INSIDER

Health Care on the Campaign Trail
Health care reform is a hot topic right now. The presidential candidates have made speeches, debated and discussed health care at voter forums. All three major party candidates have issued proposals aimed at increasing access or coverage, reducing costs and improving quality.  [April 2008]

House Passes Mental Health Parity Bill
Mental health parity reform moved another step closer to enactment when the House approved the Paul Wellstone Mental Health and Addiction Equity Act (H.R.1424) on March 5. The Senate approved the Mental Health Parity Act (S.558) – a version supported by the business community and mental health advocates – by unanimous consent in September 2007.  [April 2008]

DOL Proposes New FMLA Regulations
The U.S. Department of Labor (DOL) has proposed new regulations for the Family and Medical Leave Act (FMLA). Although employers were hoping for significant guidance, these proposed regulations provide mostly clarifications and minor changes.  [April 2008]

President Bush Releases Fiscal 2009 Budget Proposal
President Bush has proposed a budget for fiscal year 2009. Many of the budget’s health care and retirement proposals appeared in earlier budget submissions, such as replacing the tax exclusion for employer-provided health insurance with a standard tax deduction, and establishing a new retirement savings plan to replace existing defined contribution plans. These proposals failed to gain legislative traction in earlier years and are unlikely to do so this year either.  [March 2008]

DOL Addresses Exemption From HIPAA Portability Rules
In a recent Field Assistance Bulletin (FAB), the U.S. Department of Labor (DOL) differentiates exempt from nonexempt supplemental health coverage under the Health Insurance Portability and Accountability Act (HIPAA). The DOL is responding to concerns about some insurance products being improperly marketed as HIPAA-exempt supplemental plans.  [February 2008]

IRS Relaxes Restrictions on Payments for Cafeteria Plan Coverage
The IRS recently modified its position on the permissibility of pretax payments for health coverage under a cafeteria plan for domestic partners and others who are not tax dependents. Formerly, employees had to pay taxable health benefits with after-tax dollars. Now, employees may pay for both nontaxable and taxable health benefits with pretax dollars, and the cost of the taxable benefits will be imputed to employees’ gross incomes.  [February 2008]

Major Expansion of FMLA Allows Six-Month Leave to Care for Injured Servicemembers
Employees may take up to six months of job- and benefit-protected leave to care for family members injured in the line of active military duty. In certain other circumstances, workers may take up to 12 weeks of leave when a family member is on active duty or has been notified of an impending call to active duty.  [February 2008]

Much Talk, Little Action During 2007 Legislative Session
Mental health parity. 401(k) fees. Deferred compensation. COBRA. Carried interest. Medicare. Expatriate taxation. These are just some of the benefit and compensation issues Congress discussed last year. During 2007, lawmakers evinced a continuing desire to enact legislation that would affect employer-sponsored health, retirement and compensation programs – yet very little of that legislation passed. The year also marked the emergence of new issues that would affect plan investments. [January 2008]

House Approves New COBRA Entitlements and Tax Credits for Displaced Workers
The House has approved legislation that could extend continuing health care coverage to trade-displaced workers for 10 years or more. The act also would increase the tax credits available to help such workers pay for COBRA continuation coverage or other health care coverage.  [November 2007]

House Ready to Vote on Mental Health Parity
Mental health parity reform has passed the three House committees with jurisdiction, and the House is likely to approve the Paul Wellstone Mental Health and Addiction Equity Act (H.R.1424) within weeks.  [November 2007]

Mental Health Parity Legislation Advances
Legislation to expand the mental health parity requirements continues to move forward. In the House, the Energy and Commerce Committee approved the Paul Wellstone Mental Health and Addiction Equity Act (H.R.1424) on October 16, which cleared the bill for a vote by the full House.  [October 2007]

SCHIP Vetoed
As expected, President Bush vetoed legislation to reauthorize and expand the State Children’s Health Insurance Program (SCHIP).  [October 2007]

Mental Health Parity Reform Nears Passage
There are two bills pending in the House and Senate to reform the Mental Health Parity Act of 1996. Under the bills, health plans could not impose different treatment limitations and financial requirements on mental health/substance abuse benefits than on medical/surgical benefits. The parity requirements would apply to all plans that offer mental health and substance abuse benefits. Debate has been focused on three broad issues: ERISA preemption, mandated benefits and medical management practices. [September 2007]

House, Senate SCHIP Bills Include Medicare, FMLA Provisions
The House and Senate approved separate bills to reauthorize and expand the State Children’s Health Insurance Program (SCHIP), setting the stage for conference negotiations in September. The bills also would make changes to Medicare and the Family and Medical Leave Act (FMLA) – with implications for employers.  [September 2007]

Tying Health Benefits to Health Status: A Few Words of Caution
With health costs still rising at twice the rate of inflation, employers are looking for ways to get more from their health care dollars. To encourage workers to improve their health, some new insurance products provide supplemental benefits to members who meet specific health thresholds, such as a low body-mass index or cholesterol level, or practice certain healthy behaviors, such as not smoking.  [September 2007]

