ERISA Lawyer Blog

In Murray v. Principal Financial Group, Inc., No. 09-16664 (9th Cir. 2010), the plaintiff, Patricia Murray, is a "career agent" for the defendants, collectively called "Principal". Principal's career agents sell Principal products, which include a wide range of financial products and services. Here, Murray sued Principal for sex discrimination in violation of Title VII. The only issue faced by the Ninth Circuit is whether Murray is an "employee" under Title VII, as opposed to being an independent contractor, since she is protected under Title VII only if she is an employee.

The Court noted that insurance agents have consistently been held to be independent contractors, and not employees, for purposes of various federal employment statutes, such as ERISA, the ADEA and Title VII. The question though, is the appropriate test for determining an individual's status under those statutes. There are three candidates that have been used-the common law agency test, the economic realities test and the common law hybrid test: The Court said that the common law agency test, as applied by the Supreme Court in Nationwise Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), is the correct test. This test focuses on the hiring party's right to control the manner and means by which the product is accomplished. As set out in Darden, the factors relevant to this inquiry are: (1) the skill required; (2) the source of the hired individual's instruments and tools; (3) the location of the work; (4) the duration of the relationship between the hiring and hired parties; (5) whether the hiring party has the right to assign additional projects to the hired party; (6) the extent of the hired party's discretion over when and how long to work; (7) the method of payment; (8) the hired party's role in hiring and paying assistants; (9) whether the work is part of the regular business of the hiring party; (10) whether the hiring party is in business; (11) the provision of employee benefits; and (12) the tax treatment of the hired party.

Applying these factors to the instant case, the Court found that Murray is an independent contractor for purposes of Title VII. She is free to operate her business as she sees fit, without day-to-day intrusions. Murray decides when and where to work, and in fact maintains her own office, where she pays rent. She schedules her own time off, and is not entitled to vacation or sick days. Also, she is paid on commission only, reports herself as self-employed to the IRS, and sells products other than those offered by Principal in limited circumstances. The few factors which support employee status-such as the provision of some benefits, a long-term relationship with Principal, having an at-will contract, and being subject to certain minimum standards imposed by Principal- do not overcome the indications that Murray is an independent contractor.

Based on the discussion by the Court, Murray would likewise be treated as an independent contractor for ERISA purposes.

According to the Employee Benefits Security Administration's COBRA web page, the Unemployment Compensation Extension Act of 2010, signed by the President on July 22, 2010, did not extend the COBRA premium reduction. Thus, individuals whose employment is terminated (involuntarily or otherwise) after May 31, 2010 are not eligible for this reduction.

By way of background, the American Recovery and Reinvestment Act ("ARRA") provides a COBRA premium reduction (65% of the amount charged) for eligible individuals who are involuntarily terminated from employment through the end of May 2010. Due to a statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

Employee Benefits-Government Issues Regulations On New Claims Review Procedures
The Affordable Care Act provides that group health care plans must provide an internal and external review procedure for benefit claims. This requirement builds on the claims procedure currently required by ERISA. It applies, in any plan year starting on or after September 23, 2010, to any group health care plan, other than a plan which is "gandfathered" (generally defined as being in existence on March 23, 2010 and not being changed since that date). A group health care plan to which the new claims procedure rules apply is referred to as a "covered health care plan". The Departments of Health and Human Services, Labor, and the Treasury have now jointly issued final, interim regulations which implement the new claims procedure rules. Here is a summary of what the new regulations say.

The new regulations give a participant in a covered health care plan the right to appeal any decision, including a benefit claim denial or rescission, made by the plan. More specifically, the new regulations give a participant:

--the right to appeal plan decisions through the plan's internal procedure; and

--for the first time, the right to appeal plan decisions to an outside, independent decision-maker.

These internal and external appeals procedures must be clearly defined, impartial, and designed to ensure that, when health care is needed and covered, the participant will have it.

