DOL – Setnor Byer Insurance & Risk

FLSA Update: Department of Labor Revises Joint Employment Regulations under the Fair Labor Standards Act

The Fair Labor Standards Act’s regulations are changing again. These changes involve joint employment under the FLSA, which is important because joint employers are individually and jointly responsible for FLSA compliance and legally liable for violations. According to the Department of Labor, the revised regulations will reduce uncertainty over joint employer status and reduce litigation.

Assume Susan, a non-exempt employee, worked 35 hours for Acme and 35 hours for Globex in a single workweek. If Acme and Globex are deemed joint employers, each would be individually and jointly responsible for the 30 hours of overtime compensation that Susan is due. Otherwise, Susan could sue Acme, Globex or both for violating the FLSA.

The revised regulations continue to recognize two potential scenarios in which an employee may have joint employers. The first involves an employee who performs work for Employer A that simultaneously benefits another individual or entity (Employer B). The DOL adopted a four-factor balancing test to determine whether Employer B exercises sufficient direct or indirect controls over the employee to qualify as a joint employer. The four factors are whether Employer B:

hires or fires the employee;
supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
determines the employee’s rate and method of payment; and
maintains the employee’s employment records.

Employer B must actually exercise direct or indirect control over the employee. Indirect control is exercised if Employer B gives mandatory directions to Employer A that directly controls the employee. The appropriate weight to give each factor will vary depending on the circumstances. Additional factors may need to be considered in some cases, but some factors are not relevant, such as whether a potential joint employer is franchisor or whether there is a contract between potential joint employers.

No substantive changes were made for determining joint employment status in the second scenario, which involves employees who work one set of hours for one employer and a separate set of hours for another. If the employers are acting independently with respect to an employee’s employment, they are not joint employers. If they are sufficiently associated with respect to an employee’s employment, they are joint employers and must aggregate all hours worked to determine FLSA compliance.

The revised regulations, which are effective March 16, 2020, include examples for determining joint employment in various factual circumstances. Employers should pay attention to circumstances that may create a joint employment relationship and should consult their attorney to avoid costly FLSA violations. Employers should also consider Employment Practices Liability Insurance to protect against various employment-related claims. Please contact us to learn more about EPLI coverage.

FLSA Update: DOL Proposes Salary Increase for White-Collar Overtime Exemptions

It’s not déjà vu. The Department of Labor is trying to change the white-collar overtime exemptions …again. On March 22, 2019, the DOL published a proposed rule that would increase the minimum salary requirements for the Fair Labor Standards Act’s executive, administrative and professional overtime exemptions.

The DOL estimates that 1.3 million currently exempt employees would become nonexempt under the proposed rule. Without some form of intervention, employers will have to start paying overtime to these newly-nonexempt employees.

The proposed rule does not change the standard duties tests for exempt white-collar employees. Instead, the DOL focused primarily on updating the minimum salary and compensation levels needed to qualify for the executive, administrative and professional overtime exemptions.

Proposed Salary Level [Current Salary Level]

Weekly: $679 [$455]

Bi-weekly: $1,358 [$910]

Semi-Monthly: $1,471 [$985.83]

Monthly: $2,942 [$1,971.66]

Annually: $35,308 [$23,660]

The proposed rule also increases the total annual compensation needed to exempt “highly compensated employees” from $100,000 to $147,414 per year. It also allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level, but payments must be made on an annual or more frequent basis.

According to the DOL, salary levels needed to be updated to reflect growth in wages and salaries. The proposed salary levels, however, are lower than the salary levels required under the 2016 final rule, which was blocked by a federal court. The minimum salary needed to qualify for white-collar exemptions under the 2016 final rule was $913 per week ($47,476 per year).

The period for public comment on the proposed rule opened March 22^nd and closes May 21, 2019. The DOL anticipates that the proposed rule, once finalized, will become effective in 2020. This gives employers some time to prepare, but not a lot.

