Tag: health insurance

States Continue to Adopt the “Continuous-Trigger” Theory of “Occurrence” Under Commercial General Liability Insurance Policies

A growing number of states, including Ohio, Pennsylvania, and Virginia, and most recently, West Virginia, now follow the “continuous-trigger” theory when examining coverage under an occurrence-based Commercial General Liability (CGL) insurance policy.
The West Virginia Supreme Court of Appeals recently confirmed in Westfield Ins. Co. v. Sistersville Tank Works, Inc., No. 22-848 (Nov. 8, 2023), that West Virginia law recognizes the “continuous trigger” theory to determine when insurance coverage is activated under a CGL policy that is ambiguous as to when coverage is triggered.
In 2016 and 2017, former employees of Sistersville Tank Works, Inc. (STW), filed three separate civil lawsuits West Virginia state court alleging personal injuries as the result of exposure to various cancer-causing chemicals while working around tanks that STW supposedly installed, manufactured, inspected, repaired or maintained between 1960 and 2006. STW purchased CGL policies from Westfield each year for the period 1985 to 2010. Typical of virtually all CGL policies, the Westfield CGL policies issued to STW were occurrence-based and provided coverage for bodily injury and property damage “which occurs during the policy period.”  Under the Westfield CGL policies, the bodily injury or property damage must be caused by an “occurrence,” defined under the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Westfield denied coverage for the three underlying lawsuits and filed a declaratory judgment complaint in the United States District Court for the Northern District of West Virginia seeking a declaration that it owed no duty to provide a defense or indemnification to STW because the former employees were diagnosed after the expiration of the last CGL policy, and, therefore, STW could not establish that an “occurrence” happened within the policy period.
The District Court granted summary judgment to STW and found that Westfield owed a duty to defend and indemnify under all the Westfield CGL policies in effect between 1985 and 2010. Specifically, the District Court concluded that Westfield’s obligation to cover a bodily injury that “occurs during the policy period” was ambiguous because the language in Westfield’s CGL policies did not clearly identify when coverage was “triggered” when a claimant alleged repeated chemical exposures and the gradual development of a disease over numerous policy periods. The District Court predicted that the West Virginia Supreme Court of Appeals would apply the continuous-trigger theory to clarify the ambiguous language in the policies at issue, which resulted in each occurrence-based CGL policy insuring the risk from the initial exposure through the date of manifestation being triggered.
Westfield appealed to the United Stated Court of Appeals for the Fourth Circuit and argued that a “manifestation trigger” of coverage should apply to determine coverage, under which only the CGL policy in effect when an injury is diagnosed, discovered, or manifested provides coverage for the claim. The Fourth Circuit, recognizing that West Virginia had not address the issue, then certified the following question to the West Virginia Supreme Court of Appeals:

At what point in time does bodily injury occur to trigger insurance coverage for claims stemming from chemical exposure or other analogous harm that contributed to development of a latent illness?

The West Virginia Supreme Court began its analysis of the certified question by observing that “in the context of latent or progressive diseases,” the definition of “occurrence” was ambiguous and subject to interpretation by the Court. The Court then examined the history of the insurance industry’s adoption of “occurrence” language in CGL policies in the 1960s including the specific intent of drafters of the “occurrence” language to include “cases involving progressive or repeated injury” in which “multiple policies could be called into play.”
The Court also observed that most courts that have examined the “continuous-trigger” theory have expressly adopted it, including Ohio (Owens-Corning Fiberglas Corp. v. Am. Centennial Ins. Co., 660 N.E.2d 770, 791 (Ohio Com. Pl. 1995); Pennsylvania (J.H. France Refractories Co. v. Allstate Ins. Co., 626 A.2d 502, 506 (Pa. 1993); and Virginia (C.E. Thurston & Sons, Inc. v. Chi. Ins. Co., No. 2:97 CV 1034 (E.D. Va., Oct. 2, 1998)). Conversely, the Court noted that no jurisdiction has adopted the “manifestation” trigger advocated by Westfield.
The Court concluded by expressly adopting the “continuous-trigger” theory of coverage to determine when coverage is activated under the insuring agreement of an occurrence-based CGL policy “if the policy is ambiguous as to when coverage is triggered.”  In doing so, the Court observed that the continuous trigger theory of coverage “has the effect of spreading the risk of loss widely to all of the occurrence-based insurance policies in effect during the entire process of injury or damage[,]” which includes the time of “the initial exposure, through the latency and development period, and up to the manifestation of the bodily injury, sickness, or disease[.]”
The Westfield decision ensures that West Virginia law concerning the activation of coverage under occurrence-based CGL policies aligns with the law in other states around the country. It also should be a reminder to businesses that purchase occurrence-based CGL policies to establish and maintain a repository of insurance policies for as long as possible, and especially for businesses that may be subject to personal injury claims that involve long latency periods between exposure and manifestation. Having copies of those policies will increase the chance of finding at least one insurer (and potentially more) that owes a defense and indemnification for such claims.
© Copyright Babst, Calland, Clements and Zomnir, P.C.
For more news on Commercial General Liability (CGL) insurance policies, visit the NLR Insurance Reinsurance & Surety section.

