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Legal and ACA Issues Impacting Onsite Clinics

Legal and ACA Issues Impacting Onsite Clinics. National Association of Worksite Health Centers May 6, 2014. Amy A. Ciepluch Quarles & Brady LLP Amy.Ciepluch@Quarles.com 414.277.5585.

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Legal and ACA Issues Impacting Onsite Clinics

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  1. Legal and ACA Issues Impacting Onsite Clinics • National Association of Worksite Health Centers • May 6, 2014 Amy A. Ciepluch Quarles & Brady LLP Amy.Ciepluch@Quarles.com 414.277.5585

  2. National Association of Worksite Health Centers:Increasing the capabilities of onsite health,fitnessand wellness centers • NAWHC, a national trade association for sponsors of onsite clinics, fitness and wellness centers • www.worksitehealth.org - NAWHC LinkedIn Group • MBGH members receive free membership in NAWHC • Created to enable employer-sponsors of onsite clinics, fitness and wellness centers to increase their capabilities and ROI • Offers educational programs, networking, benchmarking, user groups, group purchasing, and advocacy for the worksite health center employer and vendor communities

  3. Topics for Today • Six Legal Considerations for Onsite Clinics • Questions HIPAA ERISA COBRA ACA HSA IRS

  4. Six Legal Considerations • The basic issue under each applicable law is whether the clinic is considered an employer health plan • Many employers think of clinics as just another provider • IRS and DOL see things differently • Subtle differences in definition of health plan under different rules could mean different treatment for different purposes • Bottom line: For most purposes, the more extensive the services available, the more likely the Clinic is a health plan

  5. Six Legal Considerations • Most of the legal issues have been around for a long time • Some recent “spotlights” on on-site clinics: • COBRA audit guidance (discussed below) • Explicitly included in W-2 reporting of health coverage • Included in calculation of “Cadillac tax” on high-cost health coverage • Not addressing • Wellness program issues (ADA, GINA, nondiscrimination) • Health law requirements (application of provider HIPAA rules, nurse supervision, practice of medicine, etc.)

  6. Legal Consideration #1: Treatment under ERISA • Clinic subject to ERISA if group health plan • Group health plan is employee welfare benefit plan that provides medical benefits • Exclusion for on-site facilities “for the treatment of minor injuries or illness or rendering first aid in case of accidents occurring during working hours” • Many clinics provide services clearly beyond treatment of workplace minor injury and illness • Clinic with services limited to “urgent care” for employees while working likely meets this exclusion

  7. Legal Consideration #1: Treatment under ERISA • Clinic features that may make a clinic an ERISA plan: • Services available to dependents • Services available during non-working hours • Treatment of ongoing condition • Provision of minor surgery • Provision of physical therapy • Provision of preventive care services

  8. Legal Consideration #1: Treatment under ERISA • Result of ERISA plan status for clinic: • Must comply with ERISA’s reporting and disclosure requirements: • SPDs, SMMs, SBCs • SARs • 5500s • Claims and appeals procedure requirements apply (probably not many denials)

  9. Legal Consideration #1: Treatment under ERISA • Possible approaches: • Limit services to urgent care for employees during work hours only – exempt from ERISA • Limit availability to employees enrolled in major medical and tack on to major medical through “supplement” to SPD/plan document • Tack on to major medical, limit services for employees not enrolled in major medical to urgent care only • Offer full spectrum of services to all employees and/or dependents and undertake additional reporting and disclosure burden • Risk of noncompliance includes penalty on audit, 5500 failure penalty

  10. Legal Consideration #2: Application of COBRA • COBRA regulations state that on-site clinics are groups health plan subject to COBRA unless ALL of the following are met: • The medical care consists primarily of first aid that is provided during the employee's working hours for treatment of a health condition, illness or injury that occurs during those working hours; • The medical care is available only to the employer's current employees; and • Employees are not charged for use of the clinic.

  11. Legal Consideration #2: Application of COBRA • Typical clinic does not meet the exception to COBRA • Services available outside of working hours • Wide array of services available • Some charge for use of clinic • March, 2012 IRS COBRA audit guidance for its examiners recites rule described above and alerts auditors to look for on-site clinic COBRA compliance • Compliance is difficult where: • Physical layout of clinic only allows access from inside company (no former employees on-site) • Clinic is available to all employees, not just those enrolled in major medical • Company has “no former employees” on site rule

  12. Legal Consideration #2: Application of COBRA • Possible approaches: • Limit access to only employees enrolled in major medical, include clinic in COBRA election for major medical • Create COBRA notice and determine premium for all employees • Automatically extend clinic availability for 18 (36?) months following termination of employment • Risk of noncompliance includes: • Penalty of the lesser of 10% of the employer's cost for all group health plans during a year or $500,000 for each year during which there were "inadvertent failures“ • Former employee claims • Larger penalty for intentional (knowing) failures

  13. Legal Consideration #3: Impact on HSA Eligibility • IRS guidance says if Clinic provides "significant medical care" beyond worksite injury and preventive care before applying deductible, coverage is considered non-HDHP coverage and employees with access to clinic are not eligible to contribute to an HSA • IRS example says the following clinic services will not jeopardize HSA eligibility: • Dental and vision services • Physicals and immunizations • Allergy shots • Providing nonprescription pain relief • Treatment of injuries caused by accidents at worksite

  14. Legal Consideration #3: Impact on HSA Eligibility • Possible approaches • Limit services to those on permitted list above • Could possibly add others if not “significant” (workplace illness?) • Integrate with major medical for employees in HDHP • Must charge FMV for all services not on permitted list above • No guidance on FMV for this purpose • Percentage of Medicare rate? • Percentage of health plan allowed cost? • Flat dollar fee for all services? • Based on general market data?