Employers are once again facing uncertainty and confusion surrounding the white-collar overtime exemptions. The result is an increased risk exposure. Employment Practices Liability Insurance can protect against various employment-related claims. Limited coverage for wage and hour claims may be available.

Please contact us if you would like to learn more about employment practices liability insurance.

Fair Labor Standards Act: Wage & Hour Law Update

What is the most recent development involving Fair Labor Standards Act? Here’s a hint. It’s not the highly-publicized rise and fall of those new white-collar overtime exemption regulations. In fact, quite a bit has happened since the Department of Labor officially abandoned its fight for new white-collar regulations in late 2017.

Opinion Letters

In June 2017, the DOL announced that it would reinstate the issuance of written opinion letters to help employers and employees better understand the FLSA. These letters provide the Wage and Hour Division’s official opinion of how the FLSA applies in the specific circumstances described by the person requesting the opinion.

On January 5, 2018, the DOL made good on its promise when it re-issued seventeen FLSA-specific opinion letters, the first in nearly a decade. These letters were originally prepared in 2009 by the departing Bush administration and quickly withdrawn under the new Obama administration. Then, on April 12th, the DOL issued two new FLSA-specific opinion letters.

This new round of opinion letters covers various topics, including:

Compensability of frequent rest breaks required by a serious health condition;
Compensability of travel time;
Calculation of salary deductions;
Salary deductions for full-day absences based on hours missed; and
Year-end non-discretionary bonuses.

Opinion letters are significant because they can provide an affirmative defense for actions that may otherwise be unlawful under the FLSA. An employer may avoid liability for actions:

Taken in good faith; and
In conformity with and in reliance on any written regulation, order, ruling, approval or interpretation of the DOL’s Wage and Hour Division.

Tipped Employees

In December 2017, the DOL proposed new tip regulations. Under the FLSA, employers can credit tips toward their minimum wage obligation. This “tip credit” is equal to the difference between the cash wages it pays the employee (which must be at least $2.13 per hour) and the $7.25 per hour Federal minimum wage.

Under current regulations, employees must be allowed to keep all of their tips, except for tips distributed through a tip pool. However, the tip pool must be limited to employees who customarily and regularly receive tips, like servers, bartenders and bussers. This restriction applies regardless of whether an employer claims a tip credit.

The proposed regulations remove this restriction for employers that do not take a FLSA tip credit and pay a direct cash wage of at least the full Federal minimum wage. The proposed regulations do not change the rules for employers that do claim a tip credit.

Under the proposed regulations, employers who do not take a tip credit would be allowed to share tips with back-of-house workers and other employees who do not customarily and regularly receive tips. According to the DOL, this lets employers reduce wage disparities among employees who all contribute to a customer’s experience, and also incentivizes all employees to improve customers’ experience.

The period for public comment on the proposed regulations ended February 5, 2018, so we can only wait to see what the DOL does next.

The rapidly changing FLSA can put employers at serious risk. Adjusting to change takes time, but violations can happen in the blink of an eye. Employers should consider Employment Practices Liability Insurance to protect against various employment-related claims, including limited coverage for wage and hour claims.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Federal Judge Blocks New White-Collar Overtime Regulations

A federal judge in Texas has blocked the Fair Labor Standards Act’s new white-collar overtime exemption regulations. Ten days before their effective date, District Court Judge Amos Mazzant issued a nationwide preliminary injunction that temporarily prohibits the Department of Labor from implementing and enforcing the new white-collar overtime exemption regulations. As a result, the new regulations will not be going into effect on December 1, 2016.

In May 2016, the Department of Labor revised various white-collar overtime exemption regulations to:

increase the minimum salary requirement from $455 per week ($23,660 annually) to $913 per week ($47,476 annually);
increase the minimum annual compensation requirement for the highly-compensated employee exemption from $100,000 to $134,004; and
create a process to automatically update the minimum salary and compensation levels every three years, beginning on January 1, 2020.