The End of the COVID Public Health Emergency and Its Effect on Employee Benefit Plans

The COVID-19 public health emergency ends on May 11, 2023. The emergency resulted in two big changes to welfare plans: the relaxation of certain notification and timing requirements, and the requirement for plans to cover COVID testing and vaccination at no cost to plan participants. While the public health emergency ends May 11, 2023, plans have a grace period until July 11 to take certain actions and come into compliance with the normal rules.

Plan Sponsor Requirements

Before the grace period ends, plan sponsors will generally need to follow the rules that existed before COVID. Among the most important of these rules are the requirements for plan sponsors to:

  • Timely provide all notices, including those for HIPAA and COBRA.
  • Review COVID-related coverage under their employee assistance programs (EAPs) to determine if such coverage would be considered “significant medical care,” which can result in additional reporting and compliance obligations.
  • Review telehealth options to ensure they are properly integrated and provided by an entity that can comply with the post-COVID requirements. Telehealth rules were substantially relaxed during COVID. With telehealth now expected and utilized by more participants, getting telehealth right is more crucial than before.

Plan Sponsor Decisions

With the end of the public health emergency, plan sponsors must also make several important decisions with respect to their employee benefit plans:

  • Whether testing will continue free of charge or will be subject to cost sharing.
  • Whether non-preventative care vaccines for COVID will continue to be free of charge.
  • Whether costs for certain COVID-related services will continue to be posted.

As they are mostly based on what costs the plan sponsor or plan will cover going forward, these plan sponsor decisions are largely business-related. In the absence of a choice by the plan sponsor, the insurance provider will likely make a default choice. The important legal consideration is that the plan documents and employee communications should be consistent and accurately reflect the plan sponsor’s decisions.

Participant Requirements

In addition to the changes for plan sponsors, the end of the public health emergency will result in the reinstatement of a number of rules applicable to participants. Participants will need to:

Follow the HIPAA Special Enrollment timing rules.

Elect COBRA within the 60-day window for elections.

Make all COBRA payments timely.

Timely notify the plan of disabilities and qualifying events under COBRA.

Follow the timing limitations of their plans and insurance policies regarding filing claims, appeals, and external reviews.

Next Steps

First, plan sponsors should decide what COVID-related coverage will remain fully paid by the plan, if any. Some insurance companies are already starting to communicate with participants, and maintaining a consistent message will avoid unnecessary problems.

Second, plan sponsors should review their EAP and telehealth coverages for compliance with the rules that will soon be in effect. To the extent necessary, plan sponsors should update the documentation for their plans.

Finally, plan sponsors should consider a voluntary reminder communication to participants. Many rules have been relaxed over the last two years or so, and participants may be confused regarding the rules. A reminder may save stress for participants and those administering the plan, and will also serve to document the plan sponsor’s intention to properly follow the terms of the plan.

© 2023 Varnum LLP

For more healthcare legal news, click here to visit the National Law Review.

NJDOBI Mandates Insurance Carriers to Reimburse Providers for Telemedicine and Telehealth Encounters During State of Emergency and Public Health Emergency

NJDOBI issued Bulletin 20-07 to mandate insurance carriers to reimburse providers for telemedicine and telehealth encounters.  This applies to: (1) all health insurance companies; all HMOs; all health service corporations and any other entity issuing health benefits plans in New Jersey.