Internal Appeals

A covered group health care plan must comply with all the requirements applicable to group health plans under the current ERISA claims procedure, as set forth in the Department of Labor's regulations (at 29 CFR 2560.503-1). The new regulations also contain the following six new requirements:

--the internal review procedure must apply to any adverse benefit determination, which includes any denial, reduction, termination or rescission of coverage, or any failure to pay a benefit;

--the plan must notify the participant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care no later than 24 hours after receiving the claim (the DOL regs required 72 hours);

--the plan must provide the participant, free of charge and before any adverse benefit determination is issued, with the rationale for the upcoming determination, and with any new or additional evidence considered, relied upon, or generated by the plan in connection with the claim;

--to avoid conflicts of interest, the plan must ensure that all claims are handled in a manner designed to ensure the independence and impartiality of the decision-makers (e.g., the decision to hire a claims adjudicator or a medical reviewer cannot be made based upon the likelihood that the individual will support a denial of benefits);

--notice regarding benefit determinations must: (1) be written in a culturally and linguistically appropriate manner, (2) include information sufficient to identify the claim involved (such as date of service, the health care provider, the claim amount and any diagnosis codes), (3) describe the plan's internal/external claims procedure and how to initiate an appeal and (4) provide contact information for any government office established to assist the participant pursue internal and external claims; and

--if the plan fails to strictly adhere to all of the requirements of the internal claims procedure, the participant is deemed to have exhausted that procedure and may immediately initiate an external claim.

In addition, the plan is required to provide continued health care coverage to the participant pending the outcome of the internal appeal.

External Appeals

A covered health care plan must generally comply with either a State external review procedure or the Federal external review procedure. When the plan is insured, if there is a State external review procedure which applies to and is binding on the plan's insurer, and which includes, at a minimum, the consumer protections in the NAIC Uniform Model Act in place on July 23, 2010, then that insurer must comply with that State external review procedure, and the plan itself need not provide an external review. Any other covered health care plan, including a covered plan that is self-insured, must follow the Federal external review procedure (as discussed below, not yet established).

Under the new regulations, a State external review procedure will be treated as containing the requisite consumer protections if it:

--provides for the external review of an adverse benefit determination (including a final internal adverse benefit determination), which is based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit;

--requires the insurer to provide effective written notice to a plan participant of his or her rights in connection with an external review;

--if the State procedure requires exhaustion of an internal claims procedure, makes exhaustion unnecessary if the insurer has waived the exhaustion requirement, the participant has exhausted (or is considered to have exhausted) the internal claims procedure or the participant has applied for expedited external review;

--requires the insurer to pay the cost of an independent review organization (an "IRO") for conducting the external review (other than a minimal filing fee);

--does not impose a minimum dollar amount of a claim for it to be eligible for external review;

--gives the participant at least four months, after receiving a notice of an adverse benefit determination (including a final internal adverse benefit determination), to file a request for an external review;

--provides that an IRO will be assigned on a random basis, or utilizes
another method of assignment that assures independence and impartiality of the assignment procedure-the IRO cannot be selected by the insurer, plan or participant;

--provides for maintenance of a list of approved IROs-any IRO must be accredited by a nationally recognized private accrediting organization;

--provides that any approved IRO has no conflicts of interest that will influence its independence;

--allows the participant to submit to the IRO in writing additional information that the IRO must consider when conducting the external review, and requires that the participant is notified of this right;

--provides that the IRO's decision is binding on the insurer, plan and
participant, except to the extent that other remedies are available under State or Federal law;

--provides that the IRO must provide written notice to the insurer and the participant of its decision to uphold or reverse the adverse benefit determination, by no more than 45 days after it receives the request for external review;

--provides for an expedited external review in certain urgent circumstances and, in such cases, provides that the IRO will provide notice of its decision within 72 hours after it receives the request for review.

--requires that the external review procedures be described in the plan's summary plan description, policy, certificate, membership booklet, outline of coverage, or other evidence of coverage;

--requires that the IRO maintains written records of its decisions and makes them available to the State upon request; and

--follows procedures for external review of adverse benefit determinations involving experimental or investigational treatment, substantially similar to what is set forth in section 10 of the NAIC Uniform Model Act.