In September 2016, twenty-one states filed a lawsuit to challenge the legality of the new regulations. On the same day, more than 50 state and national business organizations filed a separate lawsuit challenging the regulations. Both cases were filed in the Eastern District of Texas and were later consolidated.

The plaintiffs filed an Emergency Motion for Preliminary Injunction to prevent the new regulations from going into effect on December 1, 2016. Though a number of arguments were made, Judge Mazzant, who was nominated by President Obama, ultimately determined that the DOL exceeded its delegated authority and ignored Congress’s intent by promulgating and attempting to implement the new regulations.

According to Judge Mazzant, Congress unambiguously intended the white-collar exemptions to depend on an employee’s duties rather than an employee’s salary. By significantly increasing the minimum salary level, the new regulations essentially supplant the well-established duties test. If the intent is to replace the duties test with a salary requirement, then only Congress can make the change, not the DOL.

Judge Mazzant noted that the new regulations would also be invalid because they are not based on a permissible construction of the FLSA and do not comport with Congress’s intent. The broad purpose of the white-collar exemptions was to exempt from overtime those engaged in executive, administrative and professional capacity duties. However, the DOL essentially created a de facto salary-only test by significantly increasing the minimum salary level.

Judge Mazzant ultimately concluded that the public interest is best served by a nationwide preliminary injunction that preserves the status quo until the case can be fully resolved on its merits. Since the DOL is currently prohibited from implementing and enforcing the new regulations, employers don’t have to change their wage and exemption practices for white-collar employees, at least for now.

The ultimate fate of the new regulations is uncertain. Though the preliminary injunction is temporary, this case can languish in court for more than a year. The DOL is currently considering all legal options. In the meantime, the Obama administration that initially directed the DOL to update the white-collar overtime exemption regulations will be replaced by a Trump administration that may direct the DOL otherwise.

Since the level of uncertainty and confusion surrounding the white-collar overtime exemptions has reached new heights, employers may benefit from having Employment Practices Liability Insurance to protect against various employment-related claims. Limited coverage for wage and hour claims may be available.

Please contact us if you would like to learn more about complying with the FLSA’s new (old) white collar overtime exemption regulations.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Now What? Preparing for the New FLSA White Collar Overtime Exemptions

On December 1, 2016, it will be more expensive for employers to take advantage of the Fair Labor Standards Act’s (FLSA) so-called white collar overtime exemptions. Since FLSA violations have always been expensive, employers should begin the process of determining whether and to what extent they will be affected by the new overtime exemption regulations .

The new rules focus primarily on the minimum salary and compensation levels needed to qualify for the FLSA’s executive, administrative, professional, and computer employee overtime exemptions. Employers can ask the following questions to determine the potential impact of the new overtime rules.

Are there any employees classified as exempt under one of the FLSA’s white collar overtime exemptions? If no, you should not be affected by the higher standard salary levels under the new rules. If yes, move on to the next question.

Do any of these employees ever work more than 40 hours in a workweek? If no, you should not be affected by the higher standard salary levels under the new rules. If yes, move on to the next question.

Do any of these employees earn a salary of less than $913 per week? (This works out to $1,826 biweekly, $1,978 semimonthly, $3,956 monthly or $47,476 annually.) If no, you should not be affected by the higher standard salary levels under the new rules. If yes, exemption classifications and compensation practices will need to be adjusted before December 1, 2016 to avoid violating the new rules.

Various adjustments can be made to ensure compliance under the new rules. However, the most appropriate adjustment(s) will likely depend on each employer’s specific circumstances, such as the number of newly-nonexempt employees, their salaries, how often they work overtime and how much overtime they work.

Depending on their circumstances, employers may implement one or more of the following adjustments.