The mandate requires the insurance carriers to do the following:

  1. Review their telemedicine and telehealth networks for adequacy and grant any requested in-plan exception for individuals to access out of health telehealth providers if network providers are unavailable.
  2. Encourage their network providers to utilize telemedicine or telehealth services wherever possible and clinically appropriate in order to minimize exposure of provider staff and other patients to those who may have the COVID-19 virus
  3. Update their policies to include reimbursement for telehealth services that are provided by a provider in any manner that is practicable, including, if appropriate, and clinically appropriate, by telephone.   The Bulletin suggests that this be done on the carrier’s website.  This would include instruction on the use of telephone-only communications to establish a physician-patient relationship and the expanded use of telehealth for the diagnosis, treatment, ordering of tests, and prescribing for all conditions. Carriers are required to update telehealth policies to include telephone only services within the definition of telehealth.
  4. Reimburse providers that deliver covered services to members via telemedicine or telehealth. Carriers may establish requirements for such telemedicine and/or telehealth services, and guidance issued by the Department, including documentation and recordkeeping, but such requirements may not be more restrictive than those for in-person services. Carriers are not permitted to impose any specific requirements on the technologies used to deliver telemedicine and/or telehealth services (including any limitations on audio-only or live video technologies) during the state of emergency and public health emergency declared pursuant to EO 103.
  5. Ensure that the rates of payment to in-network providers for services delivered via telemedicine or telehealth are not lower than the rates of payment established by the carrier for services delivered via traditional (i.e., in-person) methods, and carriers must notify providers of any instructions that are necessary to facilitate billing for such telehealth services.
  6. May not impose any restriction on the reimbursement for telehealth or telemedicine that requires that the provider who is delivering the services be licensed in a particular state, so long as the provider is in compliance with P.L. 2020, c.3 and c.4 and this guidance.
  7. May not impose prior authorization requirements on medically-necessary treatment that is delivered via telemedicine or telehealth.

See the entire text of Bulletin 20-07.

© 2020 Giordano, Halleran & Ciesla, P.C. All Rights Reserved

D.C. District Court Limits the HIPAA Privacy Rule Requirement for Covered Entities to Provide Access to Records

On January 23, 2020, the D.C. District Court narrowed an individual’s right to request that HIPAA covered entities furnish the individual’s own protected health information (“PHI”) to a third party at the individuals’ request, and removed the cap on the fee covered entities may charge to transmit that PHI to a third party.

Specifically the Court stated that individuals may only direct PHI in an electronic format to such third parties, and that HIPAA covered entities, and their business associates, are not subject to reasonable, and cost-based fees for PHI directed to third parties.

The HIPAA Privacy Rule grants individuals with rights to access their PHI in a designated record set, and it specifies the data formats and permissible fees that HIPAA covered entities (and their business associates) may charge for such production. See 45 C.F.R. § 164.524. When individuals request copies of their own PHI, the Privacy Rule permits a HIPAA covered entity (or its business associate) to charge a reasonable, cost-based fee, that excludes, for example, search and retrieval costs. See 45 C.F.R. § 164.524(c) (4). But, when an individual requests his or her own PHI to be sent to a third party, both the required format of that data (electronic or otherwise) and the fees that a covered entity may charge for that service have been the subject of additional OCR guidance over the years—guidance that the D.C. District Court has now, in part, vacated.

The Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act set a statutory cap on the fee that a covered entity may charge an individual for delivering records in an electronic form. 42 U.S.C. § 17935(e)(3). Then, in the 2013 Omnibus Rule, developed pursuant to Administrative Procedure Act rulemaking, the Department of Health and Human Services, Office for Civil Rights (“HHS OCR”) implemented the HITECH Act statutory fee cap in two ways. First, OCR determined that the fee cap applied regardless of the format of the PHI—electronic or otherwise. Second, OCR stated the fee cap also applied if the individual requested that a third party receive the PHI. 78 Fed. Reg. 5566, 5631 (Jan. 25, 2013). Finally, in its 2016 Guidance document on individual access rights, OCR provided additional information regarding these provisions of the HIPAA Privacy Rule. OCR’s FAQ on this topic is available here.

