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March 3 — Employers should take a closer look at the benefits they offer and the third-party administrators they contract with in light of comments made by a high-ranking DOL official last month indicating that self-funded plans may be subject to a new rule banning health-care discrimination based on sex, benefits attorneys and industry groups told Bloomberg BNA.
Speaking out during a conference session, Phyllis C. Borzi, assistant secretary of labor for the Department of Labor, said the Department of Health and Human Service's rule that was proposed in September is a “trap for the unwary” because employers sponsoring self-funded plans may be operating under a false assumption that it won't apply to them .
Under the proposed rule, individuals can't be denied health care or health coverage based on their sex, including their gender identity. The rule would apply to insurance exchanges, any health program that the HHS itself administers and any health program or activity that receives funding from the HHS. The proposed rule would extend the protections of Section 1557, a civil rights provision of the Affordable Care Act, to women as well as people with disabilities, and others, HHS said.
Susan M. Nash, a partner in McDermott Will and Emery LLP's Chicago office, told Bloomberg BNA March 2 that Borzi's interpretation is correct, but isn't readily visible in the rule.
“If you look carefully at the rule, she is right. The way it’s drafted, it does indicate that even if a plan was being self-insured and being administered by a third-party administrator that was receiving federal financial assistance, that particular plan would be subject to the rule. It’s buried in a footnote in the middle of the proposed rules,” Nash said.
Because most employer-sponsored plans are administered by TPAs and many of those TPAs are also insurance companies that receive federal funds, it's likely that many more plans will be subject to this rule than were initially thought to be, Nash said.
Greta E. Cowart, a shareholder with Winstead PC in Dallas, agreed that self-funded plans should pay attention to Borzi's comments, telling Bloomberg BNA on March 2, “I would take it as a practical tip from Phyllis, but I would bet it’s an informed tip.”
“The government has indicated that they believe the proposed rules reach further than maybe what many practitioners had thought,” Cowart said.
While it's understandable that employers looked at the proposed rule, Nondiscrimination in Health Programs and Activities (RIN 0945–AA02), and thought it didn't apply to them, they need to look closer, Gretchen K. Young, senior vice president of health policy at the ERISA Industry Committee, told Bloomberg BNA on March 3.
“If you read the rule closely, you discover that they didn’t say that employer group health plans are affected, in fact they imply very strongly that this rule doesn’t reach those, but what they do reach is the TPA,” she said.
The rules say that if a TPA receives federal money, including subsidies obtained by insurers operating on the federal health insurance marketplace, then the TPA has to comply with the rules, Young said. The way HHS structured the rules, TPAs have to apply the rules to anyone they administer benefits for, she said.
“For instance if my large employer has a TPA, and just about all self-funded plans do, then that TPA gets federal money if it’s on the exchanges. Then all of my people are brought under this rule,” Young said. She added that it doesn't make sense to apply the rule to plans that TPAs administer benefits for because those self-funded plans don't receive federal funds.
The rule is “deceptive” and appears to be a “misunderstanding” of how health plans governed by the Employee Retirement Income Security Act work, Young said.
While there isn't a specific timeline for the release of the final rule, Young and Cowart said with the Obama administration wrapping up, it's a good bet the final rules will be out this year.
To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at firstname.lastname@example.org
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