Increase Salaries. The obvious adjustment, and the one likely envisioned by those enacting the new rules, would be to increase the salaries of exempt white collar employees to no less than $913 per week. Though this may be the simplest and least disruptive adjustment, it may also be the most unrealistic. Though salary increases for some employees may be nominal, they can be more than double for others.

[Remember, employees are not exempt simply because their salaries satisfy the increased salary levels under the new rules. Their primary job duties must also involve the kind of work associated with the specific white collar exemption. Employees must satisfy the minimum salary level requirement and the applicable “standard duties test” to be exempt.]

Pay Newly-Nonexempt Employees Overtime Compensation. The alternative to increasing salaries is to re-classify these exempt white collar employees as overtime-eligible employees. If they work more than 40 hours in a workweek, they must be paid one and a half times their regular rate. As with other nonexempt employees, employers must track the number of hours worked each day and the total hours worked each workweek by newly-nonexempt employees. For many, this will be an entirely new experience and will take some getting used to.

This may not be a problem for employees who rarely work or who work very little overtime. These employees can continue working the same number of hours. Though employers will pay more for occasional overtime work, they may still be paying substantially less than $913 per week. The same cannot be said about employees who regularly work or who work a lot of overtime. The cost of paying time and a half to these employees could be very high, and may even approach $913 per week.

Prohibit Overtime. Newly-nonexempt employees can be prohibited from working overtime. If no overtime is worked, no overtime compensation is required. This option may be simple, but it may not be easy. Exempt employees typically work more than 40 hours in a workweek because they have more than 40 hours of work to do. This work must still get done, but someone else will have to do it.

Adjust Personnel, Schedules or Assignments. Those who prohibit overtime may have to make various operational adjustments. For example, workload distribution and workforce scheduling may need to be adjusted to compensate for the loss of overtime work. In some cases, new employees may need to be hired to make up for any lost productivity.

Adjust Wages. If newly-nonexempt employees are allowed to continue working overtime as always, employers will end up paying more money for the same amount of work. Reallocating regular wages and overtime compensation is a way to keep the hours worked by and the amount paid to newly-nonexempt employees largely the same. However, employers may not reduce an employee’s hourly wage below the highest applicable minimum wage (federal, state, or local) or continually adjust wages each workweek in order to manipulate the regular rate.

Employers cannot wait too long to begin planning for the upcoming change. It takes time to properly implement organizational adjustments to exemption classifications and compensation practices, particularly if they are substantial or complex. With all the publicity surrounding the new white collar overtime exemption rules, it’s probably safe to assume that violations will be noticed not only by those employees who are affected by the new rules, but by the Department of Labor too.

Since the Final Rule is sure to bring a level uncertainty and confusion, employers may benefit from having Employment Practices Liability Insurance to protect against various employment-related claims. Limited coverage for wage and hour claims may be available.

Please contact us if you would like to learn more about complying with the FLSA’s new white collar overtime exemption rules.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Florida Supreme Court Ruling May Increase Workers’ Compensation Premiums

A recent decision by the Florida Supreme Court may soon have employers paying substantially more for workers’ compensation insurance. In Castellanos v. Next Door Company, the Court ruled that Florida’s mandatory workers’ compensation attorney fee schedule is unconstitutional. In response to this ruling, the National Council on Compensation Insurance (NCCI) proposed increasing Florida’s workers’ compensation rates by 17.1%.

Under Florida Statute 440.34, attorneys who successfully secure workers’ compensation benefits for injured clients may be awarded attorneys’ fees. However, any attorney fee award, which is based on the amount of workers’ compensation benefits secured, must equal:

20 percent of the first $ 5,000;
15 percent of the next $ 5,000;
10 percent of any remaining benefits that will be provided during the first 10 years after the claim is filed; and
5 percent of any benefits secured after 10 years.

In Castellanos, the Florida Supreme Court considered whether this mandatory fee schedule is constitutional.