The D.C. District Court struck down OCR’s 2013 and 2016 implementation of the HITECH Act, in part. Specifically, OCR’s 2013 HIPAA Omnibus Final Rule compelling delivery of protected health information (PHI) to third parties regardless of the records’ format is arbitrary and capricious insofar as it goes beyond the statutory requirements set by Congress. That statute requires only that covered entities, upon an individual’s request, transmit PHI to a third party in electronic form. Additionally, OCR’s broadening of the fee limitation under 45 C.F.R. § 164.524(c)(4) in the 2016 Guidance document titled “Individuals’ Right under HIPAA to Access their Health Information 45 C.F.R. Sec. 164.524” violates the APA, because HHS did not follow the requisite notice and comment procedure.” Ciox Health, LLC v. Azar, et al., No. 18-cv0040 (D.D.C. January 23, 2020).

All other requirements for patient access remain the same, including required time frames for the provision of access to individuals, and to third parties designated by such individuals. It remains to be seen, however, how HHS will move forward after these developments from a litigation perspective and how this decision will affect other HHS priorities, such as interoperability and information blocking.

© Polsinelli PC, Polsinelli LLP in California

For more on HIPAA Regulation, see the National Law Review Health Law & Managed Care section.

Federal Court Strikes Down HIPAA Fee Limitations for Third-Party Medical Records Requests

On Jan. 29, 2020, OCR released a notice regarding a recent federal court ruling in the case of Ciox Health, LLC v. Azar, et al., where a federal judge in the District Court for the District of Columbia vacated the “third-party directive” within the individual right of access “insofar as it expands the HITECH Act’s third-party directive beyond requests for a copy of an electronic health record with respect to protected health information (“PHI”) of an individual … in an electronic format.”1 Additionally, the court held that the fee limitation set forth at 45 CFR § 164.524(c)(4) should only to an individual’s request for access to their own records, and does not apply to an individual’s request to transmit records to a third party.

The Ciox Health case centered on the restrictions the Department of Health and Human Services (“HHS”) and the Office for Civil Rights (“OCR”) put in place in the 2013 Omnibus Rule 2 and through informal guidance published in 2016 regarding fees that can be charged to patient in searching for, retrieving, and delivering their records and PHI as it pertains to third-party directives. Third-party directives are a mechanism promulgated by the HITECH Act that granted individuals the right to obtain a copy of their PHI maintained electronically, and “if the individual so chooses, to direct the covered entity to transmit such copy directly to an entity or person designed by the individual.”3 Additionally, the HIPAA Privacy Rule permits a reasonable cost-based fee to provide the individual (or the individual’s personal representative) with a copy of the individual’s PHI, or to direct a copy to a designated third party. The fee may include only the cost of certain labor, supplies, and postage (this fee is also referred to as the “Patient Rate”).4

The 2013 Omnibus Rule broadened the third-party directives to PHI maintained in any format, not just electronic records. Moreover, the 2013 Omnibus Rule amended the Patient Rate and required actual labor costs associated with the retrieval of electronic information to be excluded.5

In 2016, HHS issued a guidance document titled Individuals’ Right under HIPAA to Access their Health Information 45 C.F.R. § 164.524 (the “2016 Guidance”).6  The 2016 Guidance made two notable requirements that gave rise to the current litigation. Most significantly, HHS declared that the Patient Rate applies “when an individual directs a covered entity to send the PHI to a third party.”7

“This limitation,” HHS said, referring to the Patient Rate, “applies regardless of whether the individual has requested that the copy of PHI be sent to herself, or has directed that the covered entity send the copy directly to a third party designated by the individual (and it doesn’t matter who the third party is).”8

Additionally, in the 2016 Guidance, HHS provided a methodology to calculate the Patient Rate in requests for an electronic copy of PHI maintained electronically. The methodology would require the entity to determine a fee by calculating the actual allowable costs to fulfill each request or by using a schedule of costs based on the average allowable labor costs to fulfill standard requests. HHS also provided an option for entities to charge a flat rate for requests for electronic copies of PHI not to exceed $6.50 as an alternative to going through the process of calculating these costs.

