Category: Health Care Law

CMS Publishes Proposed Rule on Reporting and Returning Medicare Overpayments

The National Law Review recently published an article by Anne W. Hance, Amy Hooper Kearbey, Daniel H. Melvin, and Joan Polacheck of McDermott Will & Emery regarding Medicare Overpayments:

The Centers for Medicare & Medicaid Services released a proposed rule implementing section 6402(a) of the U.S. Patient Protection and Affordable Care Act regarding reporting and returning overpayments under the Medicare program.

On February 16, 2012, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule implementing section 6402(a) of the U.S. Patient Protection and Affordable Care Act (PPACA) regarding reporting and returning overpayments under the Medicare program.  The proposed rule will have meaningful implications for provider compliance programs.  Providers are encouraged to review the rule carefully and consider providing comments, which are due April 16, 2012.

Background

Section 6402(a) of PPACA established a new section 1128J(d) in the Social Security Act regarding reporting and returning Medicare and Medicaid overpayments.  Specifically, section 1128J(d) requires a person who has received an overpayment to report and return the overpayment by the later of (i) 60 days after the overpayment was identified or (ii) the date any corresponding cost report is due.  Significantly, the knowing and improper failure to return an overpayment is subject to liability under the Federal False Claims Act, which exposes the provider or supplier to treble damages and penalties.

The proposed rule implements section 1128J(d) as it relates to providers and suppliers of services under Medicare Parts A and B.

The Proposed Rule

What is an “overpayment” and when has it been “identified?”

CMS proposes to define an overpayment as  “… any funds that a person receives or retains under title XVIII of the [Social Security] Act to which the person, after applicable reconciliation, is not entitled under such title.”  The preamble provides a number of examples of overpayments, and clarifies the only overpayments by a cost reporting provider that can be delayed until the cost report is due are those payments that are reconciled by the cost report (e.g., graduate medical education payments), not overpayments arising from claims-related issues, such as upcoding.

A person would be considered to have “identified” an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.  Where a provider receives information about a potential overpayment, such as from an anonymous tip through a compliance hotline, the provider would have a duty to investigate the information.  If the reasonable inquiry identifies an overpayment, the provider would then have 60 days from that time to report and return the overpayment.  While CMS recognizes a provider may not be financially able to return the full amount of the overpayment within the 60-day period (directing such providers to use the existing Extended Repayment Schedule process), CMS does not address the critically important fact that providers will usually require more than 60 days to determine the actual amount of the overpayment for purposes of making a refund to the government.

With respect to overpayments that arise from violations of the Federal Anti-Kickback Statute, CMS acknowledges that in certain instances (e.g., where the alleged kickback involves a physician and manufacturer) the provider is unaware of the kickback scheme.  Even where the provider becomes aware of a potential kickback, the provider is often not in a position to evaluate whether an actual violation of the Anti-Kickback Statute has occurred.  Thus, the preamble to the proposed rule states “providers who are not a party to a kickback arrangement are unlikely in most instances to have ‘identified’ the overpayment that has resulted from the kickback arrangement and would therefore have no duty to report it or … repay it.”  However, CMS indicates that even if a provider is not a party to a kickback arrangement, it may have a duty to report if it has sufficient knowledge of the arrangement.  Although CMS indicates it would “refer the reported overpayment to OIG [Office of Inspector General] for appropriate action and would suspend the repayment obligation until the government has resolved the kickback matter,” the reporting obligation in effect requires the provider to become a whistleblower, or possibly risk false claims accusations from a third-party whistleblower even if not from the government directly.  Moreover, neither the proposed rule nor the Medicare contractors’ voluntary refund processes provide a process for a provider to report without payment in such circumstances.

Interaction with Stark Law and OIG Self-Disclosure Protocols

For overpayments that are the subject of a disclosure made pursuant to the Medicare Self-Referral Disclosure Protocol (SRDP) or the OIG Self-Disclosure Protocol (OIG SDP), CMS would suspend the 60-day deadline for returning the overpayment.  Under the proposed rule, a self-disclosure under the SRDP would not alleviate the provider’s obligation to report the overpayment.  However, a disclosure under the OIG SDP would be treated as a report for purpose of the reporting requirement.  CMS requests comments on alternative approaches to prevent providers who make disclosures under the SRDP from having to make multiple reports of identified overpayments.

Procedural Issues

CMS proposes overpayments be reported using the existing voluntary refund process, under which overpayments are reported using a form established by the Medicare contractor.

CMS also proposes a 10-year look-back period (i.e., the obligation to report and return an overpayment applies if the overpayment is discovered within 10 years of the date the overpayment was received).  To facilitate this look-back period, CMS proposes to amend its regulations that generally limit the claims reopening period to four years to allow for a 10-year reopening period for claims resulting in a reported overpayment.  CMS’s stated rationale is to align the look-back period with the outer limits of the False Claims Act statute of limitations.  This would mean SRDP disclosures would also be subject to the 10-year look-back period.

Future Guidance Regarding MAOs, Medicare Part D Plan Sponsors and MMCOs

The proposed rule only describes the reporting and returning requirements as they relate to Medicare Part A and B providers and suppliers, and expressly states the obligations of “other stakeholders,” including Medicare Advantage Organizations (MAOs), Medicare Part D Plan Sponsors (Plan Sponsors) and Medicaid managed care organizations (MMCOs), “will be addressed at a later date.”  Nonetheless, CMS reminds such stakeholders that they are still subject to the reporting and returning requirements of Section 1128J(d), and could face potential liability under the Federal False Claims Act and the Federal Civil Monetary Penalties law, as well as exclusion from federal health care programs for a failure to comply with these obligations.

