement merit the immediate attention of all Covered Entities, their business associates and their management.

SEMC HIPAA Specific Compliance Lessons For Health Plans & Business Associates

In announcing the Resolution Agreement, OCR Director Jocelyn Samuels sent a clear warning to all Covered Entities and their business associates “to pay particular attention to HIPAA’s requirements when using internet-based document sharing applications,” stating “In order to reduce potential risks and vulnerabilities, all workforce members must follow all policies and procedures, and entities must ensure that incidents are reported and mitigated in a timely manner.”

The Resolution Agreement makes clear that OCR expects health plans and other Covered Entities and their business associates to be able to show both their timely investigation of reported or suspected HIPAA susceptibilities or violations as well as to self-audit and spot test HIPAA compliance in their operations. The SEMC corrective action plan also indicates Covered Entities and business associates must be able to produce documentation and other evidence needed to show the top to bottom dedication to HIPAA compliance necessary to prove a “culture of compliance” with HIPAA permeates their organizations.

In light of OCR’s warning and expectations, Covered Entities and business associates should start by considering the advisability for their own organization to take one or more of the steps outlined in the “robust corrective action plan” included in the Resolution Agreement, starting with the specific steps the corrective action plan requires SEMC to address its internet application security concerns such as:

  • Conducting self-audits and spot checks of workforce members’ familiarity and compliance with HIPAA policies and procedures on transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems, including unsecured networks and devices; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; security incident reporting related to ePHI; and
  • Inspecting laptops, smartphones, storage media and other portable devices, workstations and other devices containing ePHI and other data devices and systems and their use; and
  • Conducting other tests and audits of security and compliance with policies, processes and procedures; and
  • Documenting results, findings, and corrective actions including appropriate up the ladder reporting and management oversight of these and other HIPAA compliance expectations, training and other efforts.

Broader HIPAA Compliance & Risk Management Lessons

Beyond the specific internet applications and other security of ePHI lessons in the Resolution Agreement, Covered Entities and their business associates also should be mindful of other more subtle, but equally important broader HIPAA compliance and risk management lessons provided in the Resolution Agreement and other recent OCR guidance about their overall HIPAA compliance responsibilities.

One of the most significant of these lessons is the need for proper workforce training, oversight and management. The Resolution Agreement sends an undeniable message that OCR expects Covered Entities, business associates and their leaders to be able to show their effective oversight and management of the operational compliance of their systems and members of their workforce with HIPAA policies. The SEMC corrective action plan should prompt Covered Entities and business associates to weigh the adequacy of their existing workforce training, reporting, investigation and other management processes and documentation. Meanwhile, OCR’s report that an OCR complaint made by SEMC insiders to OCR prompted its investigation also should sensitize Covered Entities and their business associates of the need to ensure that their workforce training and management processes are appropriate to position their organization both to show their processes encourage proper internal reporting and investigation of compliance concerns, as well as manage the inevitable HIPAA and other human resources retaliation and whistleblower exposures that can arise out of such reports.

The Resolution Agreement also provides insights to the internal corporate processes and documentation of compliance efforts that Covered Entities and business associates may need to show their organization has the required “culture of compliance” needed to mitigate consequences of breaches or other compliance glitches. Particularly notable are Resolution Agreement’s terms on the documentation and up the ladder reporting to management and OCR of SEMC’s self-audit and self-correction activities and management oversight and management of these activities. Like tips shared by HHS in the recently released Practical Guidance for Health Care Governing Boards on Compliance Oversight, these details in the Resolution Agreement provide invaluable tips to Boards and other leaders of Covered Entities and business associates about steps they can take to promote their ability to demonstrate their organizations have the necessary culture of HIPAA compliance OCR expects.

Health Plan HIPAA Compliance Risks & Responsibilities of Employers & Their Leaders

While HIPAA places the primary duty for complying with HIPAA on Covered Entities and business associates, health plan sponsors and their management still need to make HIPAA compliance a priority for many practical and legal reasons.

As employers forced to cope with the deluge of fears and questions of employees and other health plan members impacted by recent massive PHI breach reports shared by Blue Cross association health insurance plan giants, Anthem and Premera can attest, HIPAA data breach or other compliance reports often trigger significant financial, administrative, workforce satisfaction and other operational costs employer health plan sponsors. Inevitable employee concern about health plan data breaches undermines employee value and satisfaction of the health benefit plan as an employee benefit. These concerns also usually require employers to expend significant management and financial resources to respond to these concerns and address other employer fallout from the breach.

The costs of investigation and redress of a known or suspected HIPAA data or other breach typically far exceed the actual damages to participants resulting from the breach. While HIPAA technically does not make sponsoring employers directly responsible for these duties or the costs of their performance, as a practical matter sponsoring employers typically can expect to pay costs and other expenses that its health plan incurs to investigate and redress a HIPAA breach. For one thing, except in the all too rare circumstances where employers as plan sponsors have specifically negotiated more favorable indemnification and liability provisions in their vendor contracts, employer and other health plan sponsors usually agree in their health plan vendor contracts to pay the expenses and to indemnify health plan insurers, third party administrators, and other vendors for costs and liabilities arising from HIPAA breaches or other events arising in the course of the administration of the health plan. Since employers typically are obligated to pay health plan costs in excess of participant contributions, employers also typically would be required to provide the funding their health plan needs to cover these costs even in the absence of such indemnification agreements.

Sponsoring employers and their management also should be aware the employer’s exception from direct liability for HIPAA Rule compliance does not fully insulate the employer or its management from legal risks in the event of a health plan data breach or other HIPAA violation.

