Insurance Regulation

Government response to the Coronavirus has included a wide range of emergency measures governing health plan administration. Some of these measures address dislocations caused by sudden change in employment status while others address administration of benefits for employees marooned at home. The fast pace of change wrecks the predictability required for health care benefits tied to employment. Deciding when and how to satisfy each new, temporary rule has become as difficult as paying for the benefits.

While regulators mean well – bless their hearts – they often don’t coordinate well. Number one on a list of disconnected hearts and minds – employers don’t govern insurers. Number two on that list – insurers don’t govern themselves. Employers are stuck with the terms and conditions of the group insurance policy they bought; it’s the law. Insurers are stuck with the terms and conditions a regulator has approved; they can’t easily change the approved plan. Yet regulators have encouraged employers and insurers to “color outside the lines” without worry.

The United State Department of Labor (DOL) and the Internal Revenue Service (IRS) have issued “guidance” on employee benefit plan administration for employers and the Washington Insurance Commissioner has issued emergency rules for health insurers. Federal regulators have essentially advised that if a plan administrator means well, things will be o.k.

“[DOL] recognizes that affected plan participants and beneficiaries may encounter problems due to the COVID-19 outbreak. The guiding principle for plans must be to act reasonably, prudently, and in the interest of the covered workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments in such cases and should attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.” [Notice 2020-01]

The agencies needed to make this statement because the law prohibits action in conflict with written plan documents. Plan fiduciaries must administer plans “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of [ERISA].”

On the insurer side of the equation, the Washington Insurance Commissioner praised “the effort of two health insurers doing business in Washington to provide short-term premium forgiveness to many of their policyholders.” In the same press release, he warned that he would “review rate filings for all types of insurers doing business in Washington to make sure that no company is taking advantage of policyholders during the current pandemic.” Interesting. Here is the governing prohibition on this “unfair practice and fraud.”

Except to the extent provided for in an applicable filing with the commissioner then in effect, no insurer, insurance producer, or title insurance agent shall, as an inducement to insurance, or after insurance has been effected, directly or indirectly, offer, promise, allow, give, set off, or pay to the insured or to any employee of the insured, any rebate, discount, abatement, or reduction of premium or any part thereof named in any insurance contract, or any commission thereon, or earnings, profits, dividends, or other benefit, or any other valuable consideration or inducement whatsoever which is not expressly provided for in the policy. [ RCW 48.30.140 emphasis added]

To be clear, I don’t object to these types of practices or strategies; however, I do find the regulatory forbearance jarring given past regulatory punishment of equally noble but illegal practices. I cannot recall successfully resisting a regulatory enforcement action where the consumer was helped but the law was violated. Naturally, plan administrators should tread lightly and document the hell out of everything. With that advice in mind, here are recent federal guidance and enforcement statements.

May 1, 2020 – Washington Insurance Commissioner extended the emergency order requiring all regulated health insurers to waive copays and deductibles for coronavirus testing and to suspend any prior authorization requirement related to coronavirus treatment.

May 4, 2020 – DOL and IRS issued a joint regulation providing an extension of certain plan deadlines for health plan enrollment, for electing and paying for COBRA and for appealing benefit denials. Even though these rules do not explicitly require notice to plan beneficiaries, administrators should protect against future complaints by giving notice of the new extended deadlines.

DOL’s Employee Benefits Security Administration (EBSA) also issued Disaster Relief Notice 2020-01. Expanding upon the joint rule extending plan deadlines, the Notice extended deadlines for filing the M-1 report required of multiple employer welfare arrangements and extended participant notice requirements. Good faith efforts to provide required notices as soon as practicable including use of email, text messages and websites satisfy regulatory standards.

Included in various documents published by DOL and IRS were new model COBRA Notices.

May 12, 2020 – IRS issued two notices (Notice 2020-29 and Notice 2020-33) governing employee benefit plan elections under IRS Code §125 cafeteria plans and health flexible spending accounts. Among other changes, the notices permit but do not require employers to allow employees to make mid-year changes to plan elections. Employers may allow employees to enroll in a plan even if she initially declined; to change coverage to a different offered option; and drop coverage upon a written statement that she has other coverage. In addition, a premium reimbursement plan may pay for expenses incurred prior to the beginning of the plan year for coverage during the plan year. In other words, the plan can reimburse a December 2019 premium payment for coverage starting in January 2020.

Much more information can be found in the notices and on the agency websites. Expect more change going forward.