Aug. 22, 2013 Compliance Observer

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Aug. 22, 2013 Compliance Observer
We continue to see guidance released by the various agencies involved in the regulation of
insurance and employee benefits. In this Alert, we will bring you up to date on the following

  •  DOL and DoD Release Guidance on Supreme Court’s DOMA Ruling
  • Transition Rules for Limits on Out-of-Pocket Maximums
  • HIPAA Notice of Privacy Practices Due to Employees by September 23, 2013
  • Exchange Notice Due to Employees by October 1, 2013

DOL and DoD Release Guidance on Supreme Court’s DOMA Ruling

Source: EBIA Weekly Archives (August 15, 2013)

The Department of Labor released a revised FMLA Fact Sheet which defines “spouse” as “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including ‘common law’ marriage and same sex marriage.” In this document the DOL has asserted that the FMLA regulations will look to the state of residence for determining who is considered a spouse.

In contrast, the Department of Defense announced that the military will begin offering benefits, including health coverage under TriCare, to same- sex spouses of uniformed servicemembers no later than September 3, 2013 retroactive to the date of the Supreme Court decision. The DoD has acknowledged that not all servicemembers are stationed in a jurisdiction that recognizes same-sex marriage.

The DOL and DoD guidance differ on the issue of which same-sex marriages will be recognized for purposes of federal benefits with the DOL recognizing (for FMLA purposes) only marriages valid in the state of residence and the DoD recognizing (for certain military benefits) all marriages valid in the place they were conducted. We continue to await further guidance from the IRS which has giving this issue priority status.

Why is this Important?

Employers will have to provide certain benefits to same-sex spouses in states that recognize same-sex marriage. Employers are awaiting guidance as to whether they need to recognize marriages valid in the employee’s state of residence or marriages valid in the state where the marriage was conducted. Recent information released from the DOL and DoD provides conflicting information. Additional guidance is expected from the IRS along with clarification on the effective date for implementation.

Transition Rules for Limits on Out-of-Pocket Maximums

Source: Zywave Legislative Brief (August 2013)

The Affordable Care Act (ACA) limits the amount that health plan members can pay for out-of-pocket expenses. The ACA’s limit on out-of-pocket costs pertains to all non-grandfathered plans (large and small, fully insured and self-insured) and is set to take effect with the 2014 plan year. The out-of-pocket limit for 2014 cannot exceed $6,350 for single coverage and $12,700 for family coverage. Expenses applied to this annual limit include deductibles, coinsurance, and both medical and prescription copayments.

However, there is a transition rule for 2014 which allows plans that use more than one service provider (for example, a health plan with an administrator for medical coverage and a separate pharmacy benefit manager), to impose different out-of-pocket maximums and the different service providers can use different methods for crediting members’ expenses against the maximum. There are two conditions that must be met in order to take advantage of the transition rule. This transition relief is only in place for the first plan year beginning on or after January 1, 2014.

Why is this Important?

Employers can expect an increase in claims costs due to the implementation of the out-of-pocket limit on health plan costs. Members are expected to reach their out-of-pocket limit more easily with lower limits and with copayments being applied to the maximum. The transition relief may mitigate some of the increased costs for 2014.

HIPAANotice of Privacy Practices Due by September 23, 2013

Source: Zywave Legislative Brief (February 2013)

The HIPAA final regulations were released in January 2013 and included various changes in the language of the Notice of Privacy Practices. Because these changes are considered material changes, the notice must be redistributed to plan participants. All self-insured plan sponsors must provide this notice. Fully insured plan sponsors must provide the notice if they have access to Protected Health Information (PHI) for plan administrative functions (remember that eligibility information can be considered PHI in certain circumstances). If a fully insured plan sponsor does not have access to PHI, it is not required to maintain or provide a Privacy Notice.


The Notice of Privacy Practices must be written in plain language and must:

  • Explain how the health plan may use and disclose an individual’s PHI;
  • Describe the individual’s rights with respect to his or her PHI;
  • Summarize the health plan’s legal duties with respect to the PHI;
  • Include a statement of an affected individual’s right to be notified following a breach of unsecured PHI;
  • For health plans (other than issuers of long-term care policies) that intend to use or disclose PHI for underwriting purposes, a statement that the covered entity is prohibited from using or disclosing PHI that is genetic information for underwriting purposes must be included; and
  • statements about uses and disclosures of PHI that require an individual’s authorization, such as disclosures for marketing purposes.

A template of a Notice of Privacy Practices can be found at:


The final rule contains special delivery provisions that allow some health plans to avoid the cost of a separate mailing. The final rule contains the following guidance for distributing updated Privacy Notices:

  • A health plan that currently posts its Privacy Notice on its website must post the material change or a revised notice by Sept. 23, 2013 and provide the revised notice, or information about the material change and how to obtain the revised notice, in its next annual mailing to plan participants (such as at the beginning of the plan year or during the plan’s open enrollment period).
  • A health plan that does not post its Privacy Notice on a website must provide the revised notice, or information about the material change and how to obtain the revised notice, to individuals covered by the plan within 60 days of the material revision to the notice.

Why is this Important?

Most employers access PHI in the administration of their health plan. A revised Notice of Privacy Practices must be provided to employees by September 23, 2013. Failure to provide a Privacy Notice may result in fines and penalties by the DOL under ERISA.

Exchange Notice Due to Employees by October 1, 2013

Source: Department of Labor Technical Release No. 2013-02

Employers must provide an Exchange Notice to all employees, regardless of status (FT/PT) or eligibility for coverage by October 1, 2013. In addition, the Notice must be provided to all new hires within 14 days of their start date. The Department of Labor has issued model notices that can be used for this purpose. The model notices are available in both pdf and Word formats and in a Spanish language version. The model notices can be accessed on the DOL’s website at:


There are two notices:

  • For employers who offer a health plan;
  • For employers who do not offer a health plan.

The notice for employers who offer a health plan includes an optional set of information (numbers 13-16 in Part B of the form). This optional information is member specific and may be difficult to provide. If you choose not to include this information, it is the recommendation of the experts at EBIA that you delete this section from your notice. Please remember that this is a “model” notice and can be amended to fit your needs as long as it retains the required information.


We recommend that you distribute the Notice information as close to October 1, 2013 as possible in the event that there are additional changes to the notice that are released by the DOL. The notice must be provided in writing and may be sent by first-class mail. Alternatively, it may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met. This includes distribution to participants who:

  1. Have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee and has access to the employer’s information system as an integral part of his/her job; or
  2. Have affirmatively consented to receiving documents through electronic media and has not withdrawn such consent.

Why is this Important?

ACA requires that all employers provide the Exchange Notice to all employees regardless of status (FT/PT) or eligibility for coverage by October 1, 2013. In addition, all new hires must receive the Notice within 14 days of their start date.

Your AssuredPartners NL Benefit Team continues to focus on compliance in an effort to assist you in the implementation of the many regulatory requirements

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