House SCHIP Provision Would Impose Fee on Health Plans
The Children’s Health and Medicare Protection Act of 2007 (CHAMP Act, H.R. 3162) would reauthorize and expand the State Children’s Health Insurance Program (SCHIP) for five years. It also would impose an annual fee on insured and self-insured health plans to fund a new research center to study health care services and procedures.  [September 2007]

Court Upholds EEOC’s Regulation Allowing Plans to Coordinate Retiree Health Benefits With Medicare
The U.S. Court of Appeals for the Third Circuit recently upheld the Equal Employment Opportunity Commission’s (EEOC’s) proposed regulation to allow employers to coordinate retiree health benefits with Medicare benefits. Finding that the regulation was “reasonable” and “necessary and proper in the public interest,” the appeals court upheld a lower court’s decision to lift an injunction, permitting the regulation to stand. The EEOC is now free to finalize its rule, thereby giving employers license to coordinate retiree medical benefits with Medicare.  [August 2007]

Massachusetts Universal Health Care Goes Live
In a first for the nation, all residents of Massachusetts were required to obtain health insurance by July 1, 2007, under a law passed last year. By May 2007, more than 100,000 residents who had been uninsured had acquired coverage. To make universal coverage possible, the law makes new demands on employers in Massachusetts, which must make a “fair and reasonable” contribution to the cost of their employees’ health insurance or else pay a fair-share contribution to the state.  [August 2007]

Senate Approves Drug Importation Provisions
In May, the Senate approved a provision to allow the importation of prescription drugs from Canada and other industrialized countries, but a separate provision requiring the secretary of Health and Human Services to certify the safety of imported drugs would likely prevent the measure from taking effect. The developments constitute yet another point-counterpoint in the years-long legislative wrangling over prescription drug importation. Supporters vow to continue their push to legalize drug importation.  [July 2007]

Genetic Nondiscrimination Legislation Moves Forward
In a 420-3 vote on April 25, the House approved the Genetic Information Nondiscrimination Act (H.R.493), which would prohibit health insurers and employers from discriminating against employees based on their (or their family members’) genetic information.  [May 2007]

Congress Considers Mental Health Parity Legislation
The House and Senate are considering bills that would expand the mental health parity requirements in current law. The existing Mental Health Parity Act of 1996 prevents group health plans from imposing lower annual or lifetime dollar limits on mental health benefits than on medical/surgical benefits.  [April 2007]

President and Others Propose Big Changes for Health Care
President Bush has proposed a new budget for fiscal year 2008. Some of the administration’s proposals are continuations of past initiatives, such as expanding health savings accounts (HSAs), while others represent new directions, such as eliminating the income tax exclusion for employer-provided health coverage.  [March 2007]

Genetic Nondiscrimination Legislation Getting Attention
The Senate Health, Education, Labor and Pensions (HELP) Committee approved the Genetic Nondiscrimination Act (S.358) on January 31, 2007. The act would prohibit health insurers and employers from discriminating against employees based on their (or family members’) genetic information.  [February 2007]

President Proposes New Tax Treatment for Health Care Benefits
A few days before his State of the Union address, President Bush unveiled a proposal to change the tax treatment of health care coverage. The proposal would make employer-sponsored coverage taxable and establish a new standard deduction for private health coverage.  [February 2007]

House Approves Legislation to Require Negotiation of Part D Drug Prices
On January 12, the House approved the Medicare Prescription Drug Price Negotiation Act of 2007 (H.R.4) by a vote of 255-170. The legislation would require the secretary of Health and Human Services (HHS) to try to negotiate lower drug prices – including discounts, rebates and other price concessions – for sponsors of Part D prescription drug or Medicare Advantage plans. The secretary would have to report the results of these negotiations to Congress twice a year.  [February 2007]

U.S. Appeals Court Upholds Dismissal of Maryland’s Health Insurance Law
On January 17, 2007, the United States Court of Appeals for the Fourth Circuit affirmed a lower-court decision that ERISA preempts the Maryland Fair Share Health Care Fund Act, which would have required nongovernmental employers with 10,000 or more workers to spend at least 8 percent of their payroll on health care or pay the difference in taxes.  [February 2007]

DOL Requests Comments on FMLA
The U.S. Department of Labor (DOL) is seeking information and comments from the public on the Family and Medical Leave Act (FMLA) and its implementing regulations.  [January 2007]

Important HSA Changes Signed Into Law
As health savings accounts (HSAs) and the high-deductible health plans (HDHPs) that go with them are being more widely used, employers and employees have run into some obstacles. Over recent months, lawmakers have been discussing legislation to simplify and improve these plans. During the 11th hour of the 2006 legislative session, Congress passed the Tax Relief and Health Care Act (H.R.6111), which President Bush signed into law December 20.  [January 2007]

Court Rules ERISA Preempts Maryland Health Insurance Law
In Retail Indus. Leaders Association v. Fielder, a federal judge in Maryland ruled that ERISA preempts the Maryland Fair Share Health Care Fund Act, which was slated to become effective January 1, 2007. [December 2006]

Court Rules ERISA Preempts Maryland Health Insurance Law
In Retail Indus. Leaders Association v. Fielder, a federal judge in Maryland ruled that ERISA preempts the Maryland Fair Share Health Care Fund Act, which was slated to become effective January 1, 2007.  [December 2006]

