Benefits Counselor - October 2023

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Another Eventful Month for the No Surprises Act's Independent Dispute Resolution Process

In August 2023, portions of the independent dispute resolution (IDR) process created by the No Surprises Act were suspended. Since then, a proposed rule has been issued regarding administrative fees, the IDR process has partially reopened, and several pieces of related guidance have been issued.

As a reminder, on August 3, 2023, in Texas Medical Association v. HHS IV (TMA IV), a U.S. District Court Judge in the Eastern District of Texas addressed claim "batching" and the administrative fee required to initiate the IDR process. The Court issued an order vacating the administrative fee increase from $50 to $350 and the prohibition on bundling similar claims. The Court held that the rule violated the Administrative Procedure Act (APA) because it was issued without a notice and comment period and found the rule to be arbitrary and capricious. The Federal IDR process was suspended because of this decision.

Subsequently, on August 24, 2023, the U.S. District Court for the Eastern District of Texas issued an opinion and order invalidating provisions of the No Surprises Act's interim final regulations on qualifying payment amount (QPA) determinations in Texas Medical Association v. HHS III (TMA III). The TMA III order vacated certain provisions establishing the methodology for calculating the QPA along with the portion of the August Technical Guidance preventing air ambulance service providers from initiating one dispute with multiple service codes.

Departments Issue Proposed Rule Regarding IDR Fees

In response to TMA IV, on September 20, 2023, the U.S. Department of Health and Human Services (HHS), the U.S. Department of Labor (DOL), and the Internal Revenue Service (IRS) (collectively, the Departments) jointly issued a proposed rule that would amend existing regulations to provide that the administrative fee and IDR entity fee ranges be established through notice and comment rulemaking. The proposed rule describes the methodology for calculating the fees and proposes the fees and fee ranges for disputes initiated on or after January 1, 2024.

Under the proposed rule, the new administrative fee would be set at $150. This new fee would apply for disputes initiated on or after the later of the effective date of the final regulations or January 1, 2024. This fee would remain in effect until the Departments change it through subsequent formal rulemaking. The proposed rule provides that the Departments could update the administrative fee more often than annually.

Comments on the proposed rule are due by October 26, 2023.

Departments Issue Guidance on QPA

On October 6, 2023, the Departments and the Office of Personnel Management (OPM) jointly issued Frequently Asked Questions (FAQs) regarding calculating the QPA, given the Court's decision in TMA III. The FAQs note that the Departments and OPM disagree with the Court's decision, and the Department of Justice intends to appeal. However, because the Court's decision is in effect, QPAs must be calculated consistently with the rules that remain in place after the TMA III decision.

The FAQs provide some welcome relief, noting that the Departments and OPM recognize that the No Surprises Act litigation has added uncertainty, complexity and unexpected burdens for entities. As a result, the Departments and OPM will focus on aiding regulated entities working diligently and in good faith to recalculate QPAs and comply with the applicable rules, rather than imposing penalties.

The FAQs clarify that plans and issuers must continue to comply with the QPA disclosure requirements. Among other topics, the FAQs also address how certified IDR entities can consider the QPA submitted during a dispute.

Besides the FAQs, the Departments and OPM generally do not intend to issue interim guidance addressing the QPA methodology. Accordingly, QPAs must be calculated using a good faith, reasonable interpretation of the applicable statutes and regulations in effect after TMA III.

The Departments are working on preparing updated guidance and changing operations as necessary to comply with the Court's vacatur of portions of the August Technical Guidance regarding air ambulance services.

IDR Partially Reopens and Departments Issue Related FAQs

Effective as of October 6, 2023, the Departments reopened the Federal IDR Process for the initiation of certain new single and bundled disputes. In conjunction with the reopening, the Departments released new guidance in the form of FAQs.