In this case, HHS was sued by Ciox Health, a medical record retrieval company, over the changes to the Patient Rate set forth in both the 2013 Omnibus Rule and the 2016 Guidance. Ciox Health argued that the $6.50 flat fee is an arbitrary figure that bears no relation to the actual cost of honoring patient requests for copies of their health information, and such a low fee has negatively impacted its business. Ciox Health claims the 2013 Omnibus Rule and the 2016 Guidance, “unlawfully, unreasonably, arbitrarily and capriciously,” restrict the fees that can be charged by providers and their business associates for providing copies of the health information stored on patients.

The district court, in declaring the changes to the Patient Rate set forth in the 2013 Omnibus Rule unlawful, held that HHS cannot rely on its general rulemaking authority to supplement the limited-scope, third-party directive enacted by Congress in the HITECH Act. The court held that the 2013 Omnibus Rule’s expansion of the third-party directive is therefore arbitrary and capricious. Moreover, the district court held that the 2016 Guidance that worked a change into the Patient Rate was akin to a legislative rule that HHS had no authority to adopt without notice and comment. As a result, the court vacated the 2013 Omnibus Rule’s expansion of the HITECH Act’s third-party directive beyond requests for a copy of electronic records with respect to PHI of an individual in an electronic format. The court also declared unlawful and vacated the 2016 Guidance as it extended the Patient Rate to third-party directives without going through notice and comment.

Health care providers and medical records access companies are no longer required to limit the fees charged to their average costs, or charge a $6.50 flat fee, when a patient requests their medical records be transmitted to a third party. The fee limitations will still apply to individuals when they request their own records, however, as decided in the Ciox Health decision, on January 23, 2020.

OCR released a notice on Jan. 29, 2020 that the right of individuals to access their own records and any fee limitations that apply when exercising this right still apply. However, OCR appears to have at least accepted this ruling for now, as it pertains to third-party directives. OCR stated that it will continue to enforce the right of access provisions in 45 CFR § 164.524 that are not restricted by the court order. The court order can be viewed here.

[1] Ciox Health, LLC v. Azar, et al., No. 18-cv-0040 (D.D.C. January 23, 2020)

[2] See Modifications to the HIPAA Privacy, Security,

Enforcement, and Breach Notification Rules Under the [HITECH] Act and the Genetic

Information Nondiscrimination Act; Other Modifications to the HIPAA Rules, 78 Fed. Reg. 5,566

(Jan. 25, 2013).

[3] 42 U.S.C. § 17935(e);

[4] 45 CFR § 164.524(c)(4)

[5] 78 Fed. Reg. at 5,636.

[6] This guidance is available at this link: https://www.hhs.gov/hipaa/for-professionals/privacy/guidance/access/index.html.

[7] Id. at 16.

[8] Id.

© 2020 Dinsmore & Shohl LLP. All rights reserved.

For more on HIPAA medical-records regulation, see the National Law Review Health Law & Managed Care section.

Update on the Public Charge Rule

Despite litigation that enjoined USCIS from proceeding with the implementation of the Public Charge Rule, Department of State (DOS) seemed ready to proceed with it at Consulates abroad.

But, as of this week, DOS is no longer “fast-tracking” the Public Charge Rule. It withdrew its request for emergency review of its new public charge form, DS-5540, that it proposes to use to determine if applicants are “self-sufficient and not a strain on public resources” and, on October 24, 2019, began a 60-day comment period.

Once the comment period is over, Office of Management and Budget (OMB) review will take place. How long that review will run is hard to know. If the experience with the OMB review of another controversial Trump Administration rule – the rescission of the H-4 EAD Rule – provides any indication, the review could go on for months.

Jackson Lewis P.C. © 2019
For more developments, see the National Law Review Immigration law page.

President Trump Issues Proclamation Suspending Entry of Immigrants Who May Burden the U.S. Healthcare System

On Oct. 4, 2019, President Trump issued a Proclamation, that will be effective on Nov. 3, 2019, suspending the entry of immigrants who will financially burden the United States healthcare system. The reasoning behind the issuance of this Proclamation is to not burden American taxpayers with immigrants who utilize the U.S. healthcare system without payment and who allegedly contribute to overcrowding of emergency rooms and hospitals. The Proclamation includes a reference to data that shows lawful immigrants being three times more likely than U.S. citizens to lack health insurance, and while the United States will still continue to welcome immigrants, the country must protect its own citizens.