IRS Issues Guidance on Debit Cards
In Notice 2006-69, the IRS simplifies the use of debit cards for health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs). The notice also expands allowable expenses, adds a new substantiation method and clarifies acceptable substantiation practices, and permits the use of debit cards in dependent care plans. The guidance generally takes effect immediately.  [November 2006]

House Ways and Means Committee Clears HSA Improvement Bill
As health savings accounts (HSAs) have become more popular, employers, participants and policymakers have become aware of some of their shortcomings. Over the past year, lawmakers have shown growing interest in fixing some of these problems (see Watson Wyatt Insider, July 2006). On September 27, the House Ways and Means Committee approved a bill to allow rollovers from health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and individual retirement accounts (IRAs). The bill would also increase the deductible contribution limit and make other changes.  [November 2006]

IRS Issues Final Regulations on Comparable Contributions to HSAs
On July 31, the IRS issued much-anticipated final regulations on how employer contributions to health savings accounts can satisfy the comparability rules. The final regulations are substantially similar to the proposed rules (see Watson Wyatt Insider, October 2005). [September 2006]

Legislation Aims to Make HSAs More Attractive
A recent Government Accountability Office (GAO) study concluded that consumer-directed health plans (CDHPs) — both health reimbursement arrangements (HRAs) and health savings accounts (HSAs) that are coupled with high-deductible health plans (HDHPs) — account for a small but growing share of private health care coverage in the United States. [July 2006]

Citizens’ Health Care Group Issues Interim Recommendations
The Citizens’ Health Care Working Group, established by the Medicare Prescription Drug, Modernization and Improvement Act of 2003, released its interim recommendations on June 1. The group recommends making affordable health care coverage for all Americans a matter of official U.S. public policy. The coverage should include a package of core services and financial assistance as necessary. The group suggests having an independent, nonpartisan group identify and periodically update the core benefit package. [July 2006]

Some Employers Finding Relief From Rising Health Care Costs, According to NBGH/Watson Wyatt Survey
Escalating increases in health care costs in recent years have wreaked havoc on companies’ compensation budgets, often holding pay and other perks hostage. Health care costs continue to rise, but at least the rate of increase has slowed. And some employers are finding ways to regain control over these costs, according to the latest National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care. [May 2006]

2007 Budget Would Expand HSAs, Calls for Pension Reform
President Bush sent Congress his budget proposal for fiscal year 2007 on February 6, 2006. The budget puts renewed emphasis on health care initiatives, proposing to expand health savings accounts (HSAs), encourage greater transparency about health care cost and quality, authorize association health plans (AHPs) and improve health information technology. [February 2006]

Flex HSA Act Aims to Improve Health Savings Accounts
Representative Eric Cantor (R-Virginia) introduced the Flex HSA Act (H.R.4511) on December 13, 2005. The act aims to promote health savings accounts (HSAs) by raising the limit on HSA contributions and permitting individuals covered by flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) to contribute to HSAs. [January 2006]

HSA/FSA Grace Period Guidance Restricts Employer Options but Provides Limited Transition Relief
In Notice 2005-86, the IRS clarifies the effect of a health flexible spending account (FSA) grace period on health savings accounts (HSAs). Employees who participate in a health FSA with a grace period may not participate in an HSA until the first day of the first month after the grace period ends. [December 2005]

Medicare Part D: Employer Options and Key Considerations
Since the Medicare Modernization Act passed in December 2003, employers, health plans and other affected entities have been busy preparing for January 1, 2006, when Medicare begins financing a standard prescription drug benefit. [July 2005]

IRS Allows Grace Period for Flex Plans
Employers that provide cafeteria plans may now establish a two-and-one-half-month grace period for participant claims, under a new rule released by the IRS last month. [June 2005]

Court Enjoins EEOC Rule Allowing Coordination of Retiree Health Benefits With Medicare
Prompted by a lawsuit filed by AARP, a federal court in Pennsylvania has prohibited the Equal Employment Opportunity Commission (EEOC) from issuing its final rule on coordinating retiree medical benefits with Medicare.  [June 2005]

IRS Issues New Guidance on HRA Contributions and Distributions
In Revenue Ruling 2005–24, the IRS authorizes tax-free employer contributions of accumulated unused vacation and sick leave to health reimbursement arrangements (HRAs) for retirees.  [June 2005]

IRS Clarifies Application of HSA Rules for Married Couples
In Revenue Ruling 2005-25, the IRS clarifies the health savings account (HSA) eligibility rules and contribution limits for married individuals. [June 2005]

Supreme Court Permits Disparate Impact Claims Under ADEA
In Smith v. City of Jackson, the U.S. Supreme Court resolved a split in the circuits, ruling that the Age Discrimination in Employment Act (ADEA) permits disparate impact claims. [June 2005]

News in Brief
Budget Resolution Affects PBGC Premiums, President Signs Bankruptcy Reform Act, DOL Revises Voluntary Fiduciary Correction Program, PBGC Takes Over United Airlines’ Pension Plans [June 2005]

President's Budget Proposal Also Addresses Hybrid Pension Plans, Other Issues
In addition to proposing reforms to the defined benefit funding rules, President Bush's budget proposal for fiscal 2006 would change the rules governing hybrid pension plans, health care plans and retirement savings plans. [March 2005]

