Hunton Employment & Labor Law Perspectives : Employment Lawyers & Attorneys : Hunton & Williams Law Firm : Labor Law Legislative Updates

Employers should be aware that the following rules for group health plans, both insured and self-insured, and including grandfathered plans, will go into effect for plan years beginning on or after September 23, 2010. 
 

1. Preexisting condition exclusions - The Health Care Reform Act generally prevents group health plans from imposing preexisting condition exclusions for participants who are under age 19.  The prohibition will go into effect for all other participants in the 2014 plan year.
2. Annual/Lifetime Benefit Limits - The Health Care Reform Act prohibits group health plans from using dollar amount lifetime limits for health benefits.  In addition, the regulations gradually phase out the use of annual dollar limits for health insurance coverage (such limits will be prohibited for plan years beginning on or after January 1, 2014). 
3. Rescission - The Health Care Reform Act prohibits group health plans from rescinding coverage, except in cases involving fraud or an intentional misrepresentation of material facts (caused by either the individual involved or the person seeking coverage on his or her behalf).  Plans seeking to rescind coverage must provide the affected individual with 30 days advance, written notice of the rescission.

The regulations also provide guidance on required plan participant protections for non-grandfathered plans.  Specifically, group health plans must provide to plan participants, without any co-pays or other cost-sharing measures for in-network providers, preventative care options such as well-child care and certain immunizations/screenings.  In addition, plan participants will be allowed to choose their own primary care provider (“PCP”) or pediatrician from the plan’s provider network, and will be able to see an OB-GYN without needing a referral or authorization from a PCP.  Moreover, group health plans will be prohibited from requiring prior authorization for emergency care at a hospital outside the plan’s network.  These protections also go into effect for plan years beginning on or after September 23, 2010.

Employers will have to review their existing group health plans to ensure that they incorporate the coverage mandated by the Health Care Reform Act.  Most of the protections must be in place for plan years beginning on September 23, 2010, which means that time is of the essence in making any modifications to existing health plans. 

More detailed information on the new regulations can be found in our client alert.

According to Fact Sheet #73, “Break Time for Nursing Mothers under the FLSA,” employers must provide reasonable amounts of unpaid break time and a private place for breast-feeding employees to express milk. “The frequency of breaks needed to express milk as well as the duration of each break will likely vary,” said the agency. The agency clarified that employers also must provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public,” where the employee may express breast milk. If a space is temporarily converted into a lactation area, it must be available whenever the nursing mother needs it.

The FLSA nursing break provisions cover only those employees who are not exempt from the FLSA’s overtime pay requirements, according to the fact sheet.  However, state laws may obligate employers to provide breaks to nursing mothers who are exempt from overtime pay under federal law.

Federal law does not require employers to compensate nursing mothers for the breaks they take to express milk, the agency said, but if an employer nevertheless compensates employees for breaks, an employee who uses the break time to express milk must be compensated in the same way that other employees are compensated for break time.  In addition, the FLSA’s general requirement that the employee must be completely relieved from duty or else the time must be compensated as work time applies. 

An employer with fewer than 50 employees at all of its work sites is not subject to the break-time requirement if compliance would cause an undue hardship.  The agency explained that the existence of an undue hardship is measured by comparing the difficulty or expense of compliance with the size, financial resources, nature, and structure of the employer's business.  The FLSA requirements do not preempt state laws that provide employees with greater protections, such as paid break time or coverage for more than one year.

Now that the Department of Labor has issued its regulations regarding the amendment and has clarified some misunderstandings from the Act, employers should aim to avoid potential claims.  To the extent employers have not already done so, they should consider what private locations they can make available to nursing mothers and communicate that information to their employees.  If compensating employees for breaks already, make sure to compensate the employee who uses the break time to express milk.  If you are an employer with less than 50 employees and compliance with the law would cause an undue hardship, make sure you can measure the hardship by the factors expressed by the agency.  
 

Section 4207 of the new law, titled “Reasonable Break Time for Nursing Mothers,” is effective immediately and requires that employers provide, for one year after a child’s birth, reasonable break time whenever a nursing employee has a need to express milk.  Though employers are not required to pay employees during this break time, “reasonable break time” is not defined in the amendment, nor is there any specified limit on the number of breaks that can be taken per day.

Employers must also provide nursing mothers with a place in which to express milk that is shielded from view and free from intrusion by coworkers and the public.  The amendment explicitly states that the provided place cannot be a bathroom. 

While the new amendment applies to all employers covered by the FLSA, there is a possible exemption for businesses with less than 50 employees.  If such small businesses can show that providing nursing breaks or a designated place to express milk would impose an “undue hardship,” such as causing significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer’s business, the new requirements do not apply. 

Although many states already have statutes requiring breaks for nursing mothers, this is the first federal law to impose such a requirement.  However, the amendment does provide that if a state law has greater protections for nursing mothers than the new federal law, then employers should continue to follow the state law requirements.