President Trump, through the Proclamation, declares the following:

    1. – The immediate suspension of immigrants entering the United States who does not have approved health insurance, within 30 days of entry, or unless the alien possesses the financial resources to pay for medical costs. Approved health insurance is defined in the Proclamation, which can be found here.
    2. – The Proclamation only applies to those who are seeking immigrant visas, as opposed to those seeking nonimmigrant visas.
      1. The Proclamation will not apply to those who hold a valid immigrant visa issued before the effective date of the proclamation; those who are seeking to enter the United States pursuant to a Special Immigrant Visa, who is a national of Afghanistan or Iraq, or any alien who is the child of a U.S. citizen seeking to enter the U.S. pursuant to the following categories: SB-1, IR-2, IR-3, IR-4, IH-3, IH-4, and IR-5 (with limitations).
      2. b. The Proclamation will also not apply to those aliens under 18, and any other aliens whose entry would be in the national interest.
      3. c. The Proclamation will not affect those who are lawful permanent residents (e.g., already received green cards), and will not affect eligibility regarding asylum, refugee status, etc.
    3. – The Proclamation will be implemented and enforced immediately, and a report must be submitted within 180 days of the effective date.

 

©2019 Greenberg Traurig, LLP. All rights reserved.

For more on the topic, see the National Law Review Immigration Law page.

U.S. District Court Upholds Short-Term Limited Duration Insurance Rule

The U.S. District Court for the District of Columbia upheld a rule that expanded the maximum length of time for short-term, limited duration insurance (STLDI).

STLDI is coverage that lasts a limited period of time and is exempt from many of the requirements that apply to plans in the individual health insurance market. Concerned that STLDI was drawing healthy lives away from the individual health insurance market that the Affordable Care Act (ACA) sought to support, the Obama administration shortened the length of time an individual could enroll in STLDI from 12 months to three months. Seeing STLDI as a low cost alternative to individual insurance, the Trump administration reversed course. Final regulations issued last year restored the period to 12 months and allowed for up to two renewals, for a total period of 36 months of coverage. One month later, seven organizations representing small health insurers, mental health patients and providers, and others brought suit challenging these regulations.

The court denied the challenge. It found that the ACA–and HIPAA, which first introduced STLDI–did not define the length of time STLDI could remain in effect and that the U.S. Departments of Treasury, Labor, and Health and Human Services could extend the length of time STLDI may remain available to enrollees without posing a threat to the ACA’s “structural core.”

The plaintiffs have already expressed their intent to appeal the decision. In the meantime, states continue to consider the question of whether and how to regulate the availability and terms of STLDI policies issued within their borders.

Copyright © by Ballard Spahr LLP
This article is by Edward I. Leeds  and Paige A. Haughton of Ballard Spahr LLP.
For more on health insurance, please see the National Law Review Health Law & Managed Care page.

Hobby Lobby: The Supreme Court’s View and Its Impact

Proskauer

For the second time in two years the United States Supreme Court (the “Court”) hasruled against the Obama Administration with respect to elements of the Affordable Care Act (the “ACA”).  In a 5-4 decision announced today in Burwell v. Hobby Lobby Stores, Inc.  (“Hobby Lobby”) (f/k/a Sebelius v. Hobby Lobby Stores, Inc.), the Court ruled that the federal government, acting through Health and Human Services (“HHS”), overstepped its bounds by requiring faith-based private, for-profit employers to pay for certain forms of birth control that those employers argued contradicted their religious beliefs, in violation of the Religious Freedom Restoration Act of 1993 (“RFRA”).

In Hobby Lobby, the Court found that for-profit employers are “persons” for purposes of the RFRA.  The Court, assuming that the government could show a compelling interest in its desire to provide women with access to birth control, ultimately held that the government could have met this interest in a less burdensome way.

Background

Among its many insurance mandates, the ACA requires non-grandfathered health insurance plans to cover “preventive services” at no cost to participants.

As part of its implementation of the ACA, HHS added 20 contraceptives that were required to be included as preventive services, including four that may have the effect of preventing a fertilized egg from developing.