AARP Blocks EEOC From Ruling on Retiree Medical Benefits and Medicare
On February 4, a federal court in Pennsylvania blocked the Equal Employment Opportunity Commission from issuing its final rule on coordinating retiree medical benefits with Medicare. [March 2005]

Final and Proposed Regulations for HIPAA
Last month, the U.S. Departments of Labor, Treasury, and Health and Human Services issued final and proposed regulations on the portability provisions of the Health Insurance Portability and Accountability Act. [February 2005]

News in Brief
Treasury Won't Change FSA Use-It-Or-Lose-It Rule, President Bush Appoints Tax Reform Panel, PBGC to Assume United Airlines Pilots' Plan, PBGC Proposes Changes to ERISA [February 2005]

2004 Legislative Session Saw Active Benefits-Related Discussions
The 2004 session of Congress continued into December, but benefits-related discussions were wrapped up in November. The 108th Congress had a busy legislative agenda, enacting legislation on hybrid pension plans, defined benefit funding and nonqualified deferred compensation. [December 2004]

California Voters Repeal Employer-Sponsored Health Coverage Law
On November 2, voters failed to uphold California's Pay or Play Employer Mandate, Proposition 72/SB2.  [November 2004]

President Signs Working Families Tax Relief Act
On October 4, President Bush signed the Working Families Tax Relief Act. The act extends the Mental Health Parity Act and changes the interest rate provisions of the Jobs Creation and Worker Assistance Act. [November 2004]

New Definitions in Working Families Tax Relief Act Will Have Broad Effects
The Working Families Tax Relief Act of 2004 changed the Code section 152 definition of "tax dependent," which is often used to determine health and group plan eligibility and benefits’ tax status. [November 2004]

DOL Proposes Veterans’ Rights Regulations for Health Care, Pension Plans
The U.S. Department of Labor has proposed regulations to clarify the implementation of the Uniformed Services Employment and Reemployment Rights Act of 1994. [November 2004]

Election 2004: What's Ahead for Health Care and Retirement Issues?
Election Day is approaching, and President Bush and Senator Kerry are entering the final stages of their presidential campaigns. Health care reform has been a popular campaign topic. Both candidates have plans for increasing access to health care coverage, controlling prescription drug costs, improving health information technology and otherwise reforming the U.S. health care system. [October 2004]

Senator Urges Treasury Department to Repeal FSA Use-It-or-Lose-It Rule
The move to repeal the use-it-or-lose-it rule for health care flexible spending accounts (FSAs) has shifted its focus from Capitol Hill to the U.S. Department of the Treasury. In August, Senate Finance Committee chair Charles Grassley (R-Iowa) wrote a letter urging Treasury Secretary John Snow to repeal the use-it-or-lose-it rule administratively. [October 2004]

Health Care Spending and Savings Accounts: A Way Out of Our Health Care Crisis?
The 2003 Medicare Prescription Drug, Improvement and Modernization Act (MMA) created tax-favored health savings accounts (HSAs), which are used in conjunction with high-deductible health plans (HDHPs). The idea is that consumers use the money in their HSA to pay their out-of-pocket health costs and rely on the HDHP mostly for medical catastrophes. [September 2004]

HSA Guidance Summary
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 created a new health savings vehicle, Health Savings Accounts (HSAs), that employers may provide in conjunction with high-deductible health plans (HDHPs).  [August 2004]

Supreme Court Rules That ERISA Preempts State Patients' Rights Laws
The U.S. Supreme Court has ruled that ERISA preempts state laws that allow health plan participants to sue their health plans for denying coverage.  [August 2004]

DOL Issues Final COBRA Regulations on Notice and Disclosure
The U.S. Department of Labor (DOL) has issued final COBRA regulations addressing notice and disclosure.  [August 2004]

News in Brief
Prescription Drug Importation Activities Continue, House Approves Stock Option Accounting Legislation [August 2004]

House Approves Legislation to Allow FSA Rollovers
The House of Representatives approved legislation to allow up to $500 of unused money in a flexible spending account to be carried forward or rolled over into a health savings account. [June 2004]

IRS Clarifies Interaction Among FSAs, HRAs and HSAs
In Revenue Rule 2004-45, the IRS explains when having either a health flexible spending account or a health reimbursement arrangement disqualifies an individual from making tax-free contributions to a health savings account.  [June 2004]

Lawmakers Look at Drug Importation — Again
Amid double-digit increases in the cost of health care benefits and mounting concerns about prescription drug costs, drug importation is attracting renewed attention. [May 2004]

IRS Issues Additional Guidance on HSAs
The IRS recently issued its second round of guidance regarding health savings accounts (HSAs), which answers employers’ most pressing questions and concerns about these new accounts. [May 2004]

Most HSAs Will Not Be Covered by ERISA
The 2003 Medicare Prescription Drug Modernization Act allows employers to establish Health Savings Accounts (HSAs) in conjunction with high-deductible health plans (HDHPs) to pay for medical expenses not covered by the HDHP. [May 2004]