The proposed rule also does not address any potential reporting and returning requirements that providers and suppliers may have under Medicare Parts C or D or the Medicaid Program, although such obligations may be addressed in providers and suppliers contracts with MAOs, Plan Sponsors and/or MMCOs.

Conclusion

The proposed rule has important implications for provider and supplier compliance programs and creates the potential for greater exposure under the Federal False Claims Act.  Providers and suppliers should review the rule carefully and consider providing comments to CMS.

© 2012 McDermott Will & Emery

2012 Launching & Sustaining Accountable Care Organizations Conference

The National Law Review is pleased to bring you information on the Launching & Sustaining Accountable Care Organizations Conference will be a two-day, industry focused event specific to CEOs, COOs, CFOs, CMOs, Vice presidents and Directors with responsibilities in Accountable Care Organizations, Managed Care and Network Management from Hospitals, Physician Groups, Health Systems and Academic Medical Centers.

By attending this event, industry leaders will share best practices, strategies and tools on incorporating cost-sharing measures in a changing healthcare landscape to strengthen the business model and ensure long-term success.

Attending This Event Will Enable You to:
1. Understand the initial outcomes and lessons learned from launching ACOs, with a focus on how to sustain these partnerships in the future
2. Hear from the early adopters of ACOs or similar cost-reducing partnerships and understand their initial operational and implementation challenges.
3. Learn about the final regulations regarding ACOs and their impact on those who want to initiate the formation process
4. Gain a clear understanding of regulatory issues and accreditation processes
5. Conquering initial hurdles for establishing an ACO
6. Gain knowledge from newly-formed ACOs
7. Ensure longevity by establishing a robust long-term plan

The Employee Benefits Landscape in 2012: PART I

Kristy N. Britsch of Dinsmore & Shohl LLP recently had an article about Employee Benefits published in The National Law Review:

As we start a new year, plan sponsors and plan administrators should be aware of important upcoming changes affecting employee benefits in 2012. This Part I discusses changes impacting qualified plans, including recently released final 408(b)(2) regulations regarding fee disclosure requirements. Part II will discuss changes impacting health and welfare plans.


REMEMBER: The following amendments were due by December 31, 2011. If you are not sure as to whether these amendments have been adopted, please contact one of our benefits attorneys.mployee benefits in 2012. This Part I discusses changes impacting qualified plans, including recently released final 408(b)(2) regulations regarding fee disclosure requirements. Part II will discuss changes impacting health and welfare plans.

A. Required Minimum Distribution Suspension Amendment

The Worker, Retiree, and Employer Recovery Act (“WRERA”), enacted in 2008, and among its other provisions, waived required minimum distributions (“RMDs”) from defined contribution plans (i.e., 401(k) plans, ESOPs, profit sharing plans, etc.) for the 2009 calendar year. Employers/plan sponsors must have adopted this amendment by the last day of the 2011 plan year (i.e., December 31, 2011 for calendar year plans)

B. Code Section 436 Funding Based Restrictions on Defined Benefit Plans

Section 436 of the Internal Revenue Code (the “Code”) (added to the Code by the Pension Protection Act of 2006) imposes restrictions on benefit distributions and accruals for underfunded single-employer defined benefit plans. The restrictions that apply are determined by the plan’s Adjusted Funding Target Attainment Percentage (“AFTAP”). If a plan’s AFTAP is less than 80%, the plan cannot be amended to increase benefits. If a plan’s AFTAP is less than 80%, but at least 60%, the portion of benefit that may be paid in a single lump sum or other prohibited payment is limited. If the AFTAP is less than 60%, the plan may not pay any lump sum distribution or other accelerated payments. Employers/plan sponsors must have adopted this amendment by the last day of the 2011 plan year (i.e., December 31, 2011 for calendar year plans).

QUALIFIED PLAN COMPLIANCE ITEMS IN 2012

Plan Restatements for Cycle B Plans (IRS Determination Letter Program)

For employers with an employer identification number (“EIN”) ending in a two (2) or a seven (7) and who sponsor individually designed plans, the period to restate a qualified plan and submit the plan with the IRS for a favorable determination letter began on February 1, 2012 and ends on January 31, 2013.

Cost of Living Adjustments

Plan sponsors should review the cost of living adjustments (“COLA”) to determine what, if any, changes must be considered.

2010

2011

2012
Annual compensation for plan purposes 
(for plan years beginning in calendar year) 401(a)(17)		 $245,000 $245,000 $250,000
Defined benefit plan, basic limit 
(for limitation years ending in calendar year) 415(b)		 $195,000 $195,000 $200,000
Defined contribution plan, basic limit
(for limitation years ending in calendar year) 415(c)		 $49,000 $49,000 $50,000
401(k) / 403(b) plan, elective deferrals
(for taxable years beginning in calendar year) 402(g)		 $16,500 $16,500 $17,000
457 plan, elective deferrals
(for taxable years beginning in calendar year)		 $16,500 $16,500 $17,000
401(k) / 403(b) /457, catch-up deferrals 
(for taxable years beginning in calendar year) (Age 50+) 414(v)		 $5,500 $5,500 $5,500
SIMPLE plan, elective deferrals
(for calendar years) 408(p)		 $11,500 $11,500 $11,500
SIMPLE plan, catch-up deferrals
(for taxable years beginning in calendar year) (Age 50+) 408(p)		 $2,500 $2,500 $2,500
IRA contribution limit
408(a)		 $5,000 $5,000 $5,000
IRA catch-up contribution 
(Age 50+)		 $1,000 $1,000 $1,000
Highly Compensated Employee 414(q) $110,000 $110,000 $115,000
SEP Coverage 408(p)
(Compensation limit)		 $550 $550 $550
FICA Covered Compensation $106,800 $106,800 $110,100
Key Employee $160,000 $160,000 $165,000
ESOP 5- Year
Distribution period
409(o)(1)(c)(ii)		 $985,000 $985,000 $1,015,000