Hobby Lobby argued that requiring the company to pay for or provide pills and procedures that they believe terminate life—so-called abortifacients—intrudes intrudes on their religious beliefs.   Hobby Lobby sued HHS, asserting that requiring them to pay for or provide abortifacients violated their First Amendment rights to freedom of religion and also violated the RFRA.

The RFRA provides that the federal government “shall not substantially burden a person’s exercise of religion” unless that burden is the least restrictive means to further a compelling governmental interest.  The Administration argued, however, that neither Hobby Lobby nor Conestoga or any other for-profit, faith-based employer was a person for purposes of the RFRA or the First Amendment.

The Decision

Writing for the majority, Justice Samuel Alito held that private—as opposed to publicly traded—employers could be considered “persons” for the RFRA.  The Court noted that the law imposed a substantial burden on religious beliefs, requiring the owners of Hobby Lobby to engage in conduct that “seriously violates their sincere religious beliefs.”

The Court noted that for the government to prevail it needed to demonstrate a compelling state interest and that its application was the least restrictive means to achieve its goals.  The Court assumed (with Justice Kennedy providing the swing vote in his concurrence) that the government does, in fact, have a compelling interest to, among other things, promote “public health” and “gender equality” by providing contraceptive coverage for women. However, the Court found that even assuming a compelling interest there were less restrictive alternatives for the government. The government could, the four-person majority noted, simply provide these benefits to all, without charge to the individuals; in his concurrence, Justice Kennedy questioned this, and noted the Court’s opinion does not decide this issue.  But Kennedy and the four-person majority agreed the government could extend the accommodation it made religiously affiliated employers:  they do not have to provide the benefit but their insurers or third-party administrators would without charge to either the employers or the employees.

Because there are less restrictive alternatives, the Court found that HHS had violated the RFRA as applied to these faith-based, for profit, private employers.

The Impact

The Hobby Lobby ruling has a direct impact on a relatively small number of employers—as a percentage of total employers across the country there are very few that can be considered faith-based employers.

However, the ruling is significant in that it signals an ongoing willingness by the Court to exercise its checks-and-balances power.  The Court indicated it may not provide the Administration much leeway in its implementation of the ACA, when implementation impacts and is limited by other federal rights.

The ruling may also be significant for certain religious-affiliated non-profit employers who are operating under the accommodation discussed above.  By identifying the accommodation as a less restrictive alternative, the Court may be signaling it believes that the exception HHS provided them suffices to meet any concerns they may have.  The Court, however, noted it was not deciding this issue, and the “government-pay” approach tendered by four justices may provide a possible opening for relief for the religious-affiliated non-profit employers.

Finally, the Hobby Lobby decision should stand as a reminder that while there may be differences of opinion about specific rules and requirements under the ACA, and some of those differences may be decided against the government, the law itself is not going away.  Employers need to continue to monitor new developments and implement strategies for complying with the ACA.

Article By:

Peter J Marathas, Jr
Stacey Cerrone
Robert W Rachal
Of:
Proskauer Rose LLP

The Affordable Care Act—Countdown to Compliance for Employers, Week 29: Wellness Programs, Smoking Cessation and e-Cigarettes

MintzLogo2010_Black

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) generally prohibits discrimination in eligibility, benefits, or premiums based on a health factor, except in the case of certain wellness programs. Final regulations issued in 2006 established rules implementing these nondiscrimination and wellness provisions. TheAffordable Care Act largely incorporates the provisions of the 2006 final regulations (with a few clarifications), and it changes the maximum reward that can be provided under a “health-contingent” wellness program from 20 percent to 30 percent. But in the case of smoking cessation programs, the maximum reward is increased to 50 percent. Comprehensive final regulations issued in June 2013 fleshed out the particulars of the new wellness program regime.

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. The final rules divide health-contingent wellness programs into the following two categories: activity-only programs, and outcome-based programs. As applied to smoking cessation, an “activity-only program” might require an individual to attend a class to obtain the reward. In contrast, an outcome-based program would require an individual to quit smoking, or least take steps to do so under complex rules governing alternative standards.