President's Budget Proposal Includes Benefits Provisions
President Bush submitted his Fiscal Year 2005 budget proposal to Congress on February 2, 2004. It proposes new savings vehicles and expanded access to health insurance and long-term care insurance, and addresses other employment-related issues. [February 2004]

Medicare Reform: What Will It Mean?
Congress has enacted the most sweeping changes ever made to Medicare by passing the Medicare Prescription Drug, Improvement and Modernization Act, which was signed into law December 8, 2003. The act provides a prescription drug benefit for Medicare beneficiaries and enacts reforms intended to encourage more private health plans to offer integrated benefits to seniors. [December 2003]

Importing Prescription Drugs from Canada: What Employers Need to Know
Some Americans are saving large amounts of money by purchasing their prescription drugs from Canada. Although health plan sponsors may find the potential savings attractive, there are good reasons to steer clear of importing prescription drugs from Canada. [December 2003]

Health Savings Accounts Could Promote Consumer-driven Health Care
In addition to its focus on prescription drug benefits and other reforms to Medicare, the Medicare Prescription Drug, Improvement and Modernization Act creates Health Savings Accounts. These accounts could promote consumer-driven health care by making high-deductible health plans more attractive to both employers and individuals. [December 2003]

IRS Ruling Could Relieve Headaches
In Revenue Ruling 2003-102, the IRS clarifies that insured and self-insured health plans, including health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and consumer-driven health plans (CDHPs), may allow participants to pay for over-the-counter (OTC) drugs with pretax dollars. [October 2003]

The Next Phase of HIPAA: Security
Many health plans, providers and health plan sponsors just recently managed compliance with the Health Insurance Portability and Accountability Act’s privacy requirements, which became effective in April of this year. Now, these same plans and covered entities must begin planning for the next phase of HIPAA — the Security Rule — which becomes effective in April 2005 (April 2006 for small plans). [October 2003]

Medicare Drug Bills: Key Considerations for Employers
The differences between the Senate-approved Prescription Drug and Medicare Improvement Act (S.1) and the House-approved Medicare Prescription Drug and Modernization Act (H.R.1) will be negotiated by a House-Senate conference committee that convenes in July. [August 2003]

EEOC Proposes ADEA Exemption for Coordinating Retiree Health Plans With Medicare
The EEOC has issued a proposed exemption to the ADEA that would allow employers to alter, reduce or eliminate employer-sponsored retiree health benefits when retirees become eligible for Medicare or a state-sponsored retiree health benefits program.  [August 2003]

DOL Issues Proposed COBRA Notice Regulations
The DOL is proposing new rules to improve the consistency and clarity of four COBRA notices furnished by employers, plan administrators, employees and their families.  [August 2003]

How will employers respond?
A typical employer-provided retiree drug plan today — involving employer payments, retiree contributions and retiree out-of-pocket amounts — might be funded as follows. [July 2003]

Congress Debates Medicare Reform
As this issue of the Watson Wyatt Insider went to press, the House and Senate had approved separate bills to reform Medicare and provide prescription drug coverage for seniors. There are some important differences between the Senate’s Prescription Drug and Medicare Improvement Act and the House-approved Medicare Prescription Drug and Modernization Act.  [July 2003]

Health Care Issues Hit Legislative Agenda
A range of health care issues — Medicare, drugs for seniors, genetic discrimination, generic drugs and health savings accounts — has been the focus of recent congressional attention. The Medicare and prescription drug debates are in full swing, and Congress is discussing legislation to ban discrimination based on genetic information, to speed generic drugs to the marketplace and to authorize Health Savings Accounts. [July 2003]

IRS Issues Guidance on Debit/Credit Cards for Health FSAs and HRAs
In a long-awaited revenue ruling, the IRS has approved the use of debit or credit cards to reimburse qualified medical expenses from health Flexible Spending Accounts and Health Reimbursement Arrangements.  [June 2003]

IRS Publishes Second White Paper on Determination Letter Program
The IRS recently published its second white paper on the determination letter program for qualified retirement plans. [June 2003]

IRS Clarifies Treatment of Certain Medical Expenses
The IRS has released two revenue rulings that clarify which types of cosmetic-type treatments and over-the-counter treatments and supplies are “qualified medical expenses” and thus eligible to be paid or reimbursed under a medical plan. [June 2003]

Bigger Than a Breadbox: The Impact of HIPAA on American Employers
The passage of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) was hailed as one way to make health benefits more portable for American workers. Title II of the Act, Preventing Fraud and Abuse, received relatively little attention back then. [April 2003]

Defined Benefit Funding Under Active Discussion
Issues surrounding defined benefit plan funding and the demise of the 30-year Treasury bond are being discussed in Washington, D.C. [April 2003]

New Medicare Framework Faces Tough Fight in Congress
When President Bush proposed his fiscal year 2004 budget, he included $400 billion over 10 years for prescription drug coverage and other reforms to Medicare. [April 2003]

Budget Proposal Addresses Employee Benefits and Compensation
In early February, President Bush sent Congress his budget proposal for fiscal year 2004. It includes benefit and compensation provisions, Medicare reform and proposals to help the uninsured gain health care coverage. [March 2003]

108th Congress to Address Benefits Issues
The 108th Congress is underway, with the new Republican majority bringing significant changes — the most important being Republican control of the Senate and the House. [January 2003]