Marvin Castellanos suffered an injury on the job. The workers’ compensation insurance company refused to authorize the medical treatment recommended by its own designated doctor and raised twelve affirmative defenses to avoid paying compensation. After a final hearing, the Judge of Compensation Claims (JCC) ruled entirely in Mr. Castellanos’ favor.

Mr. Castellanos’ attorney spent 107 hours working on the case and requested an award of attorneys’ fees calculated at $350 per hour. Despite finding this request to be reasonable and warranted, the JCC was required to follow Florida’s mandatory fee schedule. Based on the actual value of the benefits secured, Mr. Castellanos’ attorney was awarded fees in the amount of $164.54, or $1.53 per hour.

The Court noted that the mandatory fee schedule does not consider the reasonableness of a fee and does not permit the review of grossly inadequate or grossly excessive fees. “Without the ability of the attorney to present, and the JCC to determine, the reasonableness of the fee award and to deviate where necessary, the risk is too great that the fee award will be entirely arbitrary, unjust, and grossly inadequate.” Accordingly, the Court ruled that Section 440.34 is unconstitutional.

As a result, the statute’s immediate predecessor, which was construed to provide for a “reasonable” award of attorney’s fees, was essentially revived. Though the statutory fee schedule remains the starting point for calculating fees, claimants must now be allowed to present evidence to show that its application will result in an unreasonable fee.

Though the Court emphasized that its ruling does not mean that claimants’ attorneys will receive a windfall, insurance companies disagreed. On May 27, 2016, NCCI, which is a licensed rating organization authorized to submit workers’ compensation insurance rate filings on behalf of Florida insurance companies, submitted a proposed rate increase to the Office of Insurance Regulation (OIR).

According to NCCI, the first year impact of Castellanos will be a 15% increase in overall Florida workers compensation system costs. (The total proposed rate increase of 17.1% includes factors that are not related to Castellanos.) NCCI proposes applying the increased rates to new and renewal policies that are effective on or after August 1, 2016. NCCI also proposes applying the increased rates to all policies in effect on August 1, 2016 on a pro-rata basis through the remainder of the term of these policies.

If NCCI’s proposal is approved, Florida would have the highest workers’ compensation rates in the Southeast. The OIR plans to hold a public hearing regarding NCCI’s proposed rate increase in the coming months, so stay tuned.

Even if the OIR approves all or part of NCCI’s proposed rate increase, there are ways to lower workers’ compensation insurance costs, such as promoting employee safety and maintaining a safe work environment.

Please contact us if you would like more information about controlling workers’ compensation insurance costs.

Additional information is also available in our weekly Risk Management Newsletters.

Is Your Business Ready for New FLSA White-Collar Overtime Rules?

Over two years ago, the possibility of new overtime rules for white-collar employees under the Fair Labor Standard Act (FLSA) first appeared on the horizon. Last year, the Department of Labor (DOL) released proposed revisions to overtime exemption regulations, including those for executive, administrative and professional employees. Today, that once looming possibility is looking more like a fast approaching reality. Fast, as in possibly by mid-July, fast.

On March 14, 2016, the DOL submitted its final version of the revised overtime exemption regulations to the White House’s Office of Management and Budget (OMB) for review. Once the OMB completes its review, the final regulations will be published. After that, it’s just a matter of time. Unfortunately, there are some details we still don’t know about the final regulations. Minor details, really, like what they are or when they will go into effect.

What will be different under the final regulations?

No one really knows. The final regulations will not be made public until the OMB completes its review, and few details have leaked or been disclosed. Many expect the final regulations to be identical or very similar to the proposed regulations issued in July 2015, including the DOL’s proposal to:

Increase the minimum salary requirement for white collar exemptions from $455 per week ($23,660/year) to $921 per week ($47,892/year);
Increase the minimum compensation requirement for the Highly Compensated Employee exemption from $100,000 to $122,148 per year; and
Automatically update the new minimum salary and compensation levels annually.