Fee Disclosures Requirements: Plan Level Disclosures and Participant Level Disclosures

Plan administrators will be subjected to two new disclosure rules this year. One rule affects disclosures made at the plan level and the second rule affects disclosures made at the participant level. Under the final ERISA Section 408(b)(2) regulations, issued by the Department of Labor on February 2, 2012, the plan level disclosures take effect on July 1, 2012 (extended from its April 1, 2012 effective date). The participant level disclosures take effect August 30, 2012 (extended from its May 31, 2012 effective date).

A. Plan Level Disclosures

Effective July 1, 2012, “covered service providers” must disclose to an ERISA plan fiduciary any compensation that they or their affiliates receive for services related to an ERISA covered plan. This rule applies to both defined benefit plans and defined contribution plans. If a covered service provider fails to provide the required disclosures, the plan’s service contract or arrangement with that covered service provider will not be considered “reasonable” under ERISA and thus, will be a prohibited transaction subject to penalties and which could expose plan fiduciaries to liability.

To provide background, ERISA Section 408(b)(2) requires plan fiduciaries to ensure that contracts or arrangements with their service providers, and the compensation paid under such arrangement, is “reasonable” in order for the arrangement to be exempt from ERISA’s prohibited transaction rules. To ensure that compensation paid by a plan is “reasonable,” the new fee disclosure regulations impose a new disclosure obligation on service providers.

ERISA Section 406(a)(1)(C) prohibits the “furnishing of goods, services or facilities between a plan and a party in interest.” Because a “party in interest” includes any party that provides services to a plan, service arrangements generally are prohibited unless they qualify for an exemption. ERISA Section 408(b)(2) provides such an exemption by permitting a party in interest to provide “services” to a plan if:

  1. the contract or arrangement is reasonable; and
  2. the services are necessary for the establishment or operation of the plan; and
  3. no more than reasonable compensation is paid for the services.

A covered service provider includes any service provider that enters into a contract or arrangement with an ERISA covered plan and expects to receive at least $1,000 in direct or indirect compensation. The types of covered service providers subject to these new rules include the following:

  1. Fiduciaries and investment advisors.
  2. Recordkeeping or brokerage services that allow participants to self-direct the investment of his or her accounts.
  3. Certain other service providers who receive indirect compensation. Indirect compensation means compensation received from a source other than the plan, the plan sponsor, the covered service provider, or an affiliate or subcontractor. This category includes accounting, auditing, actuarial, appraisal, custodial, banking, insurance, investment advisory, legal, valuation, or third-party administration services.

Covered service providers must provide plans with a description of the services provided to the plan, a description of direct and indirect compensation that the covered service provider expects to receive (includes commissions, finders fees and Rule 12b-1 fees) from the plan, a statement of the covered service provider’s status (such as registered investment advisor or fiduciary), and a description of the fees that will be charged against the investments under the plan.

One significant change made by the final 408(b)(2) regulations is that the definition of covered plan now excludes frozen 403(b) annuity contracts and custodial accounts that were issued to employees prior to January 1, 2009 (i.e., 403(b) plans where no additional employer contributions have been made and the contract is fully vested and enforceable by the employee). For more information on the final 408(b)(2) regulations, please contact one of our benefits attorneys.

B. Participant Level Disclosures

As stated above, the extended effective date of the plan level disclosures affects compliance with the participant level disclosures. Calendar year plans will now be required to make their initial annual disclosure to participants no later than August 30, 2012 and provide their initial quarterly statements no later than November 14, 2012.

Under the participant level disclosure requirements, plan administrators of retirement plans with participant directed accounts (such as 401(k) plans) will be required to disclose to participants (including employees who are eligible to participate) the fees and expenses associated with the funds in that retirement plan. This increased disclosure obligation includes “plan related disclosures” and “investment related disclosures.”

Investment Related Disclosures

Plan administrators must provide participants and beneficiaries with performance and investment fee information for each investment option available under the plan, on or before the date that a participant could first direct his or her investments, and annually thereafter. The investment related information that must be disclosed includes the following:

  1. Identifying information for each investment option under the plan, including the name of each investment option and the type or category of the investment option (i.e., large or small cap, money market fund, etc.).
  2. Performance data and benchmark information for each investment option available under the plan.
  3. Fee and expense information for each investment option.
  4. Website address and a glossary of investment related terms so that participants can access additional information about each investment option available under the plan.
  5. 1-year, 5-year and 10-year investment performance returns and applicable benchmark returns for each investment option that does not have a fixed rate of return. For investment options with a fixed return, the annual rate of return and the term of the investment must be disclosed. The disclosure must also include a statement that an investment’s past performance is not necessarily indicative of future performance and that the rate may be adjusted.

Investment related information must be provided to participants and beneficiaries in a chart (or similar scheme) that allows participants or beneficiaries to compare information about each of the investment options offered under the plan. The chart must include the date, the name, address and telephone number of the plan sponsor (or its designee), and an explanation that additional investment related information about the plan’s investment options can be accessed via the web, and a description of how participants and beneficiaries can obtain (free of charge) paper copies of the information contained on the website.