Health Plan Vendor Compliance With HIPAA Electronic Data Interchange Rules
Only 6 percent of the health plan vendors responding to a Watson Wyatt survey met the October 16, 2002, deadline for complying with the Electronic Data Interchange (EDI) rules issued under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The remaining 94 percent applied for an extension from the Department of Health and Human Services (DHHS). [November 2002]

Congress Struggles with Prescription Drugs
Once again, Congress is struggling over prescription drug issues, including price increases and coverage for Medicare beneficiaries.  [September 2002]

Retiree Health Benefits: Time to Resuscitate?
Today’s trend away from employer-provided retiree health benefits is certain to continue, thanks to rising health care costs, growing retiree populations, uncertain business profitability and federal regulations that discourage employers from prefunding retiree medical benefits.  [September 2002]

IRS Changes the Rules for Transfers of Surplus Assets from Terminated DB Plans to DC Plans
The IRS has changed its position on transfers of surplus assets from terminated defined benefit plans to qualified defined contribution replacement plans.  [September 2002]

HHS Releases Final HIPAA Privacy Regulations
The Department of Health and Human Services (HHS) recently published final regulations that clarify the Health Insurance Portability and Accountability Act (HIPAA) standards due to become effective April 2003.  [September 2002]

IRS Issues Guidance for New Health Reimbursement Arrangements
On June 26, the IRS issued a Notice and a Revenue Ruling on the tax treatment of Health Reimbursement Arrangements (HRAs). [August 2002]

Supreme Court Rules Against ERISA Preemption of State Law
In Rush Prudential HMO, Inc. v. Moran, the Supreme Court recently ruled that a state statute allowing for an independent review of certain denials of benefits is not preempted by ERISA for an insured group health plan. [August 2002]

Privacy Legislation May Affect Benefits Administration
The easy flow of information between individuals, businesses and governments has legislators and consumers worried about the security and confidentiality of personal information, especially medical records, financial information, Social Security numbers and other sensitive data. Congress and the states have been busy enacting privacy protections. [July 2002]

IRS Allows Automatic Enrollment in Cafeteria Plans
In a recent revenue ruling, the IRS has confirmed that employers may automatically enroll employees for health coverage in a cafeteria plan as long as employees have an opportunity to decline coverage each plan year.  [July 2002]

IRS Issues Guidance on Health FSA in Asset Sale
The IRS recently issued guidance on dealing with a health Flexible Spending Arrangement (FSA) in an asset sale, confirming that employees transferred to the buyer may continue coverage under the health FSA without interruption. [July 2002]

Lose Weight on the IRS
The IRS has ruled that participation in a weight-loss program as treatment for a disease or diseases diagnosed by a physician - including obesity - is a deductible medical expense, and thus reimbursable under a health flexible spending account [May 2002]

Protecting Patient Information: A Whole New Ball Game
In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA). This far-reaching legislation affects employers, health plans and others, and provides numerous safeguards and procedures for maintaining and administering group health plans. When employers or plan administrators hear "HIPAA," they typically think - certificates of creditable coverage, special enrollment rights or nondiscrimination rules.  [March 2002]

Supreme Court Rules on Health Plan Recovery Provisions
The Supreme Court recently handed down a decision that effectively prevents ERISA welfare benefit plans from recovering money paid out in health care benefits to participants, even when the participant later receives tort damages from a third party responsible for his or her injuries. [February 2002]

Benefits Issues on 2002 Agenda
The 2002 legislative session is underway, and a variety of benefits-related issues are on the table. The approaching elections will affect discussions of key issues — patients’ rights, Medicare reform and other health care areas that are particularly sensitive during campaign season. [February 2002]

Too Much of a Good Thing: An Invalid Health Care Arrangement
The IRS recently issued a revenue ruling addressing the validity of a health care arrangement under which certain health care payments were excluded from an employee’s gross income. [February 2002]

Employers Shifting More Health Care Costs to Employees
Faced with a new round of double-digit health care benefit cost increases in 2002, more than half (56 percent) of employers say they will raise employee contributions by as much as or more than their expected cost increases. In addition, more than 70 percent of employers are considering benefit reductions or an increase in employee copays over the next 12 months, according to Watson Wyatt's Health Care Costs 2002 Survey. [November 2001]

Defined Contribution Health Care: The Next Big Idea?
Every decade or so, employer-sponsored health care benefits seem to undergo a sea change. In the 1970s, we faced ERISA; in the early 1980s, flex emerged; late in the 1980s and into the 1990s, managed care moved into the mainstream. [October 2001]

Bill Pending in Congress on Genetic Discrimination
The mapping of the human genome and related scientific developments have prompted concerns about the potential abuse of genetic information, including discrimination by health insurers and employers on the basis of such information. [October 2001]

Patients' Rights Moves Forward
The patients’ rights debate took another step forward in August when the House approved a revised version of the Bipartisan Patient Protection Act (H.R.2563). [September 2001]

Mental Health Parity Returns to Agenda
The Mental Health Parity Act of 1996 is scheduled to expire September 30, but parity supporters are hoping new, broader legislation will be enacted before then. [September 2001]