While HIPAA generally limits direct responsibility for compliance with the HIPAA Rules to a health plan or other Covered Entity and their business associates, HIPAA hybrid entity and other organizational rules and criminal provisions of HIPAA, as well as various other federal laws arguably could create liability risks for the employer. See, e.g., Cyber Liability, Healthcare: Healthcare Breaches: How to Respond; Restated HIPAA Regulations Require Health Plans to Tighten Privacy Policies and Practices; Cybercrime and Identity Theft: Health Information Security Beyond. For example, hybrid entity and other organizational provisions in the HIPAA Rules generally require employers and their health plan to ensure that health plan operations are appropriately distinguished from other employer operations in order for otherwise non-covered human resources, accounting or other employer activities to avoid subjecting their otherwise non-covered employer operations and data to HIPAA Rules. To achieve this required designation and separation, the HIPAA rules typically also require that the health plan include specific HIPAA language and the employer and health plan take appropriate steps to designate and separate health plan records and data, workforces, and operations from the non-covered business operations and records of the sponsoring employer. Failure to fulfill these requirements could result in the unintended spread of HIPAA restrictions and liabilities to other aspects of the employer’s human resources or other operations. Sponsoring employers will want to confirm that health plan and other operations and workforces are properly designated, distinguished and separated to reduce this risk.

When putting these designations and separations in place, employers also generally will want to make arrangements to ensure that their health plan includes the necessary terms and the employer implements the policies necessary for the employer to provide the certifications to the health plan that HIPAA will require that the health plan receive before HIPAA will allow health plan PHI to disclosed to the employer or its representative for the limited underwriting and other specified plan administration purposes permitted by the HIPAA Rules.

Once these arrangements are in place, employers and their management also generally will want to take steps to minimize the risk that their organization or a member of the employer’s workforce honors these arrangements and does not improperly access or use health plan PHI, systems in violation of these conditions or other HIPAA Rules. This or other wrongful use or access of health plan PHI or systems could violate criminal provisions of HIPAA or other federal laws making it a crime for any person – including the employer or a member of its workforce – from wrongfully accessing health plan PHI, electronic records or systems. Since health plan PHI records also typically include personal tax, social security information that the Internal Revenue Code, the Social Security Act and other federal laws generally would require the employer to keep confidential and to protect against improper use, employers and their management also generally should be concern about potential exposures for their organization that could result from improper use or access of this information in violation of these other federal laws. Since HIPAA and some of these other laws under certain conditions make it a felony crime to violate these rules, employer and their management generally will want to treat compliance with these federal rules as critical elements of the employer’s Federal Sentencing Guideline and other compliance programs.

Beyond the already discussed concerns, employers or members of their management also may have an incentive to promote health plan compliance with HIPAA or other health plan privacy or data security requirements to many the exposure of the employer or management or other staff to statutory, regulatory, contractual or ethical liabilities arising under ERISA, Internal Revenue Code, the Fair & Accurate Credit Transaction Act (FACTA), trade secret, insurance, disability, identity theft, cybersecurity or other federal or state laws.

For instance, health plan sponsors and management involved in health plan decisions, administration or oversight could face personal fiduciary liability risks under ERISA for failing to act prudently to ensure that the health plan compliance with HIPAA and other federal privacy and data security requirements.. ERISA’s broad functional fiduciary definition encompasses both persons and entities appointed as “named” fiduciaries and others who functionally exercise discretion or control over a plan or its administration. Consequently, the sponsoring employer and certain members of its human resources or other executive management team who functionally possess or exercise responsibility or authority over the administration of the employer’s health plan or its data or other assets, the selection or oversight of plan fiduciaries, vendors, or other workforce members its administration, or other key health plan operations risk ERISA fiduciary liability for their own failures to act prudently in carrying out HIPAA compliance or other responsibilities or to take action when they know or should know that another fiduciary is or has breached these duties. This fiduciary status and risk can occur even if the entity or individual does not is not named a named fiduciary, expressly disclaims fiduciary responsibility or does not realize it bears fiduciary status or responsibility. Since fiduciaries generally bear personal liability for their own breaches of fiduciary duty as well as potential co-fiduciary liability for fiduciary breaches committed by others that they knew or prudently should have known, most employers and members of their management will make HIPAA health plan compliance a priority to avoid or minimize these potential ERISA fiduciary exposures.

Furthermore, most employers and their management also will appreciate the desirability of taking reasonable steps to manage potential exposures that the employer or members of its management could face if their health plan or the employer violates the anti-retaliation rules of HIPAA or other laws through the adoption and administration of appropriate human resources, internal investigation and reporting, risk management policies and practices. See Employee & Other Whistleblower Complaints Common Source of HIPAA Privacy & Other Complaints.

Act To Manage HIPAA & Other Related Risks

OCR’s release of the Resolution Agreement on the heels of widespread publicity about massive health plan and other data breaches at Blue Cross health care giants, Anthem and Premera and other U.S. businesses and the potential legal and financial exposures that a HIPAA data breach or other violation could create, health plans and their sponsors, insurers, business associates, and leaders should appreciate the advisability of acting promptly to ensure that their health plans and business associates are taking appropriate steps to comply with the HIPAA Rules and manage other associated risks and liabilities. At minimum, health plans and their business associates should move quickly to conduct a documented assessment of the adequacy of their health plan internet applications and other HIPAA compliance in in light of the Resolution Agreement and other developments. Given the scope and diversity of the legal responsibilities, risks and exposures associated with this analysis, most health plan sponsors, fiduciaries, business associates and their management also will want to consider taking other steps to mitigate various other legal and operational risks that lax protection or use of health plan PHI or systems could create for their health plan, its sponsors, fiduciaries, business associates and their management. Health plan fiduciaries, sponsors and business associates and their leaders also generally will want to explore options to use indemnification agreements, liability insurance or other risk management tools as a stop gap against the costs of investigation or defense of a HIPAA security or other data breach.

For Legal or Consulting Advice, Legal Representation, Training Or More Information

If you need help responding to these new or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, help updating or defending your workforce or employee benefit policies or practices, or other related assistance, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, Ms. Stamer’s more than 27 years’ of leading edge work as an practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

Board certified in labor and employment law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on HIPAA and other health and other employee benefit, human resources, and related insurance, health care, privacy and data security and tax matters and policy.

Ms. Stamer’s legal and management consulting work throughout her 27 plus year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes.

As a key part of this work, Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements.