In addition to the information that must be automatically provided to participants, plans must also provide the following information to participants upon request:

  1. Prospectuses for any SEC registered investment options.
  2. Financial statements and reports, such as shareholder reports.
  3. Share value of each investment option and valuation date.
  4. A list of assets that constitute the investment alternatives under the plan.

Plan Related Disclosures

Plan administrators must provide to each participant and beneficiary, on or before the date in which a participant can first direct his or her investments and annually thereafter, certain plan information, which may be categorized into three areas: (1) general plan information, (2) administrative expense information, and (3) individual expense information. If there is a change to this information, the updated information must be provided at least 30 days, but no more than 90 days, in advance of the effective date of the change.

  1. General Plan Information: General plan information must be provided to participants and beneficiaries explaining the structure and mechanics of the plan, such as an explanation of the circumstances under which a participant or beneficiary may give investment instructions; an explanation of any limitations on such instructions, including transfer restrictions to or from a designated investment option; a list of investment options available under the plan; the identification of any investment managers, and a description of any “brokerage windows” or brokerage accounts that enable participants and beneficiaries to select investment options beyond those offered by the plan.
  2. Administrative Expense Information: Plan administrators must provide participants and beneficiaries with an explanation of fees and expenses for general plan administrative services (e.g., legal, accounting or recordkeeping costs that may be charged against participants’ accounts on a plan-wide basis) and an explanation of the basis on which such charges will be allocated (e.g., pro rata) to each individual account under the plan. Administrative expenses must be reported to participants in a quarterly statement.
  3. Individual Expense Information: Plan administrators must provide to participants and beneficiaries an explanation of any fees and expenses that may be charged to an individual’s account based on an individual basis (not plan-wide basis). This includes costs associated with fees and expenses for processing plan loans or qualified domestic relations orders (“QDROs”), fees associated with investment advice that may be rendered, or transfer fees. Similar to the administrative expenses, individual expenses must be disclosed to participants in a quarterly statement.

In light of the new fee disclosure requirements, at both the plan level and participant level, we urge plan sponsors to begin thinking about the compensation paid to covered service providers as part of its fiduciary review. We also urge plan sponsors and to begin thinking about participant communication strategies with respect to the new participant disclosures. If you have any questions about your “fiduciary review” or about this alert, please contact one our benefits attorneys.

© 2012 Dinsmore & Shohl LLP.

2012 Launching & Sustaining Accountable Care Organizations Conference

The National Law Review is pleased to bring you information on the Launching & Sustaining Accountable Care Organizations Conference will be a two-day, industry focused event specific to CEOs, COOs, CFOs, CMOs, Vice presidents and Directors with responsibilities in Accountable Care Organizations, Managed Care and Network Management from Hospitals, Physician Groups, Health Systems and Academic Medical Centers.

By attending this event, industry leaders will share best practices, strategies and tools on incorporating cost-sharing measures in a changing healthcare landscape to strengthen the business model and ensure long-term success.

Attending This Event Will Enable You to:
1. Understand the initial outcomes and lessons learned from launching ACOs, with a focus on how to sustain these partnerships in the future
2. Hear from the early adopters of ACOs or similar cost-reducing partnerships and understand their initial operational and implementation challenges.
3. Learn about the final regulations regarding ACOs and their impact on those who want to initiate the formation process
4. Gain a clear understanding of regulatory issues and accreditation processes
5. Conquering initial hurdles for establishing an ACO
6. Gain knowledge from newly-formed ACOs
7. Ensure longevity by establishing a robust long-term plan

Illinois Reverses Position on Income Tax Treatment of Benefits for Civil Union Partners

An article by Elizabeth A. Savard, Todd A. Solomon and Brian J. Tiemann of McDermott Will & Emery regarding Illinois Income Tax Policy for Civil Unions was recently published in The National Law Review:

The Illinois Department of Revenue recently issued guidance reversing its position on the state income tax treatment of benefits for non-dependent civil union partners.

Federal law excludes amounts that an employer pays toward medical, dental or vision benefits for an employee and the employee’s spouse or dependents from the employee’s taxable income.  However, because civil union partners are not recognized under federal law, employers that provide these same benefits to employees’ civil union partners must impute the fair market value of the coverage as income to the employee that is subject to federal income tax, unless the civil union partner otherwise qualifies as the employee’s “dependent” pursuant to Section 152 of the Internal Revenue Code.

The Illinois Department of Revenue previously indicated that Illinois would follow the federal approach in taxing the fair market value of employer-provided coverage for non-dependent civil union partners because state law did not provide an exemption from such taxation.  However, recent guidance issued by the Department of Revenue reverses that position and indicates that employer-provided benefits for a non-dependent civil union partner are now exempt from Illinois state income taxation.  Illinois civil union partners are directed to calculate their state income taxes by completing a mock federal income tax return as if they were married for purposes of federal law.

In addition, for federal tax purposes, employees may not make pre-tax contributions to a Section 125 cafeteria plan on behalf of a non-dependent civil union partner (i.e.,contributions for the partner generally must be after-tax) and may not receive reimbursement for expenses of the non-dependent civil union partner from flexible spending accounts (FSAs), health reimbursement accounts (HRAs) or health savings accounts (HSAs).  However, for Illinois state tax purposes, the employee now can be permitted to pay for the non-dependent civil union partner’s coverage on a pre-tax basis.

Employers providing medical, dental or vision benefits to civil union partners residing in Illinois should take action to structure their payroll systems to tax employees on the fair market value of coverage for employees’ non-dependent civil union partners for federal income tax purposes, but not for state purposes.

