Recent legal challenges have focused on constitutional issues, but health care reform is expected to create new reasons for benefits and employment-law litigation, according to a reform expert. Reform rules fraught with legal risk include: (1) pay-or-play requirements, (2) claims appeals and external review, (3) essential benefits; and (4) retiree medical rules. Another area of concern is that scenarios will arise under reform that will generate discrimination complaints.
Attorney James R. Napoli of Proskauer Rose in Washington, D.C., has shared with the SmartHR Manager blog some forward-looking thoughts about impending compliance challenges and litigation targets brought on by health reform. Napoli, who heads his firm’s Health Care Reform Task Force, will speak at greater length and unveil more of his predictions at his firm-sponsored ERISAFest in New York City on March 15.
Realignment From Full- to Part-time Employees?
How employers tally full-time workers will affect the degree of their involvement and expense in meeting health reform requirements. Under health reform, employers with 50 or more full-time employees that do not offer affordable health coverage with essential health benefits will pay an assessment starting in 2014. Napoli predicts the following scenarios:
- This requirement may trigger some workforce realignment from full-time workers to part-time status in an effort to reduce obligations under the law.
- Reeling back coverage and sending folks to the exchanges may be risky, and it’s important to do so in a way that does not contribute to employment disputes.
- Workers who object to losing full-time benefits in the move to part-time status may be able to build a case they were discriminated against —- if employers are not careful.
Independent Review Organizations
Employers will have to contract with independent review organizations (IROs) under health reform’s July 2010 claims appeals & external review rules. IROs will have authority to review claim disputes de novo and to overturn a plan determinations. IRO rulings are binding under reform. Some argue that this gives them control over plan funds, and they can be considered plan fiduciaries.
IROs will decide potentially large-dollar items, like patterns of benefits denials (uncovered services) and eligibility rescissions (for example, in cases of fraud or misrepresentation.)
Lawsuits likely will center on whether IROs should be considered plan fiduciaries or non-fiduciary service providers, Napoli says.
Retiree-only Plans
While health reform outlawed lifetime limits (and annual limits after Jan. 1, 2014) on coverage, retiree-only plans are exempt from this requirement. Therefore, retiree-only plans can retain caps on coverage. Napoli notes that:
- Employers may try to move eligible folks into the retiree-only option. Workers who are steered out of coverage without limits into coverage with strict limits may think they have an arguable legal claim.
- Reform might contribute to employer flight from providing retiree medical benefits, as a result of the increasing costs and obligations of providing coverage in general.
Other Litigation Areas
- Caps on non-essential benefits (for example, a given rehabilitative device might be subject to a $500 limit because it is not defined as essential). Napoli notes that such limits might be challenged if one can successfully argue that the “non-essential” benefit should have in fact been defined as essential.
- Allegations of employment-law violations or discriminatory intent may stem from employers steering workers to the health insurance exchanges, he says.
Napoli is the managing author of The New Health Care Reform Law — What Employers Need to Know (A Q&A Guide), published by Thompson Publishing Group.