Benefits Monthly Minute
The February Monthly Minute examines the DOL’s recent focus on mental health parity compliance, the Hughes vs. Northwestern University retirement plan fee litigation, and the latest COVID-19 testing coverage guidance.
Mental Health Parity Compliance Heightens Employer Anxiety
The Consolidated Appropriations Act, 2021 (CAA) amended the MHPAEA to require plans to provide comparative analyses of their non-quantitative treatment limitations (NQTLs) to the Secretary of the Treasury, the Secretary of Labor, and the Secretary of HHS, upon request, as described in the April, 2021 Monthly Minute. Released in late January, the 2022 MHPAEA Report to Congress (2022 Report) highlights the recent emphasis on greater MHPAEA enforcement. As noted in earlier guidance, EBSA selected the following four NQTLs to focus on (although evaluations were not limited to these four NQTLS) in FY2021: (1) preauthorization for inpatient services; (2) concurrent care review for inpatient and outpatient services; (3) out-of-network provider reimbursement rates; and (4) provider network admission and participation criteria, including reimbursement rates. The 2022 Report revealed that the EBSA issued 156 letters to plans and issuers requesting comparative analyses for 216 unique NQTLs, and none of the comparative analyses that EBSA reviewed contained sufficient information. EBSA observed the following common themes in deficiencies:
- Failure to document comparative analysis before designing and applying the NQTL;
- Conclusory assertions lacking specific supporting evidence or detailed explanation;
- Lack of meaningful comparison or meaningful analysis;
- Non-responsive comparative analysis;
- Documents provided without adequate explanation;
- Failure to identify the specific MH/SUD and medical/surgical benefits or MHPAEA benefit classification/s affected by an NQTL;
- Limiting scope of analysis to only a portion of the NQTL at issue;
- Failure to identify all factors;
- Lack of sufficient detail about identified factors;
- Failure to demonstrate the application of identified factors in the design of an NQTL; and
- Failure to demonstrate compliance of an NQTL as applied.
EBSA also identified several other NQTLs that were not applied in parity for mental health/substance use disorder benefits (MH/SUD), including limitation or exclusion of applied behavior analysis therapy or other services to treat autism spectrum disorder, limitation or exclusion of medication-assisted treatment for opioid use disorder, and exclusion of speech therapy to treat MH/SUD conditions.
KMK Comment: The agencies are expected to step up MHPAEA enforcement activity and the 2022 Report is the DOL’s wake-up call on the need to stay current with mental health parity compliance. To this end, employers should confirm that TPAs and insurers have prepared detailed, comprehensive and timely comparative analyses for all of their plan’s NQTLs. Employers should also work closely with legal counsel and service providers to ensure NQTL comparative analyses and MH/SUD coverage is MHPAEA complaint to be prepared for DOL requests for parity information and avoid penalties for noncompliance.
Supreme Court Remand Demands Context-Specific Inquiry in Retirement Plan Fee Cases
Late last month, the Supreme Court decided a much anticipated retirement-plan fee case, Hughes vs. Northwestern University. In the case, plaintiffs alleged plan fiduciaries breached their duty of prudence by retaining recordkeepers that charged excessive fees, offering options likely to confuse investors, and neglecting to provide cheaper and otherwise-identical alternative investments. The district court dismissed the case, and the Seventh Circuit affirmed, by focusing on the fiduciary obligation to assemble a diverse menu of options. But, in an about face, the Supreme Court determined that the Seventh Circuit erred in relying on the participants’ ultimate choice over their investments to excuse allegedly imprudent decisions by fiduciaries. The Supreme Court stated: “Determining whether petitioners state plausible claims against plan fiduciaries for violations of ERISA’s duty of prudence requires a context-specific inquiry of the fiduciaries’ continuing duty to monitor investments and to remove imprudent ones [as set forth in Tibble vs. Edison International] ….” In rejecting the lower courts’ neglect of Supreme Court precedent articulated in the Tibble case and remanding the case for further review, the Court explained that the fiduciaries’ provision of an adequate array of investment choices did not excuse allegedly imprudent decisions; instead, a context-specific inquiry that evaluates each particular investment option rather than the overall investment lineup, must be done.
KMK Comment: The Supreme Court’s ruling is a useful reminder that plan fiduciaries must not simply rely on offering a broad range of investment options to satisfy their fiduciary duties. The ruling may also present new hurdles for plaintiffs because the Court makes clear that prevailing in an ERISA fee-case requires a context-specific inquiry that challenges specific investment options, with due regard for the circumstances prevailing at the time of the fiduciary’s decision.
New Variants in COVID-19 Coverage Guidance
As reported in the January, 2022 Monthly Minute, on January 10, 2022, the Departments issued FAQs Part 51 which clarified that the requirement for group health plans to cover COVID-19 diagnostic tests under the FFCRA applies with respect to over-the-counter (OTC) COVID-19 tests available without a prescription. On February 4, 2022, the Departments released new FAQs Part 52 further clarifying coverage of OTC COVID-19 tests, as summarized below:
- The new guidance gives plans flexibility in how to provide access to OTC COVID-19 tests:
- A direct-to-consumer shipping mechanism is any program that provides direct coverage of OTC COVID-19 tests without requiring the individual to obtain the test in-person.
- When implementing an in-person mechanism, a plan must ensure that individuals have access to OTC COVID-19 tests through an adequate number of locations.
- The Departments will not consider a plan non-compliant with the safe harbor in FAQ Part 51, Q2 if it established a direct coverage program that satisfies the revised safe harbor but is temporarily unable to provide adequate access due to a supply shortage. In that circumstance, a plan may continue to limit reimbursement to $12 per test (or the full test cost, if lower) for OTC COVID-19 tests purchased outside of the direct coverage program. Similarly, a plan would not be out of compliance because an individual is unable to obtain at least 8 OTC COVID-19 tests per month.
- A plan is permitted to address suspected fraud and abuse related to the reimbursement of OTC COVID-19 tests. To this end, plans may disallow reimbursement for tests purchased from a private individual via an in-person or online person-to-person sale, or from a seller that uses an online auction or resale marketplace.
- These OTC COVID-19 test coverage requirements do not apply to tests that use a self-collected sample but require processing by a laboratory or other health care provider to return results.
- An individual cannot be reimbursed more than once for the same medical expense. Therefore, the cost of OTC COVID-19 tests paid or reimbursed by a plan cannot be reimbursed by a health FSA or HRA.
KMK Comment: The added flexibility under the FAQs Part 52 will come as welcomed news to plans struggling to provide OTC COVID-19 tests against the backdrop of supply shortages and limited access. Unfortunately, it also raises the specter of policing fraudulent reimbursement which adds another item to the increasingly long COVID-19 coverage to-do list.
COMPLIANCE ALERT — Cycle 3 Restatement Deadline
The Cycle 3 restatement window for pre-approved defined contribution plans began August 1, 2020 and ends July 31, 2022. Adopting employers should be working with plan providers and legal counsel now to ensure timely restatement.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.