As a transitional rule, any existing State external review procedure will be treated as meeting the foregoing requirements, until the first plan year beginning after July 1, 2011. At that time, the Federal external review procedure will apply unless the State procedure is revised to meet these requirements.

The Departments of Health and Human Services, Labor, and the Treasury will establish a Federal external review procedure. The new regulations describe the standards which the Federal external review procedure must follow.

The Affordable Care Act - the health care reform legislation passed by Congress and signed into law by President Obama on March 23, 2010 -requires health care plans to cover recommended preventive services, without charging a deductible, copayment or co-insurance (that is, without "cost-sharing"). Any health care plan is covered by these requirements, unless the plan is "grandfathered" (that is the plan existed on March 23, 2010 and has not been changed so as to lose grandfather status). The Departments of Health and Human Services, Labor, and the Treasury have now issued regulations, which require covered private health care plans to offer recommended preventive services, and to eliminate cost-sharing for this coverage. The rules in the Affordable Care Act pertaining to preventive care, and the new regulations, apply in plan years beginning on and after September 23, 2010. The government has also issued a Fact Sheet on the new regulations. Here is what the Fact Sheet says on the preventive services that must be covered.

Plans covered by the preventive care rules in the Affordable Care Act and the new regulations must offer coverage of a comprehensive range of preventive services, which are recommended by physicians and other experts, without imposing any cost- sharing requirements. Specifically, these preventive services (including medications) include the following:

--Evidence-based preventive services: The U.S. Preventive Services Task Force, an independent panel of scientific experts, ranks preventive services based on the strength of the scientific evidence documenting their benefits. Preventive services with a "grade" of A or B, like breast and colon cancer screenings, screening for vitamin deficiencies during pregnancy, screenings for diabetes, high cholesterol and high blood pressure, and tobacco cessation counseling will be treated as preventive services that a covered plan must offer.

--Routine vaccines: A set of standard vaccines recommended by the Advisory Committee on Immunization Practices, ranging from routine childhood immunizations to periodic tetanus shots for adults, must be offered by a covered plan.

--Prevention for children: Preventive care for children, recommended under the Bright Futures guidelines developed by the Health Resources and Services Administration with the American Academy of Pediatrics, will be treated as preventive services that a covered plan must offer. This preventive care includes regular pediatrician visits, vision and hearing screening, developmental assessments, immunizations, and screening and counseling to address obesity and help children maintain a healthy weight.

--Prevention for women: Care provided to women under both the Task Force recommendations and new guidelines being developed by doctors, nurses, and scientists, which are expected to be issued by August 1, 2011, will be treated as preventive services for these purposes.

--Updates: The list of preventive services is regularly updated to reflect new scientific and medical advances. As new services are approved, covered health care plans will be required to cover them (with no cost-sharing) for plan years beginning one year later. A full list of the preventive services which must be offered by a covered plan is available at www.HealthCare.gov/center/regulations/prevention.html.

The Department of Labor (the "DOL") has now issued a final, interim regulation on improved fee disclosure for pension plans. The DOL has also made available a Fact Sheet which describes the new regulation. Here is what the Fact Sheet says:

ERISA requires plan fiduciaries, when selecting and monitoring service providers and plan investments, to act prudently and solely in the interest of the plan's participants and beneficiaries. Responsible plan fiduciaries must also ensure that arrangements with their service providers are "reasonable" and that only "reasonable" compensation is paid for services. Fundamental to the ability of fiduciaries to discharge these obligations is obtaining information sufficient to enable them to make informed decisions about the services, the costs, and the service providers.

The new regulation represents a significant step toward ensuring that pension plan fiduciaries are provided the information they need to assess both the reasonableness of the compensation to be paid for plan services and potential conflicts of interest that may affect the performance of those services. For the first time, a specific obligation to provide this information is imposed on plan service providers.