© 2012 McDermott Will & Emery

DOL Proposes New FMLA Regulations on Military Family Leave

Recently in The National Law Review was an article regarding New FMLA Regulations written by the Labor & Employment Practice of Morgan, Lewis & Bockius LLP:

Proposed rules impact exigency leave and military caregiver leave and include clarifications on increments of intermittent leave.

On January 31, the U.S. Department of Labor (DOL) made public proposed Family and Medical Leave Act (FMLA) regulations that attempt to align existing regulations with two statutory amendments passed in 2009. The DOL’s Notice of Proposed Rulemaking (NPRM) addresses the coverage of military caregiver and exigency leaves and revamps eligibility requirements for certain airline industry employees. It also proposes changes to other FMLA regulations, although it does not contain the kind of groundbreaking regulatory changes issued in 2008. Nevertheless, the proposed changes do contain important clarifications to existing law that, if finalized, will impact employers.

Background on FMLA Amendments

As most employers are now well aware, the FMLA was amended in January 2008 to provide two types of military family leave for FMLA-eligible employees:

  • “Exigency leave”: A 12-week entitlement for eligible family members of National Guard and Reserves servicemembers to deal with exigencies related to a call to active duty.
  • “Military caregiver leave”: A 26-week entitlement for eligible family members to care for seriously ill or injured servicemembers of the regular Armed Forces, National Guard, and Reserves.

Less than a year later, Congress once again amended the FMLA. Through the National Defense Authorization Act for Fiscal Year 2010 (FY 2010 NDAA), P.L. No. 111-84, Congress expanded both types of military family leave by doing the following:

  • Expanding the FMLA’s military caregiver leave entitlement to include veterans with serious injuries or illnesses who are receiving medical treatment, recuperation, or therapy if the veterans were members of the Armed Forces at any time during the period of five years preceding the date of the medical treatment, recuperation, or therapy. Veterans had not been covered under existing law.
  • Expanding the exigency leave entitlement to include family members of the regular Armed Forces deployed to a foreign country who were not entitled to exigency leave under existing law.[1]
  • Extending the availability of military caregiver leave for current members of the Armed Forces to include a preexisting serious injury or illness that was aggravated by active duty service.

FY 2010 NDAA did not include an effective date, so these changes were presumed to be effective on October 28, 2009. The DOL, however, has now taken the position that employers are not required to provide employees with military caregiver leave to care for a veteran until the DOL defines, through regulation, a qualifying serious injury or illness of a veteran. Thus, according to the DOL, until the regulations are finalized, any time provided voluntarily by employers under this provision cannot count to reduce an employee’s FMLA entitlement. Because the statute did not have a delayed effective date for this provision, however, it is not clear whether a court would agree with this approach.

Later in 2009, Congress also passed the Airline Flight Crew Technical Corrections Act (AFCTCA), Public Law 111-119, to provide an alternate eligibility requirement for airline flight crew employees.

Now, more than two years after the passage of the 2009 amendments, the DOL has issued its NPRM to promulgate rules related to the FY 2010 NDAA and AFCTCA. The public comment period on these proposed rules will close 60 days after the NPRM is officially published in theFederal Register.

A summary of the key proposals follow.

Proposals Relating to Qualifying Exigency Leave

Definition of Active Duty

§ 825.126(a)

The DOL proposes important amendments that help clarify what kind of service qualifies for exigency leave under the FMLA. Specifically, the proposal would replace the existing definition of “active duty” with two new definitions: “covered active duty” as it applies to the Regular Armed Forces and “covered active duty” as it applies to the Reserves. The DOL believes that this change will “more accurately reflect the fact that there are limitations on the types of active duty that can give rise to qualifying exigency leave.”

The proposed definition of “covered active duty” as it relates to the Regular Armed Forces comes as no surprise, given the mandate of the FY 2010 NDAA. Simply put, a member of the Regular Armed Forces meets the definition of “covered active duty” when deployed with the Armed Forces in a foreign country.

The proposed definition of “covered active duty” as it relates to Reserve members, however, is a bit more nuanced. Proposed Section 825.126(a)(2) defines “covered active duty or call to covered active duty” status for a member of the Reserve components as duty under a call or order to active duty during the deployment of the member to a foreign country under a federal call or order to active duty in support of a contingency operation. While the FY 2010 NDAA struck the term “contingency operations” from the FMLA, the DOL takes the position that it will continue to require members of the Reserve components to be called to duty in support of a contingency operation in order for their family members to be entitled to qualifying exigency.

That means that, if the proposal is adopted, employers would need to offer exigency leave only to those Reserve members who are (1) called to duty in support of a contingency operation when that call is (2) in a foreign country.

Exigency Leave for Childcare and School Activities

§ 825.126(a)(3)

The current regulations allow eligible employees to take qualifying exigency leave to arrange childcare or attend certain school activities for a military member’s son or daughter. The proposed regulations would place new limits on this type of leave. Specifically, if the proposal becomes effective, the military member must be the spouse, son, daughter, or parent of the employee requesting leave in order for the employee to qualify for the leave under the DOL’s proposed amendment to the regulation. The child in question could be “the military member’s biological, adopted, or foster child, stepchild, legal ward, or child for whom the military member stands in loco parentis, who is either under age 18 or age 18 or older and incapable of self-care because of a mental or physical disability at the time that FMLA leave is to commence.”

For example, the employee may be the mother of the military member and may need qualifying exigency childcare and school activities leave for the military member’s child. Under this proposal, the child for whom childcare leave is sought need not be a child of the employee requesting leave.