She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. In these and other engagements, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others. Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation, Ms. Stamer also advises and represents clients on OCR and other HHS, Department of Labor, IRS, FTC, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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State Exchange Problems Present ACA Concerns That Exist Beyond King v. Burwell

March 3, 2015

While most Americans are familiar with the well-publicized issues and higher than projected premium costs of coverage offered to Americans enrolling in health care coverage through the federal healthcare marketplace Healthcare.gov created under the health care reforms of the Patient Protection & Affordable Care Act (ACA), many Americans are just beginning to recognize the growing problems and concerns emerging with state exchanges in those states that elected to enact their own exchange.  As the Supreme Court prepares to hear arguments in the challenge to the payment of ACA subsidies to individuals in states that elected not to adopt a state-run health care exchange to pay for coverage purchased through the federal healthcare.gov marketplace in King v. Burwell on Wednesday, March 4, 2015, the growing evidence of rapidly emerging funding and other challenges affecting state-run exchanges raise concerns about the solvency and reliability of coverage promised and purchased through those state-run exchanges.

During the Congressional debates leading up to the enactment of ACA, for instance, ACA advocates touted the Massachusetts health care mandates and reform law of Massachusetts as part of the model for ACA and evidence of the potential benefits offered by enactment of ACA.  Now Massachusetts officials are blaming ACA for serious underfunding and other problems in their state’s health care connector.

Massachusetts Governor Charlie Baker recently cited the Health Connector and its challenges in enrolling Massachusetts residents in health insurance plans as part of the Affordable Care Act that forced the state to temporarily transition hundreds of thousands of state residents into the commonwealth’s Medicaid program as a primary reason for the state’s projected $1.5 billion budget deficit.  He now has asked for the resignations of four Massachusetts Health Connector board members:  MIT professor Jonathan Gruber,  Covered California actuarial consultant John Bertko; Massachusetts Nonprofit Network CEO Rick Jakious and Spring Insurance Group CEO George Conser.

The Massachusetts experience is not unique.  Other states also are experiencing significant funding and other problems dealing with the ACA mandates and implementation.  See, e.g.,  Funding Woes Imperil Future of State Run Exchanges;  State Insurance Exchanges Face Challenges In Offering Standardized Choices Alongside Innovative Value-Based Insurance.

This mounting evidence of serious cost, financing and other concerns in state-run exchanges creates new reason for concern about the future of ACA’s health care reforms even for those citizens of states whose eligibility for subsidies is not challenged by the King v. Burwell Supreme Court challenge.  These and other budget overruns and operational challenges raise serious questions about the ability of the federal government or the states to fund the promises currently made by ACA in its present form.  Congress and state governments almost certainly will be forced to deal with these broader challenges regardless of the outcome of King v. Burwell.   As American leaders continue to struggle to deal with these and other mounting problems impacting the U.S. health care system, the input of individual Americans and businesses and community leaders is more critical than ever.  Get involved in helping to shape improvements and solutions to the U.S. health care system and the Americans it cares for by sharing your ideas and input through the Coalition For Responsible Health Care Policy  and exchanging information and ideas for helping American families deal with their family member’s illnesses, disabilities and other healthcare challenges through Project COPE: Coalition for Patient Empowerment here.

About Project COPE: The Coalition On Patient Empowerment &  Coalition on Responsible Health Policy

Do you have ideas or experiences to share about medical debit, ACA or other health care challenges?  Have ideas for helping improve ACA and other health care policies impacting the US health care system, helping Americans cope with these and other health care challenges or other health care matters? Know other helpful resources or experiences that you are willing to share?  Are you concerned about health care coverage or other health care and disability issues or policy concerns?  Join the discussion and share your input by joining Project COPE: Coalition for Patient Empowerment here.

Sharing and promoting the use of practical practices, tools, information and ideas that patients and their families, health care providers, employers, health plans, communities and policymakers can share and offer to help patients, their families and others in their care communities to understand and work together to better help the patients, their family and their professional and private care community plan for and manage these  needs is the purpose of

The Coalition and its Project COPE arise and operate on the belief that health care reform and policy must be patient focused, patient centric and patient empowering.  The best opportunity to improve access to quality, affordable health care for all Americans is for every American, and every employer, insurer, and community organization to seize the opportunity to be good Samaritans.  The government, health care providers, insurers and community organizations can help by providing education and resources to make understanding and dealing with the realities of illness, disability or aging easier for a patient and their family, the affected employers and others. At the end of the day, however, caring for people requires the human touch.  Americans can best improve health care by not waiting for someone else to step up:  Step up and help bridge the gap when you or your organization can. Speak up to help communicate and facilitate when you can.  Building health care neighborhoods filled with good neighbors throughout the community is the key.

The outcome of this latest health care reform push is only a small part of a continuing process.  Whether or not the Affordable Care Act makes financing care better or worse, the same challenges exist.  The real meaning of the enacted reforms will be determined largely by the shaping and implementation of regulations and enforcement actions which generally are conducted outside the public eye.  Americans individually and collectively clearly should monitor and continue to provide input through this critical time to help shape constructive rather than obstructive policy. Regardless of how the policy ultimately evolves, however, Americans, American businesses, and American communities still will need to roll up their sleeves and work to deal with the realities of dealing with ill, aging and disabled people and their families.  While the reimbursement and coverage map will change and new government mandates will confine providers, payers and patients, the practical needs and challenges of patients and families will be the same and confusion about the new configuration will create new challenges as patients, providers and payers work through the changes.

We also encourage you and others to help develop real meaningful improvements by joining Project COPE: Coalition for Patient Empowerment here by sharing ideas, tools and other solutions and other resources. The Coalition For Responsible Health Care Policy provides a resource that concerned Americans can use to share, monitor and discuss the Health Care Reform law and other health care, insurance and related laws, regulations, policies and practices and options for promoting access to quality, affordable healthcare through the design, administration and enforcement of these regulations.

You also may be interested in one or more of the following other recent articles published on the Coalition for Responsible Health Care Reform electronic publication available here, our electronic Solutions Law Press Health Care Update publication available here, or our HR & Benefits Update electronic publication available here such as:

 You also can find out about how you can arrange for training for you, your employees or other communities to participate in training on “Building Your Family’s Health Care Toolkit,”  using the “PlayForLife” resources to organize low-cost wellness programs in your workplace, school, church or other communities, and other process improvement, compliance and other training and other resources for health care providers, employers, health plans, community leaders and others here.