Overview of The New Regulation

• It applies only to defined contribution and defined benefit pension plans, and focuses on the disclosure of the direct and indirect compensation certain service providers receive from the plans.
• It applies to plan service providers that expect to receive at least $1,000 in compensation in connection with their services to the plan, and that provide: (1) certain fiduciary or registered investment advisory services, (2) recordkeeping or brokerage services to a participant-directed individual account plan in connection with the investment options made available under the plan or (3) certain other services for which indirect compensation is received.
• It focuses on service providers and compensation arrangements that are most likely to raise questions for plan fiduciaries with respect to the amount of compensation being received by a service provider for plan-related services and potential conflicts of interests that might compromise the quality of those services.
• It includes a class exemption from ERISA's prohibited transaction provisions for a plan fiduciary who enters into a contract without knowing that the service provider has failed to comply with its disclosure obligations.

Disclosure of Services and Compensation Under the New Regulation

• Information required to be disclosed by plan service providers must be furnished in writing to the plan fiduciary.
• Information that must be disclosed includes a description of the services to be provided and all direct and indirect compensation to be received by the service provider, its affiliates or subcontractors from the plan. Direct compensation is compensation received directly from the plan. Indirect compensation generally is compensation received from any source other than the plan sponsor, the covered service provider, an affiliate, or subcontractor.
• Because certain services and costs are so significant or present the potential for conflicts of interest, information concerning those services and costs must be disclosed without regard to whether services are furnished as part of a bundle or package.
• Service providers must disclose whether they are providing any services as a fiduciary to the plan.
• Information also must be disclosed about plan investments and investment options. These disclosure obligations are placed on the fiduciaries to investment vehicles that hold plan assets and on recordkeepers and brokers who, through a platform or other mechanism, facilitate the investment in various options by participants in individual account plans, such as 401(k) plans.

Ongoing Disclosure Obligations Under the New Regulation

• Changes: A service provider generally must disclose a change to the initial information required to be disclosed as soon as practicable, but no later than 60 days from the date on which the covered service provider is informed of such change.
• Reporting and Disclosure Requirements: Service providers also must, upon request, disclose compensation or other information related to their service arrangements that is requested by the responsible plan fiduciary or plan administrator in order to comply with ERISA's reporting and disclosure requirements.

The new regulation is effective for contracts or arrangements between plans and service providers as of July 16, 2011.

In Williams v. Metropolitan Life Insurance Company, Nos. 09-1025, 09-1568 (4th Cir. 2010), the plaintiff, Gloria Williams, had been employed by Cingular Wireless as a customer services clerk. She became a participant in Cingular's insurance plan (the "Plan"), which offered long-term disability benefits. The Plan was insured by the defendant, Metropolitan Life Insurance Company ("MetLife"), who was the claims administrator, and served in the dual role of evaluating benefit claims and paying approved claims. The terms of the Plan granted MetLife the discretionary authority to interpret the Plan and to determine benefit eligibility.

The plaintiff had developed medical issues with her hands and wrists, causing severe pain when she engaged in work activities, such as typing on a computer. Eventually, the plaintiff left work and filed a claim with MetLife for long-term disability benefits. MetLife paid the benefits for about 18 months, and then terminated them. The plaintiff filed this suit under ERISA, challenging MetLife's decision to terminate the long-term disability benefits, and the case found its way to the Fourth Circuit Court of Appeals.

The Court said that when, as here, a plan subject to ERISA grants the claims administrator the discretionary authority to make eligibility determinations for participants, a reviewing court evaluates the claims administrator's decision to deny or stop benefits for abuse of discretion. Under that standard,the Court will not overturn the claims administrator's decision so long as it is reasonable. To be "reasonable", the decision must result from a deliberate, principled reasoning
process, and must be supported by substantial evidence.

The Court continued by noting that under the Supreme Court's decision in Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008), where, as here, the claims administrator has a structural conflict of interest because it both decides and pays claims, the conflict becomes one of the factors that a judge must take into account in determining whether the claims administrator's decision to deny or terminate benefits is reasonable. In this case, however, this conflict should not have a significant role in the Court's evaluation of MetLife's decision to terminate the plaintiff's benefits. MetLife's initial finding and payment of the long-term disability benefits, and its referral of its termination decision to two independent doctors, suggests that MetLife was not inherently biased in making its
decision to terminate the benefits.