It’s possible that the final regulations may include additional changes, particularly the duties test used to determine eligibility under the current white-collar exemptions . In the proposed regulations, the DOL asked for comments about whether changes need to be made to the duties tests. Though the DOL specifically stated that it’s not proposing any specific regulatory changes to the duties test, we don’t know for sure.

When will the final regulations become effective?

This is also uncertain, but it may be sooner than initially expected. The Solicitor of Labor has indicated that the effective date of the final regulations will be 60 days after publication. But, before they can be published, they must be reviewed. The OMB generally has 90 days to review regulations, which would put the deadline near the middle of June. However, because of the upcoming election, the middle of May is probably the OMB’s real deadline. Here’s why.

Under the Congressional Review Act (CRA), Congress is generally given 60 days to review and disapprove a major rule, like the DOL’s new overtime exemption regulations. However, the CRA makes an exception for “midnight rules” that are issued toward the end of an administration. If a rule is issued too late, the 60-day review period essentially resets to give the next session of Congress an opportunity to review and disapprove the rule.

The current administration does not want this to happen, so the OMB must complete its review before the date on which the CRA’s reset provision is triggered. Otherwise, the new overtime exemption regulations would be at the mercy of the next Congress and a new president.

According to calculations by the Congressional Research Service, this date is estimated to be May 16, 2016.

This date was estimated using projected congressional schedules, so it may change. Nevertheless, if we assume the final regulations are published by May 16, 2016, and add 60 days, the new regulations could become effective around July 15, 2016, maybe even sooner!

Or, maybe later. On March 17, 2016, the Protecting Workplace Advancement and Opportunity Act was introduced as a bill. If passed, this law would essentially void any changes made to the white-collar overtime exemptions. Before proposing any new changes, the law would also require the DOL to undertake a comprehensive analysis of how changing overtime regulations would impact employers, including small businesses.

In the meantime, potentially significant changes to overtime pay requirements for white-collar employees may soon be here. How can employers prepare? Unfortunately, plans cannot be finalized until the final regulations are released, but employers can use the July 2015 proposed regulations as a guide to begin developing preliminary plans. In case there are any surprises, these plans should be flexible and capable of adapting to possible contingencies.

The risk of employment-related lawsuits, particularly those involving overtime under the FLSA, is nothing new for employers. But, the prospect of new rules, and their uncertainty, is expected to increase that risk significantly. Employment Practices Liability Insurance can protect against various employment-related claims, and limited coverage for wage and hour claims may also be available.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Employee Assistance Programs under the Affordable Care Act

Employee Assistance Programs (EAPs) are designed to help employees prevent, identify and resolve various personal issues and matters. Many employers include EAPs in their benefits packages to enhance employee effectiveness and maintain workplace productivity. In addition to providing benefits like pre-paid legal, crisis intervention or professional development services, EAPs commonly provide health-related benefits, such as mental health, substance abuse and wellness services. Does this mean that they must comply with the Affordable Care Act?

According to final regulations issued by the Departments of Labor, Treasury and Health & Human Services on October 1, 2014, the answer is…maybe.

If an EAP qualifies as an excepted benefit, it will generally be exempt from the ACA’s requirements. Otherwise, the EAP must incorporate the market reforms mandated by the ACA, such as no lifetime or annual limits. Under the final regulations, an EAP must satisfy four requirements to qualify as an excepted benefit.

The EAP cannot provide significant benefits in the nature of medical care.

The amount, scope and duration of services are considered when determining whether an EAP meets this requirement. For example, an EAP that provides only limited, short-term outpatient counseling to substance abusers without requiring prior authorization or review for medical necessity, will not be considered an EAP that provides significant benefits in the nature of medical care. Alternatively, EAPs providing disease management services (lab testing, counseling, prescription drugs, etc.) for chronic conditions, such as diabetes, do provide significant benefits in the nature of medical care.

The Departments may provide additional clarification in the future regarding when a program provides significant benefits in the nature of medical care.