EEOC to Rethink ADEA's Application to Retirees
The Equal Employment Opportunity Commission (EEOC) has backed off from its previous position that reducing or eliminating retiree medical benefits on the basis of age or Medicare-eligibility violates the Age Discrimination in Employment Act (ADEA). [September 2001]

Senate Approves Patient Protection Legislation
When the Democrats took control of the Senate in June, the patients' bill of rights moved straight to the top of the legislative agenda. Most observers expected a lengthy debate with numerous amendments, but the Senate approved the Bipartisan Patient Protection Act (S.1052) by a vote of 59-36 on June 29.  [August 2001]

IRS Finalizes Cost Maintenance Requirements for Excess Asset Transfers for Retiree Health Accounts
The IRS has released final regulations dealing with the requirement that employers that transfer excess assets from their defined benefit plan to a §401(h) account pursuant to §420 must provide retiree health benefits that satisfy a minimum cost standard for five years after the transfer. [August 2001]

Court Rules That Not Covering Prescription Contraceptives Violates the PDA
In a case of first impression, a federal district court in Seattle ruled in Erickson v. Bartell Co. that an employer violated the Pregnancy Discrimination Act (PDA) by not covering prescription contraceptives under the group health plan. This ruling specifically affects employers in the western district of Seattle—but may reveal a trend in cases to come. [July 2001]

Court Ruling Threatens Employer-Sponsored Retiree Medical Benefits
Without much fanfare—but with potentially significant implications for retiree medical plans—the District Court for the Western District of Pennsylvania ruled in Erie County Retirees Assoc. v. County of Erie, Pennsylvania, that the county's retiree medical plan failed the equal benefit/equal cost safe harbor under the Age Discrimination in Employment Act (ADEA). This is the first court to apply the equal benefit/equal cost safe harbor under the ADEA. [June 2001]

Liability Remains the Sticking Point on Patients' Bill of Rights
Congress is discussing the Patients' Bill of Rights again, and expanded liability is still the most contentious issue. Liability provisions, which allow patients to sue their health plan if delayed or denied care causes injury or death, have appeared in many recent patients' rights bills, including the one that passed the House in 1999. [May 2001]

eHR/Benefits Offers Web Tools to Manage Health and Welfare Benefits
Watson Wyatt recently launched eHR/Benefits, a new service that includes a customizable web portal to facilitate the administration and management of health and welfare benefits. eHR/Benefits brings together our benefits, communication and technology expertise to offer clients strategic consulting services in the areas of plan design and pricing, vendor management and employee communications - all in one seamless service. [May 2001]

Facing the Music on Medicare Reform
President Bush and Congress are under tremendous pressure to create a prescription drug benefit for Medicare beneficiaries. Escalating drug prices, Medicare+Choice withdrawals and other factors have stepped up demand for a drug benefit. [May 2001]

ERISA Preempts State Laws That Automatically Revoke Ex-Spouse Beneficiary Designations
The Supreme Court has ruled that ERISA preempts state laws that automatically revoke spousal beneficiary designations after a divorce. The ruling applies to all ERISA-covered plans, such as life insurance, retirement and most types of executive deferred compensation plans. [May 2001]

No Relief from the Supreme Court on the ADEA and Retiree Health Plans
Last August, in Erie County Retirees Assoc. v. County of Erie, Pennsylvania, the Third Circuit Court of Appeals held that the Age Discrimination in Employment Act (ADEA) applies to retirees and retiree health plans. As long as that ruling stands, employers in Pennsylvania, New Jersey, Delaware and the Virgin Islands who offer their over-65 retirees less coverage than their under-65 retirees may be violating the ADEA (unless their plan meets the safe harbor test). [April 2001]

President Offers ''Helping Hand'' with Prescription Drugs
Figuring out the best way to provide affordable prescription drugs to America's seniors has been hotly debated for several years, and recent escalating drug costs have focused even more attention on the issue. [March 2001]

HHS Releases Final Privacy Rules
HHS issued regulations governing the use and disclosure of personal medical information. These complex and controversial regulations constitute the first comprehensive federal standards for protecting the privacy of health information. [February 2001]

Cafeteria Plans: IRS Issues One Final Change of Election Regulation
On January 10, 2001, the IRS issued final regulations relating to the circumstances under which employees may change elections under a cafeteria plan. [February 2001]

Prescription Contraceptives and the Pregnancy Discrimination Act
The EEOC recently expressed an opinion in a "Commission Decision" that could affect many employers' health plans. [February 2001]

Interim Final Regulations on HIPAA Nondiscrimination Provisions
Under HIPAA, group health plans and issuers may not discriminate against participants or beneficiaries based on health status. [February 2001]

Bona Fide Wellness Programs Finally Defined
HIPAA requires portability and continuity of health coverage, and prohibits discrimination in health coverage based on health status. [February 2001]

IRS Proposes Cost Maintenance Requirements for Excess Asset Transfers for Retiree Health Accounts
The IRS released proposed regulations dealing with the requirement that employers that transfer defined benefit excess assets to a §401(h) account pursuant to §420 must provide retiree health benefits that satisfy the minimum cost requirement for a five-year period after the transfer. [February 2001]

