On January 1, 2019, portions of the U.S. Department of Labor’s (DOL) Final Rule expanding the availability of Association Health Plans (AHPs) went into effect. AHPs allow small businesses to band together and negotiate better deals when buying insurance for their members.

The partial government shutdown hasn’t slowed the raging debate over how states are to implement the DOL’s final rule. On December 28, 2018, a federal judge ordered litigation concerning the rule to continue despite the shutdown.

States have reacted to the final rule in dramatically divergent ways. Some states believe that AHPs will make it finally possible for small employers to offer affordable healthcare options for their employees. Other states worry that AHPs will destabilize the individual insurance marketplace. They predict that healthy people will join AHPs because they are less expensive than other insurance options, and this shift will leave sicker people in a smaller pool with higher premiums.  
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Iowa has enacted legislation to permit the offering of certain health benefit plans that would not be subject to the restrictions of the Affordable Care Act (ACA).

The bill combined two separate measures, each intended to expand access to association health plans (AHPs) that are exempt from many of the ACA’s protections. First, the new law would allow small employers to band together to form associations that would be eligible to offer members’ employees coverage as if they were a single large employer group, which would be subject to less burdensome regulation under the ACA. Second, a health benefit plan sponsored by a nonprofit agricultural organization domiciled in Iowa (the Iowa Farm Bureau Federation) and covered by a third-party administrator that has administered the organization’s health benefits plan for more than 10 years (Wellmark Blue Cross & Blue Shield) is exempt from the definition of insurance that is subject to regulation by the state insurance department.

Recently, AHPs have been touted by opponents of the ACA as a tool to avoid its effects for larger covered populations. Iowa’s measure follows an executive order by President Trump last fall directing the administration to, among other things, promote the use of AHPs. In response to that order, the Department of Labor proposed a rule that would expand the definition of AHP to allow employers greater access to AHP coverage. As we noted in a previous post, several states have pressed the idea through comments to that proposed rule that expanded access to AHPs would create opportunities for employers to offer more affordable coverage.

The impact of Iowa’s enactment remains to be seen. Critics of the measure have expressed concern that it will water down consumer protections by exempting coverage from ACA requirements that plans cover essential health benefits, such as maternity and mental health care. Although plans could continue to include such benefits, they would not be legally obligated to do so, and could cut costs by eliminating coverage for broad categories of health care.
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The Department of Labor’s proposed rule on association health plans (AHPs), issued in response to an October 12, 2017 Executive Order, has received almost 900 comments, including from several states and the District of Columbia (see, e.g., comments from Alaska, Iowa, Massachusetts, Montana, Pennsylvania, and Wisconsin). States emphasized the need for clarity in the rule and affirmation of states’ long-standing authority to regulate insurance including both solvency and consumer protection issues. Iowa, for example, attributed the more than 40-year success of a multiple employer welfare arrangement (MEWA) to both the entity’s interests to serve its members and the Iowa Insurance Division’s authority to ensure that MEWAs are “adequately solvent and following fair trade practices” and argued that continued robust state insurance oversight is critical to successful AHPs.

Last week, the Iowa Senate approved two bills which, if passed by the Iowa House of Representatives, would expand the availability in the state of AHPs, a type of MEWA covered by the Employee Retirement Income Security Act of 1974 (ERISA). The legislation would allow for Wellmark Blue Cross Blue Shield to administer an AHP for the Iowa Farm Bureau Federation and could threaten the membership of Medica, the only issuer of coverage through Iowa’s exchange.


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In what appears to be one of the largest class action settlement in the history of ERISA litigation in New Jersey, a federal judge approved $33 million settlement, including $11 million in attorneys’ fees, between Horizon Healthcare Services, Inc. (“Horizon”) and plaintiff chiropractors.

The underlying lawsuit stemmed from allegations that Horizon made “across-the-board” denials of

On May 26, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued Part XXVII of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding limitations on cost sharing under the ACA, as well as further information and guidance regarding the ACA’s “provider non-discrimination” provision.

With regard to the ACA’s limitations on cost sharing (i.e., the maximum annual limitation on cost sharing/out-of-pocket costs), the FAQ notes that the maximum annual limitation will rise in 2016 to $6,850 for self-only coverage and $13,700 for other than self-only coverage (up from the 2015 amounts of $6,600 for self-only coverage and $13,200 for other than self-only coverage). The FAQ then notes that HHS, in the final HHS Notice of Benefit and Payment Parameters for 2016 (“2016 Payment Notice”), had clarified that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only.