According to the FAQs, now that the Departments have released guidance and completed the system updates related to the administrative fee and the QPA (as discussed above), the Federal IDR portal is ready to reopen for new disputes. The FAQs indicate that parties affected by the temporary suspension will receive the following extensions:

  • Federal IDR Initiation. Disputing parties generally have four business days to initiate a dispute after the open negotiation period ends. Parties seeking to initiate a single dispute, including those involving bundled payment arrangements, for whom the initiation deadline falls between August 3, 2023, and November 3, 2023, will have until November 3, 2023, to initiate the dispute.
  • Selection of Certified IDR Entity. Disputing parties generally have three business days following the date of IDR initiation to jointly select a certified IDR entity. Parties engaged in certified IDR entity selection when the Federal IDR Process closed will have until October 20, 2023, to agree on a certified IDR entity. For new disputes initiated between October 6, 2023, and November 3, 2023, the deadline for certified IDR entity selection will be ten business days after IDR initiation.
  • Submission of Offers and Payment of Certified IDR Entity Fees. After selecting a certified IDR entity, disputing parties have 10 business days to submit their offers and pay the certified IDR entity fee and administrative fee. Use of the notice of offer form and ability to pay fees through the Federal IDR portal was temporarily suspended beginning August 4, 2023. The normal 10‑business‑day offer submission and fee payment timeline will apply for disputes initiated on or after October 6, 2023.

Processing of new and in‑progress batched disputes and new air ambulance disputes remains temporarily suspended while the Departments update guidance and operations to align with the opinions and orders in TMA III and TMA IV.

New Guidance on Transparency in Coverage Rules Halts Enforcement Discretion

On September 27, 2023, the Departments issued FAQs Part 61 regarding the implementation of the Affordable Care Act (ACA) transparency in coverage final rules (TiC Final Rules) and the similar provisions under the Consolidated Appropriations Act, 2021 (the CAA, 2021).

The TiC Final Rules require most non‑grandfathered health plans and health insurance issuers to disclose price information for in‑network and out‑of‑network services through machine‑readable files posted on a public website for plan years beginning on or after January 1, 2022. The CAA, 2021 was passed shortly after the TiC Final Rules were issued and included overlapping transparency requirements.

Since the TiC Final Rules were finalized, the Departments have issued several FAQs in which they provided enforcement discretion. FAQs Part 49 deferred enforcement of the machine‑readable file requirement for prescription drug pricing, pending further consideration by the Departments. In FAQs Part 53, the Departments announced a limited enforcement safe harbor for the machine‑readable file requirement for in‑network provider rates in certain circumstances.

FAQs Part 61 roll back each of the deferred enforcement provisions. Regarding the prescription drug machine‑readable file requirements, the Departments have determined that the CAA, 2021 requires different disclosures and that there is no meaningful overlap with the information disclosed under the TiC Final Rules. Therefore, the Departments rescinded the general policy deferring enforcement of these Rules. Enforcement will now be exercised case by case; however, the Departments intend to issue additional implementation guidance that will account for the reliance on the prior enforcement discretion.

Regarding in‑network provider rates, FAQs Part 61 rescind the enforcement discretion for in‑network provider rates not expressed as a dollar amount, which was in FAQs Part 53. The Departments indicate that plans and issuers unable to determine dollar amounts for the in‑network rate should follow existing technical reporting guidance. However, the Departments note they are unlikely to pursue enforcement action if a plan or issuer can demonstrate that compliance with the relevant provisions of the TiC Final Rules would have been extremely difficult or impossible, including, but not limited to, for the reasons stated in FAQs Part 53.

Request for Information on Over-the-Counter Preventive Care

The Departments issued a joint Request for Information (RFI) soliciting comments on the application of the preventive care services requirement under the ACA to over‑the‑counter (OTC) preventive items and services available without a prescription, such as tobacco cessation products, contraception, and breast pumps and milk storage supplies.

The RFI seeks input regarding the potential costs and benefits of requiring non‑grandfathered group health plans and health insurers to cover OTC preventive items and services without cost sharing and without a prescription from a provider. The RFI also requests comments regarding potential challenges and burdens associated with providing such coverage. Among other discussion topics and specific requests, the RFI indicates that the Departments are interested in "lessons learned” from providing coverage for OTC COVID‑19 diagnostic tests.

The RFI signals that the Departments are considering expanding coverage requirements to OTC preventive items and services without a prescription.

Comments in response to the RFI are due by December 4, 2023.