For Advice, Training & Other Resources

Should your business need legal advice about the taxability of or other requirements on tips, gratuities or other compensation,  assistance assessing or resolving potential past or existing compliance exposures, or monitoring and responding to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies.  Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others.   She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to receive these and other updates here.  Recent examples of these updates include:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information about this communication click here

NOTE:  This article is provided for educational purposes.  It is does not establish any attorney-client relationship nor provide or serve as a substitute for legal advice to any individual or organization.  Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances.

The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations.  The Regulations now require that either we (1) include the following disclaimer in most written Federal tax correspondence or (2) undertake significant due diligence that we have not performed (but can perform on request).

ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2015 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.

 

EEOC Charges Employer Violated ADA By Terminating Employment At FMLA Leave End

March 2, 2015

Employers considering terminating the employment of employees not ready to resume their usual duties when their eligibility for medical leave ends under the Family & Medical Leave Act (FMLA) or other leave policies should first consider whether the employee qualifies for accommodation under the Americans With Disabilities Act.  That’s the message transmitted by a new Employment Opportunity Commission (EEOC) Americans With Disabilities Act (ADA) lawsuit against ValleyLife of Phoenix, Arizona.

In EEOC v. ValleyLife, the EEOC charges that ValleyLife engaged in illegal disability discrimination in violation of the ADA when it allegedly fired employees with disabilities instead of providing them with reasonable accommodations when their eligibility for family leave ended under the FMLA and allegedly failed to keep employees’ medical records confidential.  See EEOC v. ValleyLife, Civil Action No. 2:15-cv-00340-GMS (N.Az).

According to the lawsuit, ValleyLife fired employees with disabilities rather than provide them with reasonable accommodations due to its inflexible leave policy.  The policy compelled the termination of employees who had exhausted their paid time off and/or any unpaid leave to which they were eligible under the FMLA.   In its complaint, for instance, the EEOC alleges that ValleyLife fired supervisor, Glenn Stephens, due to his need for further surgery when his FMLA leave was exhausted.  EEOC claims this termination violated the ADA because ValleyLife did not engage in any interactive process to determine whether any accommodations (including additional leave) were possible.  Stephens had worked for ValleyLife for over ten years at the time of his termination.  The EEOC contends that ValleyLife’s failure to offer extended leave or other accommodation to Stephens when his leave eligibility ended violated the ADA, which protects workers from discrimination based upon disability and requires employers to provide reasonable accommodations to the known physical or mental impairments of disabled employees unless doing so would cause an undue hardship.

The suit also alleges that ValleyLife commingled medical records in employee personnel files and failed to maintain these medical records confidential in violation of the medical record confidentiality requirements of the ADA, which requires employees’ to keep medical documents confidential and separate from other personnel records.

The lawsuit seeks lost wages and compensa­tory and punitive damages for the alleged victims, as well as appropriate injunctive relief to prevent discriminatory practices in the future.

Prepare Employment Discrimination Defenses

The EEOC suit against ValleyLife sends a message to employers of the need to use care to monitor and manage ADA and other disability discrimination risks at the end of a FMLA or other medical leave.  Employers assume at their own peril that their responsibility to an employee ends when an employee is unable to or fails to return to work following a FMLA or other medical leave.  Instead, the employer should evaluate whether the affected employee qualifies as disabled under the ADA and if so, whether the employer has any responsibility to offer the employee an extended leave or other accommodations before terminating the employee.

Employers also should consider reviewing and updating their current FMLA and other leave policies and communications to incorporate appropriate accommodation offer and administration procedures and notices, as well as other processes to ensure that these practices are operationalized in a manner to create and keep appropriate documentation to defend staffing decisions against potential claims of illegal discrimination under the ADA, Civil Rights, or other laws that could trigger ADA or other discrimination charges.  Employers should keep in mind that an evidentiary doctrine known as the “after acquired evidence rule” makes it important to properly document analysis and decision-making before an employment action is taken to help ensure that critical evidence of employer intention necessary to defend discrimination claims will not be excluded or compromised in the event of litigation.

For Advice, Training & Other Resources

Should your business need legal advice about the taxability of or other requirements on tips, gratuities or other compensation,  assistance assessing or resolving potential past or existing compliance exposures, or monitoring and responding to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies.  Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others.   She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to receive these and other updates here.  Recent examples of these updates include:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information about this communication click here

NOTE:  This article is provided for educational purposes.  It is does not establish any attorney-client relationship nor provide or serve as a substitute for legal advice to any individual or organization.  Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances.

The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations.  The Regulations now require that either we (1) include the following disclaimer in most written Federal tax correspondence or (2) undertake significant due diligence that we have not performed (but can perform on request).

ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2015 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.

 

Tell Congress to protect wellness programs against EEOC attacks

January 28, 2015

The EEOC has declared war on many employer sponsored wellness programs. The Senate Health, Education, Labor, and Pensions Committee will hold a hearing about how to improve employer wellness programs on Thursday, January 29. Employers and others should urge the Committee and other Congressional leaders to overrule the EEOC’s attacks on wellness programs as illegal disability discrimination under the Americans with Disabilities Act.


Stamer Kicks Off Dallas HR 2015 Monthly Lunch Series With 2015 Federal Legislative, Regulatory & Enforcement Update

November 10, 2014

Human resources and other management leaders are watching Washington to see if the change in Congressional control resulting from the November 4, 2014 mid-term election ushers in a more management friendly federal legal environment. Since President Obama took office, the Democrats aggressive pursuit of health care, minimum wage and other federal pro-labor legislation, regulations and enforcement has increased management responsibilities, costs and liabilities.

Nationally recognized management attorney, public policy advisor and advocate, author and lecturer Cynthia Marcotte Stamer will help human resources and other management leaders prepare for 2015 when she speaks on “2015 Federal Legislative, Regulatory & Enforcement Update: What HR & Benefit Leaders Should Expect & Do Now” at the 2015 Dallas HR monthly luncheon series kickoff meeting on January 13, 2014.