Nevertheless, the Court found that MetLife's termination decision is not supported by substantial evidence. The plaintiff's claims file contained overwhelming evidence reflecting significant problems with her hands and wrists. Her physicians repeatedly concluded that she should not return to work, or required a modification of job duties, due in part to the pain in her hands and her inability to type on a computer. MetLife itself noted that the plaintiff was unable to turn her head and use her hands for extended periods of time due to the pain. Based on its review of the administrative record, the Court said that MetLife's decision to terminate the benefits was not reasoned and principled, and was not supported by substantial evidence. MetLife appears to have disregarded, without justification, the plaintiff's treating physicians' conclusions regarding her medical problems. The Supreme Court has said that claims administrators may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician.

Based on the foregoing, the Court concluded that MetLife's decision to terminate the plaintiff's long-term disability benefits was an abuse of discretion and thus had to be overturned.

According to a News Release, the Department of Labor ("DOL") has adopted an amendment to Prohibited Transaction Exemption ("PTE") 84-14, which allows a QPAM to manage the assets of a plan it sponsors.

The News Release says that PTE84-14 allows plans whose assets are managed by a QPAM to engage in a variety of transactions otherwise prohibited by ERISA, provided that certain safeguards have been met. Banks, insurance companies, savings and loan associations, and investment advisors who meet certain regulatory and financial standards are eligible to serve as QPAMs under the amended exemption. The amendment to PTE 84-14 allows the QPAM to manage the assets of a plan it sponsors, so long as, among other things:

--The QPAM adopts policies and procedures designed to assure compliance with the conditions of the exemption; and

--An independent auditor conducts an annual exemption audit, which is designed to ensure that the conditions of the class exemption have been met.

So many times, an employee of a company, or a representative of an insurer, answers a participant's questions about a pension plan or health care plan. When the company or the insurer is a fiduciary of that plan for ERISA purposes, what can it do to protect itself from a claim of breach of fiduciary duty, should that employee or representative give out wrong information to the participant? In Kenseth v. Dean Health Plan, Inc., No. 08-3219 (7th Cir. 2010), the Court provides some guidance on this point.

The Court said the following. The duty to disclose material information is the core of a fiduciary's responsibility. This duty requires the fiduciary to take reasonable steps to provide accurate and complete information to participants. The most important way to meet this duty is to provide to participants accurate and complete written explanations of the benefits available under the plan. To this end, the plan's summary plan description (the "SPD") must explain the terms of the plan in language that may be understood by the ordinary reader.

Further, anticipating that the plan's participants will have questions for company employees or insurer representatives about the plan, the fiduciary must exercise appropriate caution in hiring, training, and supervising the its employees and representatives whose job requires them to field questions from participants about their benefits. Thus, when the plan documents are clear and the fiduciary has exercised appropriate oversight over what its employees and representatives advise plan participants, the fiduciary will not be held liable for a breach of duty simply because the employee or representative has given incomplete or mistaken advice to a participant.

The lesson: This may be a good time for an employer or insurer to review its plan documents for accuracy, and to confirm that, where required by ERISA, the documents, such as the SPD, have been furnished to participants. An employer or insurer could also think about how it is training and supervising those employees or representatives that will interact with plan participants.

The recently enacted Affordable Care Act, and the interim final regulations just issued for this Act, have introduced a myriad new rules pertaining to health care. Among them are rules for patient protection, the elimination of lifetime limits on benefits and mandatory dependent coverage until age 26. Participants in an employer-sponsored health care plan (a "Plan") must be notified about these new rules, and the Employee Benefits Security Administration ("EBSA") has now issued model notices for this purpose. The model notices are here (patient protection), here (no limits) and here (coverage until age 26). The notice requirements are summarized below.