District Court Vacates Regulation on Counting Drug Manufacturer Coupons in ACA Cost‑Sharing Limit

On September 29, 2023, the U.S. District Court for the District of Columbia vacated an HHS rule that allowed group health plans and insurers to decline to credit certain financial assistance provided by drug manufacturers toward annual out-of-pocket cost‑sharing limits, regardless of whether a generic version of the drug was available. This case is HIV and Hepatitis Policy Inst. v. U.S. Department of Health and Human Services.

The rule at issue allowed, but did not require, plans to count direct support from drug manufacturers (i.e., coupons) toward the annual out-of-pocket limits, regardless of generic availability. Under the prior rule, which is subject to a non‑enforcement policy, plans could exclude the value of coupons from the annual out-of-pocket limit only when a medically appropriate generic equivalent was available.

The plaintiffs alleged that the rule violated the APA and improperly provided a windfall to group health plans and insurers. HHS argued that the ACA's definition of "cost‑sharing" is ambiguous and that the rule was reasonable. The District Court disagreed and concluded that the rule appears to conflict with the ACA's definition of "cost‑sharing" and the regulations thereunder. The District Court remanded the matter to the agencies to interpret the statutory definition.

Health Plan owes $1.3 million HIPAA Settlement Payment after HHS Investigation

HHS's Office of Civil Rights (OCR) issued a press release announcing a settlement agreement with LA Care, the nation's largest publicly operated health plan that provides benefits through state, federal and commercial programs. The agreement settles potential violations of the Health Insurance Portability and Accountability Act (HIPAA) found during two OCR investigations. Under the agreement, the health plan agreed to pay $1.3 million and to implement a corrective action plan to resolve these potential violations of the HIPAA Security Rule and protect the security of electronic protected health information (ePHI).

According to the Resolution Agreement and Corrective Action Plan, the first investigation stemmed from an online article reporting that some participants could see other participants' ePHI when logging into the payment portal. The second investigation was conducted after the health plan reported a breach due to participants being mailed identification cards for other participants.

Among other actions, the health plan agreed to take these steps under a comprehensive corrective action plan that will be monitored for three years by OCR, as follows:

  • Conduct an accurate and thorough risk analysis to determine risks and vulnerabilities to electronic patient/system data across the organization.
  • Develop and implement a risk management plan to address identified risks and vulnerabilities to the confidentiality, integrity and availability of ePHI.
  • Develop, implement and distribute policies and procedures for a risk analysis and risk management plan.

This case serves as a reminder for health plans of the importance of HIPAA compliance and underscores the large monetary penalties and extensive corrective actions that result from HIPAA violations.


Tenth Circuit Adopts "Meaningful Benchmark” Pleading Standard in 401(k) Excessive Fee Case

The U.S. Court of Appeals for the Tenth Circuit joined four other circuit courts in holding that participants alleging excessive investment management or recordkeeping fees must assert a "meaningful benchmark” to survive a motion to dismiss.

Participants in the Barrick Gold 401(k) Plan alleged that the Plan's fiduciaries breached their duties under the Employee Retirement Income Security Act of 1974 (ERISA) by causing the Plan to pay excessive investment and recordkeeping fees. To support these claims, the participants relied on a comparison of the Plan's investments with other investments, including a set of collective investment trusts with lower fees. The participants also claimed that the Plan failed to conduct requests for proposals regularly and cited the "401k Averages Book,” which allegedly demonstrated that other retirement plans paid substantially less for recordkeeping services.

This case presented an issue of first impression in the Tenth Circuit: what a plaintiff must plead to plausibly allege that plan fiduciaries breached their duty of prudence by offering higher‑cost funds and charging fees higher than those of other plans. To answer this question, the Tenth Circuit looked to decisions from the Third, Sixth, Seventh and Eighth Circuits. The Court found these authorities persuasive and held that plaintiffs must allege that the fees were excessive in comparison to a "meaningful benchmark" to survive a motion to dismiss. The Court noted that "a court cannot reasonably draw an inference of imprudence simply from the allegation that a cost disparity exists; rather, the complaint must state facts to show the funds or services being compared are, indeed, comparable. The allegations must permit an apples‑to‑apples comparison.”

Applying the "meaningful benchmark" standard, the Tenth Circuit affirmed the lower court's dismissal of the excessive investment fee claims because the plaintiffs did not provide sufficient information about the comparison funds, such as the goals and strategies of such funds. Regarding the excessive recordkeeping allegations, the Court indicated that plaintiffs failed to provide information about the services provided to the Barrick Gold 401(k) Plan or the plans referenced in the "401k Averages Book." Finally, the Court held there is no requirement for fiduciaries to obtain competitive bids at any regular interval.