About The Program

While November 4, 2014 Republican election victories gave Republicans a narrow majority in both the House and Senate when the new Congress takes office January 3, 2015, the new Republican Majority may face significant challenges delivering on their promises to move quickly to enact more business-friendly health care, guest worker, tax and other key reforms Republicans say will boost the employment and the economy.

While President Obama and Democrat Congressional leaders say they plan to work with the new majority, President Obama already is threatening to use vetoes, regulations and executive orders to block Republicans from obstructing or rolling back his pro-labor policy and enforcement agenda.   When the new Congress takes office, the narrowness of the Republican Majority in the Senate means Republicans can’t block a Democratic filibuster or override a Presidential veto without recruiting some Democratic support.

As the Democrats and Republicans head into battle again, Board Certified Labor & Employment attorney and public policy advocate Cynthia Marcotte Stamer will help human resources and other management leaders get oriented for the year ahead by sharing her insights and predictions on the legislative, regulatory and enforcement agendas that HR, benefit and other business leaders need to plan for and watch in 2015.  Among other things, Ms. Stamer will:

  • Discuss how management can benefit from monitoring and working to influence potential legislative, regulatory and enforcement developments when planning and administering HR and related workforce policies;
  • Discuss the key workforce and other legislative, regulatory and enforcement priorities and proposals Democrats and Republicans plan to pursue during 2015;
  • Share her insights and predictions about how the narrow Republican majority, Mr. Obama’s lame duck presidency and other factors could impact each Party’s ability to pursue its agenda
  • Share tips management leaders can use to help monitor developments and to help shape legislation, regulation and enforcement through Dallas HR, SHRM and other organizations as well as individually;
  • Learn tips for anticipating and maintaining flexibility to respond to legislative, regulatory and enforcement developments; and
  • More

To register or get more details about the program, DallasHR, or both, see http://www.dallashr.org.

About Ms. Stamer

Board certified labor and employment attorney, public policy leader, author, speaker Cynthia Marcotte Stamer is nationally and internationally recognized and valued for her more than 25 years of work advising and representing employers, insurers, employee benefit plans, their fiduciaries and advisors, business and community leaders and governments about workforce, employee benefits, social security and pension, health and insurance, immigration and other performance and risk management, public policy and related regulatory and public policy, management and other operational concerns.

Throughout her career, Ms. Stamer continuously both has helped businesses and their management to monitor and respond to federal and state legislative, regulatory and enforcement concerns and to anticipate and shape federal, state and other laws, regulations, and enforcement in the United States and internationally.

Well known for her leadership on workforce, health and pension policy through her extensive work with clients as well as through her high profile involvements as the Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment, a founding Board member of the Alliance for Health Care Excellence, a Fellow in the American College of Employee Benefit Counsel, the American Bar Association (ABA), and the State Bar of Texas leadership and other involvements with the ABA including her annual service leading the annual agency meeting of Joint Committee on Employee Benefits (JCEB) representatives with the HHS Office of Civil Rights and participation in other JCEB agency meetings, past involvements with legislative affairs for the Texas Association of Business and Dallas HR and others, and many speeches, publications, and other educational outreach efforts, Ms. Stamer has worked closely with Congress and federal and state regulators on the Patient Protection & Affordable Care Act and other health care, pension, immigration, tax and other workforce-related legislative and regulatory reforms for more than 30 years. One of the primary drafters of the Bolivian Social Security reform law and a highly involved leader on U.S. workforce, benefits, immigration and health care policy reform, Ms. Stamer’s experience also includes working with U.S. and foreign government, trade association, private business and other organizations to help reform other countries’ and U.S. workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Ms. Stamer also contributes her policy, regulatory and other leadership to many professional and civic organizations including as Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Committee and its current Welfare Benefit Plans Committee Co-Chair, a Substantive Groups & Committee Member; a member of the leadership council of the ABA Joint Committee on Employee Benefits; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; the current Vice Chair of the ABA TIPS Employee Benefit Committee, and the past Coordinator of the Gulf Coast TEGE Council TE Division.

The publisher and editor of Solutions Law Press, Inc. who serves on the Editorial Advisory Boards of Employee Benefit News, HR.com, InsuranceThoughtLeadership.com and many other publications, Ms. Stamer also is a prolific and highly respected author and speaker,  National Public Radio, CBS, NBC, and other national and regional news organization, Atlantic Information Services, The Bureau of National Affairs, HealthLeaders, Telemundo, Modern Healthcare, Business Insurance, Employee Benefit News, the Employee Benefits News, World At Work, Benefits Magazine, InsuranceThoughtLeadership.com, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, CEO Magazine, CFO Magazine, CIO Magazine, the Houston Business Journal, and many other prominent news and publications.  She also serves as a planning faculty member and regularly conducts training and speaks on these and other management, compliance and public policy concerns for these and a diverse range of other organizations. For additional information about Ms. Stamer, see www.cynthiastamer.com.

For Added Information and Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

For Help Or More Information

If you need assistance in auditing or assessing, updating or defending your organization’s compliance, risk manage or other  internal controls practices or actions, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping employers and other management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit  and management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions.  The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, reengineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters.  She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters.Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see hereor contact Ms. Stamer directly.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at www.solutionslawpress.com.

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at here or e-mailing this information here.

©2014 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.


IRS Guidance Raises Concerns For Many Employers Offering “Skinny” & Other Limited Coverage Health Plans

November 4, 2014

Learn More Details By Participating In November 13, 2014 WebEx Briefing

Employers of 100 or more full-time employees that plan currently offering or planning to offer after November 4, 2014 health plans with mandate only or other “skinny” plan designs which do not provide “substantial coverage” for both in-patient hospitalization and physician services should re-evaluate the implications of their proposed plan design as well as existing and planned employee enrollment or other communications about those plans, in light of the new guidance provided by Notice 2014-69 released by the Internal Revenue Service (IRS) today.  Learn all the details about this new guidance and its implication by participating in our November 13 , 2014 briefing.