  15. Legal Consideration #3: Impact on HSA Eligibility • Risk of noncompliance: • HSAs not employer plan, so employer should not be responsible for employee contributions outside of payroll • Payroll tax/withholding failure if employer permits pre-tax employee HSA contributions through payroll or makes employer HSA contributions • Employee could seek recovery from company for bad tax consequences based on misleading communications (“enroll in the HDHP and you can contribute to an HSA“) or reliance on company for information

  16. Legal Consideration #4: Taxation of Clinic Benefits • Under Code Sections 105 and 106, “medical care” benefits under an accident or sickness plan and employer contributions towards those benefits are not taxable • Very broad, picks up any clinic benefits as long as they qualify as medical care for an employee or his or her spouse or dependent • Exception for benefits if clinic discriminates in favor of highly paid employees • Top 25% of employees by pay • E.g., clinic available only to executives and salaried employees, not available to “bottom 75%” • Discriminatory benefits are taxable income to highly paid employees

  17. Legal Consideration #5: Application of HIPAA • HIPAA portability rules (preexisting condition, special enrollment, nondiscrimination) apply to “group health plans” other than group health plans that are excepted benefits • Except benefits include a group health plan “in relation to its provision of . . . coverage for on-site medical clinics” • “in relation to” language suggests being part of a larger plan should not matter (e.g., if integrated with major medical) • HIPAA “administrative simplification” rules – privacy and security rules – apply to “group health plans” as defined under ERISA • If subject to ERISA, subject to HIPAA privacy and security requirements

  18. Legal Consideration #5: Application of HIPAA • Possible approaches • Pull clinics into existing HIPAA privacy and security compliance program • Review privacy and security of PHI generated through clinics • Provider staffing clinic also likely subject to HIPAA • Limit clinic services so that it is not an ERISA plan • Risks of noncompliance include DHHS penalty assessment, especially if breach/PHI misuse

  19. Legal Consideration #6: ACA Compliance • ACA employer mandates under ERISA, the Internal Revenue Code and the Public Health Service Act (government employers) apply to “group health plans” • IRS, DOL and HHS have confirmed via the preamble to the grandfathered plan regulations and an FAQ that the HIPAA portability excepted benefits rules apply for purposes of determining application of ACA employer mandates • As discussed above, HIPAA portability rule say coverage for on-site clinic is an excepted benefit

  20. Legal Consideration #6: ACA Compliance • Again, excepted benefit rules apply to a group health plan “in relation to” its provision of on-site clinic benefits, should not matter if clinic is integrated with major medical • If employer mandates applied: • Integrated plan would satisfy preventive care mandate, no annual limits • Age 26 dependent coverage theoretical problem (if clinic not available to employees children), but again, employer mandates should not apply • December, 2013 proposed regulations on excepted benefits did not address on-site clinics (and did not change rules)

  21. Compliance Example 1 • Generous Co. offers clinic that provides primary care, some preventive care, PT, lab testing, prescriptions and minor surgery to all employees. • Generous Co. also offers an HDHP and PPO as health plan options. • Generous Co. charges 100% of Medicare rate for all services other than preventive care and worksite injury and applies deductible to non-preventive care services for employees in HDHP • Generous Co. offers all employees COBRA for clinic upon termination of employment • Generous Co. includes clinic in health plan HIPAA privacy and security umbrella • Generous Co. distributes SPD/plan document, other ERISA-required communications for clinic and counts all employees in 5500 participant counts • RESULT: Clinic complies with ERISA, COBRA, HIPAA, ACA, employees in HDHP can contribute to HSAs

  22. Compliance Example 2 • To avoid application of COBRA and ERISA, Generous Co. offers clinic that provides only injury treatment and “urgent care” illness treatment to employees during regular working hours, at no cost • Generous Co. also offers an HDHP and PPO as health plan options. • Generous Co. does not charge employees anything for services (to avoid application of COBRA) • Generous Co. includes clinic in health plan HIPAA privacy and security umbrella • RESULT: Clinic complies with ERISA, COBRA, HIPAA, ACA, but employees in HDHP may not be eligible to contribute to HSAs • Issue is whether services are “significant services” outside of dental, vision, preventive care, worksite injury • Aggressive employer might decide not significant, sell employees on HDHP enrollment and HSA opportunity

  23. Questions?

  24. Thank you for attending! Amy A. CiepluchQuarles & Brady LLP411 E. Wisconsin AvenueMilwaukee, WI 53202(414) 277-5585Amy.Ciepluch@quarles.comwww.quarles.com 25483014

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