Exigency Leave for Rest and Recuperation

§ 825.126(a)(6)

Current regulations allow an eligible employee to take up to five days of leave to spend time with a military member on rest and recuperation leave during a period of deployment. The DOL proposes to expand the maximum duration of rest and recuperation qualifying exigency leave from five to 15 days, noting that the leave remains limited to the actual amount of time granted to the military member.

The proposal also clarifies that employers may request a copy of the member’s rest and recuperation leave orders or other military documentation to certify the need for leave.

Proposals Relating to Military Caregiver Leave

Certification Provisions for Caregiver Leave

§ 825.310

The current regulations limit the type of healthcare providers authorized to certify a serious injury or illness for military caregiver leave to providers affiliated with the Department of Defense (DOD) (e.g., a Department of Veterans Affairs (VA) or DOD-TRICARE provider). The proposed regulations would eliminate this distinction and would allow any healthcare provider that is authorized under Section 825.125 to certify a serious health condition under the FMLA to also certify a serious injury or illness under the military caregiver provisions.

Because of this change, the DOL also proposes to remove the prohibition on second and third opinions on certifications of military caregiver leaves—at least as it relates to non-DOD/VA providers. That is, the DOL proposes in Section 825.310(d) to provide that second and third opinions are not permitted when the certification has been completed by one of the types of DOD/VA authorized healthcare providers identified in Section 825.310(a)(1)-(4), but second and third opinions are permittedwhen the certification has been completed by a healthcare provider that is not one of the types identified in Section 825.310(a)(1)-(4).

Definition of Covered Veteran for Caregiver Leave

§ 825.127

Since the current regulations do not define “covered servicemember” with regard to veterans, the DOL plans to define “covered veteran” as an individual who was discharged or released under conditions other than dishonorable at any time during the five-year period prior to the first date the eligible employee takes FMLA leave to care for the covered veteran.

That is, a veteran will be considered a covered veteran under FMLA if he or she was a member of the Armed Forces within the five-year period immediately preceding the date the requested leave is to begin. If the leave commences within the five-year period, the employee may continue leave for the applicable “single 12-month period,” even if it extends beyond the five-year period. This interpretation may exclude veterans of previous conflicts (Gulf War veterans) and may exclude certain veterans of the War in Afghanistan and Operation Iraqi Freedom, depending on the veteran’s discharge date and the date the eligible employee’s leave is to begin.

Definition of Serious Injury or Illness

§ 825.127

In the NPRM, for both current members of the Armed Forces and covered veterans, a serious injury or illness that existed before the beginning of the military member’s active duty and was aggravated by serving in the line of duty on active duty includes both conditions that were noted at the time of entrance into active service and conditions that the military was unaware of at the time of entrance into active service but that are later determined to have existed at that time. A preexisting injury or illness will generally be considered to have been aggravated by service in the line of duty on active duty where there is an increase in the severity of such injury or illness during service, unless there is a specific finding that the increase in severity is due to the natural progression of the injury or illness.

In addition, and because the FY 2010 NDAA requires the DOL to define a qualifying serious injury or illness for a veteran, the DOL proposes a new Section 825.127(c)(2) that would define serious injury or illness for a covered veteran with three alternative definitions set out in paragraphs (c)(2)(i), (c)(2)(ii), and (c)(2)(iii).

  • Definition 1: Proposed Section 825.127(c)(2)(i) defines a serious injury or illness of a covered veteran as a serious injury or illness of a current servicemember, as defined in Section 825.127(c)(1), that continues after the servicemember becomes a veteran. Thus, if a veteran suffered a serious injury or illness when he or she was an active member of the Armed Forces and that same injury or illness continues after the member leaves the Armed Forces and becomes a veteran, the injury or illness will continue to qualify as a serious injury or illness warranting military caregiver leave.
  • Definition 2: Proposed Section 825.127(c)(2)(ii) defines a serious injury or illness for a covered veteran as a physical or mental condition for which the covered veteran has received a VA Service Related Disability Rating (VASRD) of 50% or higher and such VASRD rating is based, in whole or part, on the condition precipitating the need for caregiver leave. The DOL’s review indicates that a VASRD disability rating of 50% or higher encompasses disabilities or conditions such as amputations, severe burns, post traumatic stress syndrome, and severe traumatic brain injuries. However, the DOL notes that there are injuries that do not qualify as creating a total disability under the VASRD system that will qualify as a serious injury or illness for military caregiver leave. For example, burns resulting in distortion or disfigurement (see 38 C.F.R. § 4.118) or psychological disorders resulting from stressful events (see 38 C.F.R. § 4.129) occurring in the line of duty on active duty may not result in a VASRD rating of 60% or higher, but nonetheless may be severe enough to substantially impair a veteran’s ability to work and therefore should be considered qualifying injuries or illnesses. The DOL is particularly concerned that military caregiver leave be available to family members of veterans suffering from, or receiving treatment for, such injuries or illnesses, which may include continuing or follow-up treatment for burns, including skin grafts or other surgeries, and amputations, including prosthetic fittings, occupational therapy, and similar care.
  • Definition 3: Proposed Section 825.127(c)(2)(iii) is the third alternative definition of a serious injury or illness for a covered veteran; it covers injuries and illnesses that are not technically within the definitions proposed in paragraph (c)(2)(i) or (ii), but are of similar severity. The DOL proposes to define a serious injury or illness for a covered veteran in the third alternative as a physical or mental condition that either substantially impairs the veteran’s ability to secure or follow a substantially gainful occupation by reason of a service-connected disability, or would do so absent treatment. This proposed definition is intended to replicate the VASRD 50% disability rating standard under paragraph (c)(2)(ii) for situations in which the veteran does not have a service-related disability rating from the VA. The DOL expects that, when making determinations of serious injury or illness under this proposed definition, private healthcare providers will do so in the same way they make similar determinations for Social Security Disability claims and Workers’ Compensation claims. The DOL stresses that this definition is meant to comprehensively encompass traumatic brain injuries, post traumatic stress disorder, and other such conditions that may not manifest until sometime after the member has become a veteran.