Patient Protection. A participant in a Plan now has the right to (1) choose a primary care provider or a pediatrician, when the Plan requires the participant to designate a primary care physician and (2) obtain obstetrical or gynecological care without prior authorization. Accordingly, the Plan must notify a participant about these rights. The notice must be provided whenever the Plan provides the participant with a summary plan description or other similar description of benefits under the Plan. Also, the notice must be furnished no later than the first day of the first plan year beginning on or after September 23,2010.

No Lifetime Limits. A Plan is required to give written notice that lifetime limits on benefits no longer apply, and that an individual to whom the limits had applied, if still covered, is once again eligible for benefits under the Plan. Further, if the individual is not enrolled in the Plan, or if an enrolled individual is eligible for, but not enrolled in, any benefit package under the Plan, then the Plan must also give this individual an opportunity to enroll that continues for at least 30 days (including written notice of the opportunity to enroll). The notice and enrollment opportunity must be provided beginning not later than the first day of the first plan year beginning on or after September 23,2010. For an individual who enrolls in the Plan under this opportunity, coverage must take effect not later than the first day of the first plan year beginning on or after September 23,2010.

Dependent Coverage Up To Age 26. The interim final regulations provide transitional relief for a child whose coverage under the Plan has ended, or who was denied coverage (or was not eligible for coverage) under the Plan because, under the Plan's terms, the availability of coverage ended before the attainment of age 26. The regulations require the Plan to give the child an opportunity to enroll that continues for at least 30 days (including written notice of the opportunity to enroll), regardless of whether the Plan has an open enrollment period and regardless of when any open enrollment period might otherwise occur. This enrollment opportunity (including the written notice) must be provided not later than the first day of the first plan year beginning on or after September 23,2010. The notice may be included with other enrollment materials that the Plan distributes, provided that the information on coverage until age 26 is prominent. Enrollment in the Plan must be effective as of the first day of the first plan year beginning on or after September 23,2010.

In Ringwald v. Prudential Insurance Company, No. 09-1933 (8th Cir. 2010), the plaintiff, Eric Ringwald, had brought suit under ERISA against the defendant, Prudential Insurance Company ("Prudential"), for long-term disability benefits. The suit challenged Prudential's decision to deny plaintiff's claim for those benefits. The District Court had granted summary judgment against the plaintiff, and the plaintiff appealed.

The issue for the Eighth Circuit Court was whether Prudential's decision to deny the benefits should be reviewed under the abuse of discretion standard, as opposed to the de novo standard. The abuse of discretion standard applies when the plan gives the reviewing insurer the discretion to determine eligibility for benefits under the plan. In this case, the plan's summary plan description, or "SPD", granted this discretion to Prudential, while the plan itself said nothing on this matter. Following its recent decision in Jobe v. Medical Life Insurance Co., the Court said that a grant of discretion to the plan administrator (here Pruential), appearing only in an SPD, does not vest the administrator with discretion, where the plan provides a mechanism for amending the plan, and this mechanism does not allow the SPD to alter the plan. In this case, the insurance policy with Prudential served as the plan, and the policy had no mechanism for amendment at all. Therefore, the SPD could not be deemed to amend the plan to provide discretion to Prudential.

Based on the above, the Court ruled that Prudential's decision to deny the Plaintiff's long-term disability benefits should be reviewed under the novo standard. The Court remanded the case back to the District Court, overturning its grant of summary judgment.

According to a News Release (dated 6/22/10), the Department of Labor ("DOL") has clarified the definition of "son and daughter" under the Family and Medical Leave Act (the "FMLA") to ensure that an employee who assumes the role of caring for a child (that is, who stands "in loco parentis" to a child) receives parental rights to family leave, regardless of the legal or biological relationship.