Plans Must Provide “Substantial Coverage” for Both In-Patient Hospitalization & Physician Services To Provide Minimum Value

Notice 2014-69 makes it official that the Department of Treasury (including the IRS) and Department of Health and Human Services (collectively the Departments)  believe that group health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in the Notice as Non-Hospital/Non-Physician Services Plans) do not provide the “minimum value” necessary to fulfill the minimum value requirements of Code §36B and 4080H(b).

The Notice also notifies sponsoring employers about the Departments expectations about notifications and other communications to employees about Non-Hospital/Non-Physician Services Plans) as well as shares details about the Departments plans for implementing their interpretation in planned final regulations by March, 2015.

Standards On Employer Communications About Non-Hospital/Non-Physician Services Plans

The Notice cautions employers about the need to use care in communicating with employees about Non-Hospital/Non-Physician Services Plan.  Among other things, the Notice states that an employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) to an employee must:

  • Not state or imply in any disclosure that the offer of coverage under the Non-Hospital/Non-Physician Services Plan precludes an employee from obtaining a premium tax credit, if otherwise eligible, and
  • Timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services Plan would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit.
  • Without such a corrective disclosure, the Notice warns that a statement (for example, in a summary of benefits and coverage) that a Non-Hospital/Non-Physician Services Plan provides minimum value will be considered to imply that the offer of such a plan precludes employees from obtaining a premium tax credit. However, an employer that also offers an employee another plan that is not a Non-Hospital/Non/-Physician Services Plan and that is affordable and provides minimum value (MV) is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.

Anticipated Approach In Planned Regulations

Regarding the Departments plans to adopt regulations implementing the interpretation of Code § 36B announced in the Notice, the Notice indicates:

  • HHS intends to promptly propose amending 45 CFR 156.145 to provide that a health plan will not provide minimum value if it excludes substantial coverage for in-patient hospitalization services or physician services (or both).
  • Treasury and the IRS intend to issue proposed regulations that apply these proposed HHS regulations under Code section 36B. Accordingly, under the HHS and Treasury regulations, an employer will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value.
  • Treasury and IRS anticipate that the proposed changes to regulations will be finalized in 2015 and will apply to plans other than Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plans on the date they become final rather than being delayed to the end of 2015 or the end of the 2015 plan year. As a result, a Non-Hospital/Non-Physician Services Plan (other than a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) should not be adopted for the 2015 plan year.
  • Solely in the case of an employer that has entered into a binding written commitment to adopt, or has begun enrolling employees in, a Non-Hospital/Non-Physician Services Plan prior to November 4, 2014 based on the employer’s reliance on the results of use of the MV Calculator (a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan), however, Notice 2014-69 states the Departments anticipate that final regulations, when issued, will not be applicable for purposes of Code section 4980H with respect to the plan before the end of the plan year (as in effect under the terms of the plan on November 3, 2014) if that plan year begins no later than March 1, 2015.
  • Employers offering Non-Hospital/Non-Physician Services Plans should “exercise caution in relying on the Minimum Value Calculator to demonstrate that these plans provide minimum value for any portion of a taxable year after publication of the planned final regulations.
  • The IRS will not require an employee to treat a Non-Hospital/Non-Physician Services Plan as providing minimum value for purposes of an employee’s eligibility for a premium tax credit under Code section 36B, regardless of whether the plan is a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan before final regulations take effect.

Employers & Plans Most Likely To Be Affected

The interpretation of minimum value and planned future regulatory changes announced in Notice 2014-69 primarily will impact large employers subject to the “pay or play” shared responsibility rules of Code § 4980H that offer a health plan providing coverage that meets the “minimum essential coverage” standards of Code § 4980H.

Under Code § 4980H(a),  large employers that fail to offer employee and dependent coverage under a health plan providing “minimum essential coverage” to each full-time employee generally become liable to pay an employer shared responsibility payment of  $165 per month ($2000 per year) (commonly referred to as the “A Penalty”)  for each full-time employee.

In contrast, the penalties (commonly referred to as the “B Penalty”) created under Code § 4980H(b) generally comes into play when a covered large employer offers health plan coverage under a health plan providing minimum essential coverage but the plan either:

  • Does not provide minimum value; or
  • The cost to the employee for coverage exceeds 9.5% of the employee’s family adjusted gross income or an otherwise applicable safe harbor amount allowed under IRS regulations.Register For Briefing To Learn More
  • To learn more about Notice 2014-69 and its implications on employer health plan obligations and Code § 4980H shared responsibility exposures, register to participate in a special Solutions Law WebEx Briefing on the new guidance conducted by Attorney Cynthia Marcotte Stamer on Thursday, November 13, 2014 from Noon to 1:00 p.m. Central Time here.
  • Assuming at least one full-time employee of a covered large employer receives a subsidy for enrolling in health coverage through a health care exchange or “Marketplace” established under ACA, the B Penalty generally is equal to $250 per month ($3000 per year) multiplied by the number of such subsidized employees of the employer.

Learn More By Joining November 13, 2014 Solutions Law Press, Inc. Virtual Briefing Register Now!

To learn more about Notice 2014-69 and its implications on employer health plan obligations and Code § 4980H shared responsibility exposures, register to participate in a special Solutions Law WebEx Briefing on the new guidance conducted by Attorney Cynthia Marcotte Stamer on Thursday, November 13, 2014 from Noon to 1:00 p.m. Central Time here.

During the briefing, Ms. Stamer will:

  • Explain what health benefits, if any, employers must offer employees under current ACA guidance
  • Brief participants on this new guidance and other related guidance
  • Discuss potential implications for employers and their health plans
  • Discuss potential options for employers dealing with these plans and
  • Take questions from virtual audience participants as time permits.

Registration Fee is $35.00 per person   Registration required for each virtual participant. Payment required via website registration in advance of the program.. Payment only accepted via website PayPal. No checks or cash accepted. Participation is limited and available on a first come, first serve basis. Persons not registered at least 24 hours in advance not guaranteed to receive access information or materials prior to commencement of the briefing.