Additionally, the DOL seeks comments on whether it should make a rule that veterans who qualify for enrollment in VA’s Program of Comprehensive Assistance for Family Caregivers automatically meet the requirement of having a serious injury or illness.

Proposals Affecting Airline Flight Crews

Effective December 21, 2009, the AFCTCA provides that an airline flight crew employee will meet the hours of service eligibility requirement if he or she has worked or been paid for not less than 60% of the applicable total monthly guarantee (or its equivalent) and has worked or been paid for not less than 504 hours (not including personal commute time or time spent on vacation, medical, or sick leave) during the previous 12 months. Airline flight crew employees continue to be subject to the FMLA’s other eligibility requirements.

The DOL proposal includes provisions to align existing regulations with the passage of the AFCTCA. The proposal also does the following:

  • Defines monthly guarantees for airline employees and “line holders” (e.g., flight crew employees who are not on reserve status). For airline employees who are on reserve status, the applicable monthly guarantee means the number of hours for which an employer has agreed to pay the employee for any given month. For line holders, the applicable monthly guarantee is the minimum number of hours for which an employer has agreed to schedule such employee for any given month.
  • Defines how to calculate “hours worked” and “hours paid.”  Airline flight crew employees may become eligible under the FMLA (as amended by the AFCTCA) if they have either the required number of “hours worked” or “hours paid.” The DOL proposes to base the number of hours that an airline flight crew employee has worked on the employee’s duty hours during the previous 12-month period. Hours paid, according to the DOL, are routinely tracked by most airlines’ payroll systems.
  • Adds recordkeeping requirements for employers of airline flight crews. The requirements include all the records required of other employers under the FMLA, plus any records or documents that specify the applicable monthly guarantee for each type of employee to whom the guarantee applies, including any relevant collective bargaining agreements or employer policy documents that establish the applicable monthly guarantee, as well as records of hours scheduled, in order to be able to apply the leave calculation principles contained in proposed Section 825.205(d).

Other Proposed Changes Universal to the FMLA

Increments of Intermittent FMLA Leave

§ 825.205

The current Section 825.205(a) defines the minimum increment of FMLA leave to be used when taken intermittently or on a reduced schedule as an increment no greater than the shortest period of time that the employer uses to account for other forms of leave, provided that it is not greater than one hour. The DOL intends to emphasize that an employee’s entitlement should not be reduced beyond the actual leave taken and therefore proposes to add language to paragraph (a)(1) stating that an employer may not require an employee to take more leave than is necessary to address the circumstances that precipitated the need for leave. However, the DOL underscores that this principle remains subject to the rest of the rule, including the increment of leave rule. Thus, this change in the rules does not necessitate action for any employer already complying with the shortest increment rule.

The DOL notes that if an employee elects to substitute paid leave for the unpaid leave time offered under the FMLA, and the employer has a policy of offering paid leave in larger increments of time than unpaid leave, the employer can then require the employee to use more FMLA leave than necessary for the purpose of the leave in order to get the benefit of wage replacement. However, the employee can always elect to take the shorter increment of leave without pay to avoid drawing down the FMLA entitlement.

The DOL further proposes to clarify that the additions to Section 825.205(a) underscore the rule that if an employer chooses to waive its increment of leave policy in order to return an employee to work at the beginning of a shift, the employer is likewise choosing to waive further deductions from the FMLA entitlement period. In other words, if the employee is working, the time cannot count against FMLA time, no matter what the smallest increment of leave may be.

The DOL also proposes to remove the language in Section 825.205(a) allowing for varying increments at different times of the day or shift in favor of the more general principle of using the employer’s shortest increment of any type of leave at any time

Currently, Section 825.205(a)(2) includes a provision on physical impossibility, which provides that where it is physically impossible for an employee to commence or end work midway through a shift, the entire period that the employee is forced to be absent is counted against the employee’s FMLA leave entitlement. The DOL proposes to do either of the following:

  • Delete this provision.
  • Add language emphasizing that it is an employer’s responsibility to restore an employee to his or her same or equivalent position at the end of any FMLA leave as soon as possible.

If the DOL retains the provision as modified, it offers the following example: If after three hours of FMLA leave use it was physically possible to restore a flight crew employee to another flight, the employer would be required to do so. If, however, no other flight is available to which the employee could be assigned, or no other equivalent work is available, restoration could be delayed and the employee’s FMLA entitlement reduced for the entire period the employee is forced to be absent.

The DOL also proposes to clarify that the rule stated in Section 825.205(c), which addresses when overtime hours that are not worked may be counted as FMLA leave, applies to all FMLA qualifying reasons, not just serious health conditions.

The DOL further proposes to add Section 825.205(d), which will provide a methodology for calculating leave for airline flight crew employees.