Benefits provided by the EAP cannot be coordinated with benefits under another group health plan.

This requirement has two elements:

Participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a “gatekeeper”) before becoming eligible for benefits under the other group health plan.
Eligibility for EAP benefits must not be dependent on participation in another group health plan.

Employee premiums or contributions cannot be made a condition of participation in the EAP.
The EAP cannot impose any cost-sharing requirements (co-pay, etc.).

These final regulations apply to group health plans with plan years beginning on or after January 1, 2015. Until then, the Departments will consider EAP benefits meeting the conditions of the 2013 proposed regulations or these final regulations to qualify as excepted benefits.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the ACA’s market reforms. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Final Rules Issued for Mental Health Parity and Addiction Equity Act

The Departments of Labor, Health and Human Services and the Treasury issued final rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Act). Though interim final rules implementing the Act were published and became effective in 2010, these final rules will become effective 60 days after their November 13, 2013 publication date.

Under the Act, group health plans and group and individual health insurance coverage are required to treat mental health and substance use disorder benefits on par with medical/surgical benefits. Though the Act does not require group health plans to provide mental health benefits or substance use disorder benefits, if they are provided, financial requirements and treatment limitations cannot be more restrictive for mental health and substance use disorders than they are for medical/surgical benefits.

Financial requirements include deductibles, copayments, coinsurance and out-of-pocket maximums, but do not include aggregate lifetime or annual dollar limits. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, days in a waiting period, and other similar limits on the scope or duration of treatment.

According to a press release issued by the administration, the final rules include specific consumer protections, such as:

Ensuring that parity applies to intermediate levels of care received in residential treatment or intensive outpatient settings;
Clarifying the scope of transparency required by health plans, including the disclosure rights of plan participants, to ensure compliance with the law;
Clarifying that parity applies to all plan standards, including geographic limits, facility-type limits and network adequacy; and
Eliminating an exception to the existing parity rule that was determined to be confusing, unnecessary and open to abuse.

Health and Human Services Secretary Kathleen Sebelius said, “This final rule breaks down barriers that stand in the way of treatment and recovery services for millions of Americans. Building on these rules, the Affordable Care Act is expanding mental health and substance use disorder benefits and parity protections to 62 million Americans. This historic expansion will help make treatment more affordable and accessible.”

The final rules generally apply to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after July 1, 2014; however, they do not apply to small employers with between 2 and 50 employees. Since the Affordable Care Act extended the Act to grandfathered and non-grandfathered individual health insurance coverage, the final rules apply to individual coverage with policy years beginning on or after July 1, 2014.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care reform landscape. Check back with us periodically for future informational updates.

If you have specific questions about the Mental Health Parity and Addiction Equity Act or the Affordable Care Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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No Penalty for Noncompliance with ACA’s Notice of Coverage Options

On September 11, 2013, the United States Department of Labor announced that employers will not be fined or penalized under the Affordable Care Act for failing to provide employees with notice about coverage options available through the ACA’s Health Insurance Marketplace (Exchanges). This comes just weeks before the October 1, 2013 deadline for employers to begin providing the notice to their employees.

The announcement, which was posted on the DOL’s website as a “FAQ on Notice of Coverage Options,” states:

Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?

No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

A day later, the U.S. Small Business Administration posted similar information on its website.

This announcement comes as a surprise to those who assumed that noncompliance would be met with a fine or penalty. Though the ACA’s employer notice requirement does not contain a specific penalty provision, many assumed that the ACA’s general penalty of $100 per day would apply. And, since news of the DOL’s position came informally through its website rather than the formal regulatory process, some believe that fines or penalties for noncompliance remain a possibility in the future.

This new development has understandably left many employers unsure about how to deal with the ACA’s employer notice requirement. Though it is still the law, the DOL’s announcement has undoubtedly left many wondering whether a requirement can really exist without consequences.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care reform landscape. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, view our health product page.

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