This briefing will be conducted via WebEx over the internet. Participants may have the opportunity to participate via telephone, provided that participants electing to participate may incur added charges for telephone connectivity. Solutions Law Press, Inc. is not responsible for any power or system failures. Solutions Law Press, Inc. also expects to offer the opportunity for individuals unable to participate in the live briefing to listen to a recording of the briefing beginning approximately one week after the program via the Internet by registering, paying the required registration fee and following listening instructions received in response to such registration.

Interested persons can register here now!

About The Speaker

A Fellow in the American College of Employee Benefits Counsel, recognized in International Who’s Who, and Board Certified in Labor & Employment Law, attorney and health benefit consultant Cynthia Marcotte Stamer has  25 years experience advising and representing private and public employers, employer and union plan sponsors, employee benefit plans, associations, their fiduciaries, administrators, and vendors, group health, Medicare and Medicaid Advantage, and other insurers, governmental leaders and others on health and other employee benefit. employment, insurance and related matters. A well-known and prolific author and popular speaker Board Certified in Labor & Employment Law, Ms. Stamer presently serves as Co-Chair of the ABA RPTE Section Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Committee, an ABA Joint Committee on Employee Benefits Representative, an Editorial Advisory Board Member of the Institute of Human Resources (IHR/HR.com), Insurance Thought Leadership,com and Employee Benefit News, and various other publications.  With extensive domestic and international regulatory and public policy experience, Ms. Stamer also has worked extensively domestically and internationally on public policy and regulatory advocacy on health and other employee benefits, human resources, insurance, tax, compliance and other matters and representing clients in dealings with the US Congress, Departments of Labor, Treasury, Health & Human Services, as well as state legislatures, attorneys general, insurance and labor departments, and other agencies and regulators. A prolific author and popular speaker, Ms. Stamer regularly authors materials and conducts workshops and professional, management and other training and serves on the faculty and planning committees of a multitude of symposium and other educational programs.  See http://www.CynthiaStamer.com  for more details.

 

A Fellow in the American College of Employee Benefits Counsel, recognized in International Who’s Who, and Board Certified in Labor & Employment Law, attorney and health benefit consultant Cynthia Marcotte Stamer has 25 plus years’ experience advising and representing private and public employers, employer and union plan sponsors, employee benefit plans, associations, their fiduciaries, administrators, and vendors, group health, Medicare and Medicaid Advantage, and other insurers, governmental leaders and others on health and other employee benefit. employment, insurance and related matters. A well-known and prolific author and popular speaker Board Certified in Labor & Employment Law, Ms. Stamer presently serves as Co-Chair of the ABA RPTE Section Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Committee, an ABA Joint Committee on Employee Benefits Representative, an Editorial Advisory Board Member of the Institute of Human Resources (IHR/HR.com), Insurance Thought Leadership,com and Employee Benefit News, and various other publications. With extensive domestic and international regulatory and public policy experience, Ms. Stamer also has worked extensively domestically and internationally on public policy and regulatory advocacy on health and other employee benefits, human resources, insurance, tax, compliance and other matters and representing clients in dealings with the US Congress, Departments of Labor, Treasury, Health & Human Services, as well as state legislatures, attorneys general, insurance and labor departments, and other agencies and regulators. A prolific author and popular speaker, Ms. Stamer regularly authors materials and conducts workshops and professional, management and other training and serves on the faculty and planning committees of a multitude of symposium and other educational programs. See http://www.CynthiaStamer.com. for more details.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides business and management information, tools and solutions, training and education, services and support to help organizations and their leaders promote effective management of legal and operational performance, regulatory compliance and risk management, data and information protection and risk management and other key management objectives.  Solutions Law Press, Inc.™ also conducts and assist businesses and associations to design, present and conduct customized programs and training targeted to their specific audiences and needs.

For Added Information and Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

For additional information about upcoming programs, to inquire about becoming a presenting sponsor for an upcoming event, e-mail your request to info@Solutionslawpress.com   These programs, publications and other resources are provided only for general informational and educational purposes. Neither the distribution or presentation of these programs and materials to any party nor any statement or information provided in or in connection with this communication, the program or associated materials are intended to or shall be construed as establishing an attorney-client relationship,  to constitute legal advice or provide any assurance or expectation from Solutions Law Press, Inc., the presenter or any related parties. If you or someone else you know would like to receive future Alerts or other information about developments, publications or programs or other updates, send your request to info@solutionslawpress.com.  If you would prefer not to receive communications from Solutions Law Press, Inc. send an e-mail with “Solutions Law Press Unsubscribe” in the Subject to support@solutionslawyer.net.  CIRCULAR 230 NOTICE: The following disclaimer is included to comply with and in response to U.S. Treasury Department Circular 230 Regulations.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN. If you are an individual with a disability who requires accommodation to participate, please let us know when you register so that we may consider your request.   ©2014 Solutions Law Press, Inc.  All rights reserved.

 


Plan’s Purchase of Company Stock Triggers $6.48 Million Award Against ESOP Sponsor, Shareholder, Board Members & Trustees

November 2, 2014

A $6.48 million judgment against Direct TV satellite television installer, Bruister and Associates Inc.(BAI) its sole owner, Herbert Bruister, and other trustees of  two BAI-sponsored employee stock ownership plans shows plan sponsors and trustees involved in stock purchase transactions where employee stock ownership plans commonly referred to as “ESOPs” and other employee benefit plan buy or hold investments in the stock of plan sponsors or other related businesses the risks of failing to conduct the transactions to ensure that the transactions are prudently performed and otherwise conducted in compliance with the Employee Retirement Income Security Act (ERISA) fiduciary responsibility requirements.

BAI Lawsuit & Judgment Highlights

The BAI judgment stems from a Department of Labor lawsuit that charged BAI, along with BAI board members and plan trustees Bruister and Amy Smith, and plan trustee Jonda Henry  engaged in prohibited transactions and breached other fiduciary duties under ERISA by causing the plans to purchase 100 percent of BAI’s shares for $24 million in three sales transactions conducted between December 2002 to December 2005.