Notably, the FAQ then goes on to expand this “clarification” from the 2016 Payment Notice to all non-grandfathered group health plans, including non-grandfathered self-insured and large group health plans. As a result, for all non-grandfathered group health plans, the self-only limit applies on an individual-by-individual basis, whether the individual is enrolled in self-only, family or some other variant of coverage. Hence, for example, if an employee enrolled in family coverage in 2015 incurs $10,000 in cost sharing, that individual would be limited to the self-only cost-sharing limit for 2015 (i.e., $6,600), and “the plan is required to bear the difference” between the $10,000 in actual cost sharing and the applicable limit – in this case, $3,400. The FAQ is unclear as to how a plan will “bear the difference” in such a situation, and hence there is a lack of certainty as to whether this would involve separately tracking (and limiting) each individual’s cost sharing against the overall self-only limit and/or refunding directly to the individual the “difference.” The FAQs make clear that this interpretation applies to all non-grandfathered group health plans (including high deductible health plans) and is to be applied prospectively, for plan or policy years that begin in or after 2016.

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On May 11, the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (collectively, the “Departments”) issued Part XXVI of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding “first-dollar” coverage of preventive services under the ACA (i.e., the requirement to provide certain preventive services without the imposition of cost sharing).

The FAQ focuses primarily on the coverage of Food and Drug Administration (FDA) approved contraceptives within the context of the ACA’s first-dollar preventive services mandate. The FAQ notes that the FDA has currently identified 18 different “methods” of contraception for women (including, among others, the patch, the sponge and three kinds of oral contraceptives). The FAQ then makes clear that plans and issuers must cover, without cost sharing, at least one form of contraception in each of these 18 “methods,” and that this coverage must include the clinical services, including patient education and counseling, needed for provision of the contraceptive method. For example, the FAQ states that a plan or issuer that covers, without cost sharing, some forms of oral contraceptives, some types of IUDs and some types of diaphragms, but excludes completely other forms of contraception, is not compliant with the ACA preventive services mandate.


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Ensuring that wellness plans are legally compliant has been challenging in recent years, with the Equal Employment Opportunity Commission challenging as unlawful certain wellness plan features expressly permitted by the Departments of Labor, Health and Human Services and Treasury (the “Departments”). However, proposed EEOC regulations on the use of incentives under wellness plans promise to

On February 23, the Department of Treasury and the Internal Revenue Service (collectively, the “Agencies”) issued Notice 2015-16, the first piece of guidance on the Affordable Care Act’s “Cadillac Tax.” The Cadillac Tax is a 40 percent excise tax that is imposed on high-cost health plans under Section 4980I of the Internal Revenue Code (Code), which provision was added to the Code by the Affordable Care Act (ACA).

Very generally, the Cadillac Tax applies to taxable years beginning after December 31, 2017 (i.e., the 2018 plan year for calendar-year plans), and provides that a 40 percent excise tax will be imposed on “applicable employer-sponsored coverage” in excess of statutory thresholds (in 2018, $10,200 for self-only coverage, and $27,500 for “other than self only” coverage (e.g., family coverage)). Notably, the excise tax applies only to the “excess benefit,” i.e., the amount by which the cost of the applicable employer-sponsored coverage exceeds the statutory thresholds. Furthermore, this excise tax is to be calculated on a monthly basis, so that it applies only in the months in which there is an “excess benefit.” The cost of the applicable coverage is to be determined under rules similar to those used to calculate COBRA premiums.

Under Section 4980I, the employer is responsible for calculating the total amount of the excise tax and the excess benefit, while the actual liability for the excise tax rests with the insurer (in the case of an insured plan), the employer (in the case of a Health Savings Account (HSA)), or the “person that administers the plan” (in the case of other types of coverage). Hence, in the case of self-funded coverage that does not involve an HSA, it is unclear who (i.e., the plan sponsor, the third-party administrator, etc.) will be responsible for this liability (and note that Notice 2015-16 does not provide any guidance or clarity on this last point).


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On February 13, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued Part XXIII of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding “excepted benefits,” i.e., benefits that are exempt from the portability rules under HIPAA as well as various requirements under ERISA (including MHPAEA) and the ACA, including the ACA’s market reforms (such as the prohibition on lifetime and annual limits, etc.). Specifically, the FAQ focuses on a subcategory of excepted benefits known as “supplemental excepted benefits,” which generally are benefits provided under a separate policy, certificate or contract of insurance which are designed to “fill gaps” in primary coverage.

The FAQ notes that, in determining whether insurance coverage sold as a supplement to group health coverage can be considered “similar supplemental coverage” (and hence an excepted benefit), they will continue to apply four criteria previously set forth by the Departments in subregulatory guidance issued in 2007 and 2008:

  1. The policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan;
  2. The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles;
  3. The cost of the supplemental coverage may not exceed 15 percent of the cost of the primary coverage; and
  4. Supplemental coverage sold in the group insurance market must not differentiate among individuals in eligibility, benefit or premiums based upon any health factor of the individual (or any dependents of the individual)


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Crowell & Moring’s 2015 Litigation and Regulatory Forecasts provide an in-depth look at the trends in the courts and in the regulatory agencies, both inside the Beltway and beyond, that will impact business in the coming year.

The Litigation Forecast examines the latest litigation developments facing companies in areas ranging from health care and antitrust