The case is Matney v. Barrick Gold, No. 22‑4045, 2023 WL 5731996 (10th Cir. Sept. 6, 2023).

District Court Allows Fiduciary Breach Claims Related to BlackRock Target‑Date Funds

The U.S. District Court for the Eastern District of Virginia became the first to allow participants' claims of imprudence related to the BlackRock, Inc. target‑date funds (TDFs) to survive the motion to dismiss stage.

This case, Trauernicht v. Genworth Financial, Inc., was one of nearly a dozen lawsuits filed against sponsors of 401(k) plans that offer certain BlackRock, Inc. TDFs as investment options. These lawsuits targeted large companies, such as Genworth Financial, Inc., Booz Allen Hamilton, and Citigroup, Inc. The cases allege that the plan sponsors breached their fiduciary duties by selecting BlackRock TDFs, which have allegedly underperformed compared to other TDFs.

District courts nationwide dismissed participants' claims regarding the BlackRock, Inc. TDFs finding that the allegations of underperformance were insufficient to raise a plausible inference of imprudence. However, in September 2023, the federal district court judge in the Eastern District of Virginia was the first to rule that these allegations were plausible.

According to the Court, the participants sufficiently alleged "facts that show that the breach caused the loss because a prudent fiduciary properly monitoring the performance of the BlackRock TDFs would have replaced the funds." In support of the imprudence claim, the participants asserted that the plan fiduciaries failed to adequately monitor the BlackRock, Inc. TDFs because the meeting minutes produced in discovery did not mention a discussion of the BlackRock, Inc. TDFs. BlackRock, Inc. offered facts to disprove these allegations, but the Court declined to consider these arguments and stated these facts can be considered as the case progresses.

The Trauernicht case differs from the other lawsuits that were dismissed because the participants were given the opportunity to amend their complaint twice to include facts revealed during discovery. The participants included meeting minutes and other evidence not offered during the earlier cases involving the BlackRock, Inc. TDFs.

Cases against Citigroup, Inc.; Marsh & McLennan Co.; and CMFG Life Insurance Company are still pending.

Federal Court Rejects States' Attempt to Block DOL's ESG Rule

The U.S. District Court for the Northern District of Texas upheld the DOL's 2022 Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule (the 2022 ESG Rule) in Utah v. Walsh, N.D. Tex. This case was brought by 26 state attorneys general and private plaintiffs who alleged that the 2022 ESG Rule was arbitrary and capricious under the APA and violated ERISA.

The 2022 ESG Rule clarified that fiduciaries may consider climate change and additional environmental, social and governance (ESG) factors when they make investment decisions and exercise shareholder rights, such as proxy voting.

A key issue in this case was whether the ability to consider ESG factors under the 2022 ESG Rule in a tiebreaker situation exceeded statutory authority. Applying the two‑part framework established by Chevron USA, Inc. v. Natural Defense Council Inc., the Court concluded that the DOL complied with the APA in issuing the 2022 ESG Rule. The Court found that: (1) ERISA does not contemplate the possibility of a tie between two financially equivalent investment options; and (2) the reasonableness of the DOL's interpretation is supported by its prior rulemakings. The Court emphasized that the 2022 ESG Rule "changes little in substance" from the prior rules, noting that the DOL has considered ESG a financial factor since at least 2015.

The future of the 2022 ESG Rule remains in flux. The plaintiffs will likely appeal this decision, and there is another challenge pending in the U.S. District Court for the Eastern District of Wisconsin.

VCP Updates and Forthcoming EPCRS Changes

In late September 2023, the IRS published an Employee Plans News Release providing updates to the Voluntary Correction Program (VCP), including how to check the status of a VCP submission, and revisions to VCP forms.

Plans can now confirm whether their VCP submission has been assigned to a specialist on the IRS website. According to the IRS, plans should compare the date of their confirmation email to the date of the most recent VCP submissions that have been assigned to a specialist.