According to court documents, Bruister, Smith and Henry, as plan fiduciaries, engaged in prohibited transactions by causing the plans to pay excessive prices for BAI stock purchased from Bruister. For each purchase, the Labor Department charged the fiduciaries used flawed valuations prepared by Matthew Donnelly and his firm, Business Appraisal Institute.

The court also found that the three fiduciaries breached their duty of loyalty from start to finish. Additionally, Bruister and his attorney David Johanson went so far as to fire the initial attorney representing the plans because that attorney was too thorough. Moreover, the court found that Bruister and Johanson exercised undue influence over Donnelly’s valuations, and that as a result, Donnelly was not sufficiently independent to provide valuations for the plans.

The court concluded that Bruister, Henry and Smith, in their role as plan fiduciaries, failed to properly represent plan participants’ interests, and that they unreasonably relied on an appraiser who so obviously lacked independence. The court reasoned, “An informed trustee would not have remained idle while the seller communicated directly with the employee stock ownership trust’s independent appraiser and financial advisor to elevate the price at the participants’ expense.”

Although Johanson was not a fiduciary, the court found his conduct worthy of comment because he both was the attorney for the seller and structured each sale.   The court noted that Johanson attempted to influence the valuations in Bruister’s favor, and the testimony Johanson gave at trial did not support his denials. The court even  noted that Johanson coached Donnelly during a break in his deposition to retract his testimony that Johanson represented Bruister individually. “History rebuts Johanson’s suggestion that he did not interfere with Donnelly’s valuations and raises doubts as to each of the subject transactions,” the court said.

The order requires Bruister, Smith and Henry to jointly pay $4.5 million in restitution to the plans and requires Bruister to pay an additional $1.98 million in prejudgment interest. The order also held Bruister Family LLC liable with all defendants for $885,065 and jointly liable with Bruister for $390,604.

Company Stock Investments Carry Special ERISA Risks

Purchases of company stock by an ESOP or other employee benefit plan can create a wide range of risks under ERISA’s  fiduciary responsibility rules. When making investment or other decisions under an employee benefit plan, the general fiduciary duty standards of ERISA § 404 generally require plan fiduciaries to act prudently and solely in the interest of participants and beneficiaries. Meanwhile, except in certain narrow circumstances and subject to fulfillment of ERISA § 404,  the prohibited transaction rules of ERISA § 406 among other things prohibits plan fiduciaries from causing the plan to engage in a transaction, if he knows or should know that such transaction is a direct or indirect:

  • Sale or exchange, or leasing, of any property between the plan and a party in interest;
  • Furnishing of goods, services, or facilities between the plan and a party in interest;
  • Transfer to, or use by or for the benefit of a party in interest, of any assets of the plan; or
  • Acquisition, on behalf of the plan, of any employer security or employer real property in violation of section 1107 (a) of this title.

As for all plan investment transactions, detailed, unbiased valuation documentation showing the prudence of any decision to invest or hold the investments of the plan in company stock is critical when determining the initial purchase or sale prices for plan transactions involving company stock.  Since the sponsoring company is a party-in-interest of the plan, holding, must less using plan assets to purchase company stock or other activities resulting in the inclusion of company stock among the plan assets held by the plan creates presumptions of impropriety that impose higher than usual burdens upon the plan, its sponsor and fiduciaries to prove the appropriateness of the transaction.  See e.g., Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012).  As ESOP transactions to purchase company stock inherently require a host of complicated party-in-interest and other conflict of interest concerns, these risks are particularly heightened.  Employee benefit plans, their fiduciaries and sponsors the need to continuously and prudently conduct documented monitoring and evaluations evaluate and monitor the investment of plan assets in company stock,the analysis and decisions about whether to continue to keep and offer this stock under the plan, as well as the qualifications, credentials and conduct of the fiduciaries and others empowered to influence these decisions. The Labor Department’s statement in announcing the Parrot litigation sums up the messages from these cases. “Plan officials are required by law to manage the ESOP in a careful, prudent manner and to act solely to benefit the plan’s participants,” said Jean Ackerman, director of the Employee Benefit Security Administration’s (EBSA’s) San Francisco Regional Office, which. “This action underscores the department’s commitment to protect the benefits that employers promise to their employees.”

In light of these exposures, plan fiduciaries, sponsors and their management, service providers and consultants participating in these activities need to both act with care and carefully document their actions to position to defend potential challenges.

Plans, their sponsors and fiduciaries also should ensure that appropriate steps are taken in selecting the fiduciaries, management and service providers responsible for administering or overseeing the administration of their plans, the selection of vendors, and other critical details.  Appropriate background checks and other credentialing should be done both at commencement and periodically.  Bonding and fiduciary liability insurance should be arranged and reviewed periodically along with their activities.  Documentation of these and other steps should be carefully created and preserved.

When and if a change in stock value or other event that could compromise the investment occurs, consideration should be given as to the responsibilities that such events create under ERISA.  As company leaders often have dual responsibilities to both the company and the plan, it is important that the company sponsoring the plan, its management and owners learn in advance how these responsibilities impact each other so that they are aware of the issues and have a good understanding of responsibilities and options as situations evolve.

Businesses and business leaders that fail to conduct and maintain the necessary evidence that these requirements are met when involving the plan in these transactions risk significant liability.

“Plan fiduciaries have an obligation to work solely in the interest of plan participants,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi.in the Labor Department’s October 31, 2014 announcement of the judgment. “When they fail to do so, the retirement security of workers is put in jeopardy, and we will take action to make plan participants whole.”

 For Help or More Information

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices to monitor or respond to evolving laws and regulations,  drafting or administering programs,  resolving or defending audits, investigations or disputes or other  employee benefit, human resources, safety, compliance  or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

About Ms. Stamer

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals.  A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations.   She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications.   You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns  see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to  cstamer@solutionslawyer.net.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at www.solutionslawpress.com including:

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©2014 Cynthia Marcotte Stamer.  Non-exclusive right to republish granted to Solutions Law Press.  All other rights reserved.


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