The News Release says that the FMLA allows a worker to take up to 12 weeks of unpaid leave during any 12-month period for the birth and care of a newborn child, to adopt or assume care for a foster child, to care for an immediate family member (spouse, child or parent) with a serious health condition or to take care of the worker's own serious health condition. An administrative interpretation (Administrator's Interpretation No. 2010-3), issued by the DOL's Wage and Hour Division, clarifies that these rights extend to the situation in which a worker stands "in loco parentis" to a child (that is, the worker has put himself in the situation of a lawful parent by assuming the obligations incident to the parental relation, without going through any legal formalities).

This interpretation thus extends the right to FMLA leave to various parenting relationships that exist in today's world. It applies to many non-traditional families, including families in the lesbian-gay-bisexual-transgender community, who often in the past have been denied leave to care for their loved ones. As the interpretation makes clear, an uncle who is caring for his young niece and nephew when their single parent has been called to active military duty may exercise his right to FMLA leave. Likewise, a grandmother who assumes responsibility for her sick grandchild when her own child is debilitated will be able to seek FMLA leave. Also, an employee who intends to share in the parenting of a child with his or her same sex partner will be able to exercise the right to FMLA leave to bond with that child.

According to a new government Fact Sheet, the Departments of Health and Human Services ("HHS"), Labor, and Treasury have now issued regulations to implement a new Patient's Bill of Rights under the recently enacted Affordable Care Act. These rights will help children (and eventually all Americans) with pre-existing conditions gain coverage and keep it, protect all Americans' choice of doctors and end lifetime limits on the health care an individual may receive. These new protections apply to nearly all health insurance plans.

The Fact Sheet says that the new regulations for the Patient's Bill of Rights detail a set of protections that apply to health coverage starting on or after September 23, 2010, six months after the enactment of the Affordable Care Act. These protections are:

--No Pre-Existing Condition Exclusions for Children Under Age 19. The new regulations will prohibit health care and insurance plans from denying coverage to children based on a pre-existing condition. This ban includes both benefit limitations (e.g., an insurer or employer health plan refusing to pay for chemotherapy for a child with cancer because the child had the cancer before getting insurance) and outright coverage denials (e.g., when the insurer refuses to offer a policy to the family for the child because of the child's pre-existing medical condition). These protections will apply to all types of insurance except for individual policies that are "grandfathered," and will be extended to Americans of all ages starting in 2014.

--No Arbitrary Rescissions of Insurance Coverage. Under the new regulations, insurers and plans will be prohibited from rescinding coverage - for individuals or groups of people - except in cases involving fraud or an intentional misrepresentation of material facts. Insurers and plans seeking to rescind coverage must provide at least 30 days advance notice to give people time to appeal. There are no exceptions to this policy.

--No Lifetime Limits on Coverage. The new regulations prohibit the use of lifetime limits in all health plans and insurance policies issued or renewed on or after September 23, 2010.

--Restricted Annual Dollar Limits on Coverage. The new regulations will phase out the use of annual dollar limits over the next three years until 2014 when the Affordable Care Act bans them for most plans. Plans issued or renewed beginning September 23, 2010, will be allowed to set annual limits no lower than $750,000. This minimum limit will be raised to $1.25 million beginning September 23, 2011, and to $2 million beginning on September 23, 2012. These limits apply to all employer plans and all new individual market plans. For plans issued or renewed beginning January 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited. Employers and insurers that want to delay complying with these rules will have to win permission from the Federal government by demonstrating that their current annual limits are necessary to prevent a significant loss of coverage or increase in premiums. Limited benefit insurance plans - which are often used by employers to provide benefits to part-time workers -- are examples of insurers that might seek this kind of delay. These restricted annual dollar limits apply to all insurance plans except for individual market plans that are grandfathered.

--Protecting Your Choice of Doctors. Under the new regulations, it is clear that health plan members are free to designate any available participating primary care provider as their provider. Parents may choose any available participating pediatrician to be their children's primary care provider. And, the new regulations prohibit insurers and employer plans from requiring a referral for obstetrical or gynecological (OB-GYN) care. The new rules apply to all individual market and group health insurance plans except those that are grandfathered.