The IRS also revised several model VCP forms to remove outdated information, provide clarity, and make it easier to include some late amender failures that impact Internal Revenue Code sections 401(a) and 403(b) retirement plans. The model forms contain standardized ways for plan sponsors to correct common mistakes using the VCP.

The IRS made updates to the following forms:

  • Form 14568, Model VCP Compliance Statement;
  • Form 14568-A, Model VCP Compliance Statement—Schedule 1: Plan Document Failures for 403(b) Plans;
  • Form 14568‑B, Model VCP Compliance Statement—Schedule 2: Nonamender Failures for 401(a) Plans; and
  • Form 14568‑C, Model VCP Compliance Statement—Schedule 3: SEPs and SARSEPs.


Form 5500 Filing Deadline for Calendar Year Plans with Extensions. For plans that obtained an extension for filing their Form 5500, the Form 5500 must be filed by October 16, 2023.

SAR Deadline for Calendar Year Plans. Plan administrators must generally distribute Summary Annual Reports (SARs) within nine months of the plan's year‑end. However, if a plan has received an extension for filing its Form 5500, the nine‑month SAR deadline is extended to December 15, 2023.

Retirement Plan Compliance Deadlines and Reminders

  1. QDIA Notice: Plan sponsors of defined contribution retirement plans that utilize a Qualified Default Investment Alternative (QDIA) must provide an annual notice to all participants at least 30 days, but not more than 90 days, before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2023, and December 2, 2023.
  2. Retirement Plan Automatic Enrollment Notice: Plan sponsors of defined contribution retirement plans with an eligible automatic contribution arrangement or a qualified automatic contribution arrangement must provide an annual notice to all participants on whose behalf contributions may be automatically made to the plan, at least 30 days, but not more than 90 days before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2023, and December 2, 2023. Plan sponsors may combine the automatic enrollment notice with the QDIA notice.
  3. Safe Harbor 401(k) Plan Notice: Plan sponsors of safe harbor 401(k) plans must provide participants with an annual safe harbor notice that describes the safe harbor contribution and other material plan features at least 30 days, but not more than 90 days before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2023, and December 2, 2023. Plan sponsors may combine the safe harbor notice with other required notices, such as the QDIA notice.

Health Plan Compliance Deadlines and Reminders

  1. Medicare Part D Notice of Creditable Coverage: All group health plans offering prescription drug coverage to Medicare‑eligible employees (under either an active plan or a retiree plan) must provide an annual creditable coverage disclosure notice to their Medicare‑eligible participants and dependents by October 15, 2023. The Centers for Medicare & Medicaid Services (CMS) provides a model notice that can be accessed through the CMS website. Plan sponsors should review the model notice to ensure it accurately reflects their plan.
  2. Health Plan Open Enrollment Requirements: Plan sponsors of group health plans must issue a new Summary of Benefits and Coverage (SBC) to participants and beneficiaries covered under the plan in conjunction with open enrollment. Group health plans without open enrollment must issue the SBC no later than 30 days before the beginning of the plan year (December 2, 2023, for calendar year plans). Plan sponsors of health reimbursement arrangements (HRAs) must offer participants an annual opportunity to opt out of and waive all future reimbursements from their HRA. This notice of opt‑out can be provided with open enrollment materials.

Benefits Counselor

Reinhart's Employee Benefits Practice is one of the largest and most tenured in the country:

Attorneys: Thomas Funk, Jeffrey Fuller, Kristin Bergstrom, Bennett Choice, John Mossberg, William Tobin, Jussi Snellman, Gregory Storm, Rebecca Greene, Lynn Stathas, Philip OBrien, Beth Bulmer, Pete Rosene, Pam Nissen, Michael Joliat, Lucas Pagels, Andrew Christianson, Stacie Kalmer, Jessica Culotti, Bryant Ferguson, Justin Musil, Amanda Cefalu, John Barlament, Woomin Kang, Nicholas Zuiker, Martha Mohs, Katherine Kratcha, Karyn Durkin, Emily Pellegrini, Xavier Prather, Paul Beery, Joshua Hernandez, Matthew Barron.

Paralegals: Colleen McGuire Schmitz, Laurie Matthews, Mary Kaminski, Amanda Klein, Cheryl Yerkes, Stacy Heder, Pamela Martinez, Patrice Wright and Lucretia Anderson.


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