Recordkeeping Requirements

§ 825.300

The DOL proposes adding a sentence to Section 825.300 reminding employers of their obligation to comply with the confidentiality requirements of the Genetic Information Nondiscrimination Act of 2008 (GINA). To the extent that records and documents created for FMLA purposes contain “family medical history” or “genetic information” as defined in the GINA, employers must maintain such records in accordance with the confidentiality requirements of Title II of GINA. The DOL notes that GINA permits genetic information, including family medical history, obtained by the employer in FMLA records and documents to be disclosed consistent with the requirements of the FMLA

Conclusion

With most employers having taken the position that the veteran’s provisions went into effect when the FMLA was amended in 2009, little action is called for at this time. However, employers should take this opportunity to review their FMLA policy, and should be aware that the DOL may take issue if a qualifying exigency for a veteran is counted against an employee’s FMLA entitlement such that the employee is later restricted in taking another leave. Further, employers should consider whether they wish to provide comments to the DOL during the comment period. Beyond that, most employers need only “watch and wait” until the DOL finalizes this rulemaking process to make tweaks to existing policies. Nevertheless, the DOL’s NPRM serves as a good reminder to employers to ensure that their FMLA policies incorporate the 2009 statutory changes.

Copyright © 2012 by Morgan, Lewis & Bockius LLP.

Cutting Edge Issues in Asbestos Litigation Conference

The National Law Review would like to advise you of the upcoming Perrin Conference regarding Cutting-Edge Issues in Asbestos Litigation:

Thursday, March 1st – Friday, March 2nd, 2012
Beverly Wilshire, A Four Seasons Hotel
Beverly Hills, CA

2012 Launching & Sustaining Accountable Care Organizations Conference

The National Law Review is pleased to bring you information on the Launching & Sustaining Accountable Care Organizations Conference will be a two-day, industry focused event specific to CEOs, COOs, CFOs, CMOs, Vice presidents and Directors with responsibilities in Accountable Care Organizations, Managed Care and Network Management from Hospitals, Physician Groups, Health Systems and Academic Medical Centers.

By attending this event, industry leaders will share best practices, strategies and tools on incorporating cost-sharing measures in a changing healthcare landscape to strengthen the business model and ensure long-term success.

Attending This Event Will Enable You to:
1. Understand the initial outcomes and lessons learned from launching ACOs, with a focus on how to sustain these partnerships in the future
2. Hear from the early adopters of ACOs or similar cost-reducing partnerships and understand their initial operational and implementation challenges.
3. Learn about the final regulations regarding ACOs and their impact on those who want to initiate the formation process
4. Gain a clear understanding of regulatory issues and accreditation processes
5. Conquering initial hurdles for establishing an ACO
6. Gain knowledge from newly-formed ACOs
7. Ensure longevity by establishing a robust long-term plan

7th Drug & Medical Device Litigation Forum, 7-8 Mar 2012, Philadelphia

The National Law Review is pleased to inform you of the 7th Drug & Medical Device Litigation Forum: Implementing Appropriate Litigation Readiness and Costs Management Policies That Ensure An Effective Defense at Trial 
Event Date: 7-8 Mar 2012
Location: Philadelphia, PA, United States
Key conference topics
  • Mitigate and maintain costs associated with litigation
  • Gain judical insight on drug and medical litigation and its recent developments
  • Build better relationships with outside counsel in order to reduce the miscommunciation factor
  • Understand the limitations of marketing and advertising as it relates to emerging social media issues
  • Learn the latest on medical device product liability

Conference focus

 Pharmaceutical and medical device manufacturers have faced a growing array of legal challenges this year. With the increase of mass tort litigation, as it relates to product liability, pharmaceutical and medical device manufacturers must be prepared to defend the increasingly sophisticated, well-funded and multi-jurisdictional product liability campaigns against their companies.

The 7th Drug and Medical Device Litigation Conference will be a two-day, industry focused event specific to those within Drug & Medical Device Litigation, Product Liability and Regulatory Affairs in the Medical Device, Biotech and Pharmaceutical industries.

By attending this event, industry leaders will share best practices, strategies and tools on incorporating litigation readiness, utilizing cost efficient litigation strategies and accurately managing policies to ensure an effective defense at trial.

Attending This Event Will Enable You to:
1. Review the current landscape of drug and medical device litigation
2. Learn strategies in settlements and mass tort issues
3. Manage litigation expenses in order to effectively manage costs
4. Review recent case rulings, including the Mensing and Levine cases
5. Take a view from the bench: explore drug and medical device litigation
from a judicial point of view
6. Tackle product liability issues and challenges
7. Uncover the risks for drug and medical device companies when leveraging social media for marketing and advertising campaigns

With a one-track focus, the 7th Drug and Medical Device Litigation Conference is a highly intensive, content-driven event that includes case studies, presentations and panel discussions over two full days.

This is not a trade show; our Drug and Medical Device Litigation conference series is targeted at a focused group of senior level leaders to maintain an intimate atmosphere for the delegates and speakers. Since we are not a vendor driven conference, the higher level focus allows delegates to network with their industry peers.

Testimonials:

“Great selection & breadth of speakers. Uniformly high quality of presentations. Intimate nature of meeting provided excellent opportunities for networking” – Abbott

“Great venue to learn and exchange best practices. More importantly how to leverage lesions learned from others.” – Baxter

“One of the best meetings I’ve attended. Excellent organization, topics and speakers. Overall extremely well done.” – Sanofi Aventis

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Cutting Edge Issues in Asbestos Litigation Conference

The National Law Review would like to advise you of the upcoming Perrin Conference regarding Cutting-Edge Issues in Asbestos Litigation:

Thursday, March 1st – Friday, March 2nd, 2012
Beverly Wilshire, A Four Seasons Hotel
Beverly Hills, CA