Until the Department of Labor issues regulations regarding the amendment, employers should aim to avoid potential claims under the new federal law.  Employers that have not already done so should consider what private locations they can make available to nursing mothers and should also communicate with employees who request nursing breaks about the expected duration and frequency of such breaks in order to prevent misunderstandings and problems.

What’s In The Sausage? Bismarck famously said that most people really don’t want to see the law-making process, just like they don’t really want to see what goes into sausage.  But health care reform is too important to just wait and see how it comes out.  Following are some of the key provisions addressed in the two bills and how the bills differ.

Play or pay?  The House bill would require employers with annual payrolls of $500,000 or more to offer coverage to employees or to pay a new federal tax of up to 8% of payroll.  The Senate bill would impose a penalty of $750 per full time worker on employers if (1) they have 50 or more full time workers; (2) they do not offer health benefits; and (3) any of their workers obtain subsidized coverage through the new health insurance exchange.  Although small employers (with fewer than 50 employees) escape the obligation to provide health care in the Senate bill, everyone else has a new mandate. 

What choice do we have?  Both the House and the Senate bills provide for an insurance exchange program that would allow individuals who do not have health benefits through their employer or a public program to obtain benefits.  The insurance exchange programs differ slightly, but both allow small employers to participate in the exchange program.  The House version of the insurance exchange program is open to employers with 25 or fewer employees in the first year of implementation, employers with 50 or fewer employees in the second year, and employers with 100 or fewer employees in the third year.  The exchange program in the Senate bill is open to employers with 50 or fewer employers, but permits states to allow employers with up to 100 workers to participate.  Both bills provide that, in the future, the insurance exchange programs may be expanded to include larger employers.  Get in line early.

A little help?  Both bills provide that employers with 25 or fewer employers and average wages of $40,000 or less per employee would qualify for a tax credit.  A full tax credit is 50% of the premium cost.  The amount of the credit phases out as employer size and average wages increase.  The House bill caps the credit for employees earning more than $80,000 per year.  Both bills also provide that the government will subsidize 80% of a retiree’s medical claims in excess of $15,000.  The House bill permits this subsidy from 2013 to 2015 while the Senate bill only includes this provision through 2013.  Both bills cap this subsidy at $90,000 and require the employer’s plan to pay the remaining amount.

How will we pay for all this?  The Senate bill imposes a 40% excise tax on “Cadillac” health plans but the House bill does not.  Specifically, this tax will apply to sponsored group health plans that have annual premiums in excess of $8,500 for individual coverage and $23,000 for a family.  Employers who provide high cost health plans will be significantly impacted by this provision.  No good deed goes unpunished. 

Is It Done Yet?  Health care legislation still has a long way to go before reaching President Obama’s desk, and it’s impossible to know what it will look like by the end of the process.  The Senate bill has yet to be chopped up in debate, and then comes the grinding and combining with the House bill.  Even though the process may be hard to look at, all of us need to pay close attention on this one.  We’ll be dining on it for years to come.

The centerpiece of H.R. 3200 is its creation of a “health insurance exchange,” which would be administered by a new federal agency called the “Health Choices Administration.”  The exchange would offer private plans alongside a public option (which would be established by the Secretary of Health and Human Services) and essentially would be the only place an individual could go to purchase insurance not through an employer or a grandfathered non-group plan.  In this way, H.R. 3200 will diminish the ability of private insurers to sell non-group health coverage, as they will be forced to compete with the government option on the exchange.

The bill does not forbid employers from continuing to offer self-funded health coverage or plans purchased on the group market through private insurers.  However, it creates substantial penalties for employers whose existing plans are not "qualified health benefits plans," meaning they will have to meet a host of new regulatory requirements…some of which do not yet exist.  At a minimum, these rules will address service and premium ratings areas, insurance ratings rules, age variation categories, standards for nondiscrimination in benefits, standards for network adequacy, marketing standards, claims and appeals procedures, and standards for transparency and disclosure.

The penalty for failing to meet all of these rules will be an 8% payroll tax on employers with annual payrolls over $400,000.  The new rules likely will require a new round of negotiations with providers for those employers who continue to offer coverage outside the new exchange. Further, employers will no longer realize cost savings by offering programs like flexible spending accounts, health spending accounts, and health reimbursement arrangements. 

Perhaps the most striking aspect of H.R. 3200 is what is not in it.  Although the Obama Administration has promised that Americans will be able to keep their old health plans if they like them, Section 102 of the bill, which read: "Nothing in this division shall prevent or limit individuals from keeping their current health benefit plan," was dropped in committee.

It is difficult, if not impossible, to accurately predict the impact of health care reform on employers.  Who knows whether H.R. 3200 will ultimately become the law?  And even if it does, the bill contains countless regulatory and rulemaking loose ends and vagaries that only time will iron out.  Perhaps only one thing can be said with certainty right now: life for employers who choose to offer health insurance will get less predictable.  We will continue to track the progress of H.R. 3200 and its counterparts in the Senate and will report frequently as health care reform gets closer to being reality.