--Removing Insurance Company Barriers to Emergency Department Services. Health plans and insurers will not be able to charge higher cost-sharing (copayments or coinsurance) for emergency services that are obtained out of a plan's network. The new regulations also set requirements on how health plans should reimburse out-of-network providers. These rules apply to all individual market and group health plans except those that are grandfathered.

In Notice 2010-48, the Internal Revenue Service (the "IRS") extends to July 30, 2010, the April 30, 2010 deadline for restating (and if applicable for submitting to the IRS a determination letter request for) a pre-approved defined contribution plan with a tie to a federal disaster area identified in the Notice. In the case of an employer, the restatement consists of adopting a new adoption agreement for the plan.

The disasters in question are the storms and flooding, which occurred in March through May of this year, in the states of New Jersey, Connecticut, Tennessee, Alabama, Mississippi, Massachusetts, Rhode Island and West VIrginia. A plan will have a tie to a federal disaster area if one of the following was located in the disaster area at the time of the disaster: the employer's principal place of business, or the office of the plan administrator, the primary recordkeeper, or any other advisor involved in the restatement of the plan.

According to a News Release (dated June 16, 2010), the U.S Department of Labor's Employee Benefits Security Administration is proposing to amend Prohibited Transaction Exemption ("PTE") 96-23. PTE 96-23 is a class exemption that allows in-house managers of large employee benefit plans to engage in a wide range of transactions with related parties.

The News Release says that the proposed amendment, if adopted, would remove numerous administrative burdens that have been cited by practitioners, and would expand relief under the class exemption to include certain transactions not currently permitted. It would also address practitioner uncertainty that exists regarding certain provisions contained in the class exemption. Among other things, the proposed amendment clarifies the department's views and expectations regarding the class exemption's annual audit and written report requirements. The application of these requirements will further enhance the participant protections embodied in the class exemption.

The proposed amendment to PTE 96-23 is here.

The recent health care legislation has significantly overhauled the requirements pertaining to health care plans. However, some of the more important requirements do not apply to a "grandfathered" health care plan. Among these nonapplicable requirements are:

--no discrimination in favor of highly-paid employees;

--preventive care services must be offered with no deductibles or cost sharing;

--guaranteed access to OB-GYNs and pediatricians must be provided; and

--an appeals process must be available, which includes external review of denied claims.

Due to the exemption from the above requirements, it becomes important to identify a "grandfathered" plan. The Internal Revenue Service ("IRS"), Department of Labor ("DOL") and the Department of Health and Human Services ("HHS") has provided guidance for making this identification, in the form of a Fact Sheet, FAQs and proposed and interim regulations. Under this guidance, a group health care plan is a "grandfathered" plan with respect to any individual who is enrolled in the plan on March 23, 2010. A plan does not cease to be a "grandfathered" plan merely because one or more (or even all) of the individuals enrolled on March 23, 2010 cease to be covered by the plan. If family members of an individual, who is enrolled in the grandfathered plan as of March 23, 2010, enroll in the plan after that date, the plan is also a "grandfathered" plan with respect to those family members. A group health plan, which provided coverage on March 23, 2010, is a "grandfathered" plan with respect to new employees (whether newly hired or newly enrolled) and their families who enroll after that date. The plan must provide certain information to participants, and maintain records, pertaining to its grandfathered status (the regs have model language for this purpose).

According to the Fact Sheet, a "grandfathered" plan, as in effect on March 23, 2010, cannot make any of the following changes, or it will lose its status as such:

--it cannot significantly cut or reduce benefits (e.g., stop covering diabetes, cystic fibrosis or HIV/AIDS);

--it cannot raise co-insurance charges (e.g., if the plan imposes a fixed percentage of a charge for a medical service, such as 20% of a hospital bill, this percentage cannot be increased);

--it cannot significantly raise co-payment charges or deductibles;

--it cannot significantly lower employer contributions (that is, it cannot decrease the percent of premiums the employer pays by more than 5 percentage points);

--it cannot add or tighten an annual limit on what the insurer pays;

--it cannot change insurance companies; and

--it cannot be involved in a business restructuring intended to avoid the new health care requirements.