Nowhere do the final regulations address the role of electronic cigarettes (or “e-cigarettes”). Simply put, the issue is whether an e-cigarette user is a smoker or a nonsmoker? (According to Wikipedia, an electronic cigarette (e-cig or e-cigarette), “is a battery-powered vaporizer which simulates tobacco smoking by producing a vapor that resembles smoke. It generally uses a heating element known as an atomizer that vaporizes a liquid solution.”) But questions relating to e-cigarettes are starting to surface in the context of wellness program administration. Specifically:

  1. Is an individual who uses e-cigarettes a “smoker” for purposes of qualifying, or not qualifying, for a wellness program reward, and
  2. May a wellness program offer e-cigarettes as an alternative standard, i.e., one that if satisfied would qualify an individual as a non-smoker?

Is an individual who uses e-cigarettes a “smoker” for purposes of qualifying, or not qualifying, for a wellness program reward?

While the final rules don’t mention or otherwise refer to e-cigarettes, they do provide ample clues to support the proposition that smoking cessation involves tobacco use. Here is the opening paragraph of the preamble:

SUMMARY: This document contains final regulations, consistent with the Affordable Care Act, regarding nondiscriminatory wellness programs in group health coverage. Specifically, these final regulations increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of coverage. The final regulations further increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use. (Emphasis added.)

There is also a discussion in the preamble about alternative standards (79 Fed Reg. p. 33,164 (middle column)), which reads in relevant part:

The Departments continue to maintain that, with respect to tobacco cessation, ‘‘overcoming an addiction sometimes requires a cycle of failure and renewed effort,’’ as stated in the preamble to the proposed regulations. For plans with an initial outcome-based standard that an individual not use tobacco, a reasonable alternative standard in Year 1 may be to try an educational seminar. (Footnotes omitted.)

In addition, the final regulations’ Economic Impact and Paperwork Burden section is replete with references to tobacco use, as are the examples (see Treas. Reg. § 54.9802-1(f)(4)(vi), examples 6 and 7).

On the other hand, the definition of what constitutes a participatory wellness program refers simply to “smoking cessation” (Treas. Reg. § 54.9802-1(f)(1)(ii)(D)), and the definition of an outcome-based wellness program (Treas. Reg. § 54.9802-1(f)(1)(v)) simply refers to “not smoking.” In neither case is there any reference to tobacco.

The Affordable Care Act’s rules governing wellness programs are included in the Act’s insurance market reforms, which take the form of amendments to the Public Health Service Act that are also incorporated by reference in the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA). By virtue of being included in ERISA, participants have a private right of action to enforce these rules. So an employer that wanted to treat the use of e-cigarettes as smoking in order to deny access to a wellness reward would likely confront arguments similar to those set out above in the event of a challenge.

May a wellness program offer e-cigarettes as an alternative standard, i.e., one that if satisfied would qualify an individual as a non-smoker?

This is perhaps a more difficult question. May an employer designate e-cigarette use as an alternative standard? Anecdotal evidence suggests that employers are not doing so, at least not yet. But could they do so? And would it make a difference whether the e-cigarette in question used a nicotine-based solution as opposed to some other chemical? (According to Wikipedia, “solutions usually contain a mixture of propylene glycol, vegetable glycerin, nicotine, and flavorings, while others release a flavored vapor without nicotine.”) The answer in each case is, it’s too soon to tell.

The benefits and risks of electronic cigarette use are uncertain, with evidence going both ways. Better evidence would certainly give the regulators the basis for further rulemaking in the area. In the meantime, the final regulations’ multiple references to tobacco, and by implication, nicotine, seem to furnish as good a starting point as any. This approach would require a wellness plan sponsor to distinguish between nicotine-based and non-nicotine-based solutions, which may prove administratively burdensome.

The larger question, which may take some time to settle, is whether e-cigarettes advance or retard the cause of wellness. Absent reliable clinical evidence, regulators and wellness plan sponsors have little to guide their efforts or inform their decisions as to how to integrate e-cigarettes into responsible wellness plan designs. Complicating matters, the market for e-cigarettes is potentially large, which means that reliable (read: unbiased) clinical evidence may be hard to come by. For now, all plan sponsors can do is to answer the questions set out above in good faith and in accordance with their best understanding of the final regulations.

Article By:

Alden J. Bianchi
Of:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.