New Political Environment Will Affect Benefits Legislation
Despite an end-of-the-session push, the 106th Congress failed to enact benefits-related legislation. So bipartisan pension reform, patients' rights, Medicare reform, stock options and other benefits-related issues are all waiting for the 107th Congress. The new Congress was sworn in on January 3, ushering in a new political environment that could significantly affect benefits-related legislation.  [January 2001]

Court Rules that Failure to Cover Infertility Treatments Does Not Violate the ADA
On October 2, 2000, in Saks v. Franklin Covey, a district court in New York dismissed Rochelle Saks' claims against her employer, Franklin Covey, for failure to cover specific infertility treatments. Saks sued Franklin Covey when its self-insured plan failed to cover costs for her intrauterine insemination and in vitro fertilization.  [December 2000]

DOL Issues Final Regulations on Claims Procedures
The Department of Labor (DOL) recently issued final regulations on claims procedures for employee benefit plans governed by ERISA. Although these regulations focus mainly on group health and disability benefit plans, some changes apply to pension plans and other welfare benefit plans. [December 2000]

Participant in Health FSA Wins Denied Claim
In Grande v. Allison Engine Co., an employee successfully sued his employer and health plan for denying a claim he submitted to his health flexible spending account (FSA). [November 2000]

Staying@Work 2000: Improving Workforce Productivity
The challenge of attracting and retaining employees in today's environment of record low unemployment and an overall labor shortage has figured prominently in recent news. But an equally important issue that gets much less press is workforce health and productivity—ensuring that employees are able and willing to work to their full potential.  [November 2000]

Appeals Court Holds That ADEA Applies to Retiree Health Plan
In Erie County Retirees Assoc. v. County of Erie, Pennsylvania, the Third Circuit Court of Appeals held that the Age Discrimination in Employment Act applies to retirees and retiree health plans. This holding is contrary to the view of most employers, and if the decision stands, many of them could find themselves in violation of the ADEA. [October 2000]

Prescription Drug Debate Moves to Forefront
The Medicare prescription drug debate shot to the top of the legislative agenda earlier this summer, when both the House and Senate debated prescription drug legislation. The House approved a bill in June. Senate Democrats forced a floor vote on a competing prescription drug proposal, and members of the Senate Finance Committee met behind closed doors to discuss prescription drugs and other Medicare reform issues. In addition, President Clinton unveiled estimates of a much bigger budget surplus than was formerly projected and now wants to set aside $250 billion for prescription drugs [August 2000]

Health Care Costs: Where Will They Be in 2001?
Watson Wyatt and the Washington Business Group on Health recently conducted a mini-online survey to capture an early picture of how health care costs are shaping up for the year 2001. Sixty-one large employers representing more than 1.7 million full-time employees responded to the survey.  [August 2000]

Debate Rages over Prescription Drug Coverage
Adding prescription drug benefits to Medicare has been the central issue in the recent Medicare reform debate [June 2000]

Best Practices in Health Plan Vendor Management: Achieving Employee Satisfaction
Although benefit managers are concerned about how much their health plans cost, they are even more concerned about employee satisfaction.  [June 2000]

Retiree Medical Accounts: New Interest in an Old Idea
Although the account approach has been around since the 1980s, relatively few employers have adopted it.  [May 2000]

Health Plan Liability Still in the Spotlight
Whether patients should be allowed to sue their health plans has been a key issue in recent debates in Congress, state legislatures and the courts. Last year, the House approved a health care reform bill allowing patients to sue their health plans in state court; at least 35 states debated laws that would permit such suits; and lawsuits were filed in courts across the country. [April 2000]

Retiree Medical and Medicare+Choice Plans: Planning for an Uncertain Future
Three years have passed since the Balanced Budget Act (BBA) of 1997 launched the Medicare+Choice experiment. For those employers who have not already done so, now is a good time to take a hard look at the advantages and disadvantages of incorporating Medicare+Choice plan options within their retiree medical program. [April 2000]

Delivery System Alignment: A Health Care Benefits Strategy for the Next Five Years
We know that tomorrow's health care picture—including treatments, costs and benefits—will be quite different from the one we see today. Gene therapy and DNA libraries may change the way we think about diseases. New medical technologies will introduce new possibilities.  [March 2000]

Putting Employees in Charge
Results from the Fifth Annual Watson Wyatt/Washington Business Group on Health/Healthcare Financial Management Association Survey Report on Purchasing Value in Health Care [March 2000]

Looking to Improve HR Outcomes? Try Internal Benchmarking
Your firm has completed the cost management basics: managed care, carve-outs, flex benefits and a paid time off (PTO) plan. What’s your next step for further improving benefit costs, absenteeism, workers’ compensation experience and employee health?  [January 2000]

Participate in Watson Wyatt’s Mini-Survey on 1999 Enrollment Season
1999 benefits enrollment is over! Time to breathe a sigh of relief and tell us about your experiences.  [January 2000]

Medical Privacy Regulations May Renew Debate
When Congress missed its August 21, 1999, deadline for enacting medical privacy legislation, that gave the Department of Health and Human Services (HHS) the green light to issue rules protecting the privacy of electronic health information [December 1999]

Retiree Health Care: Looking Ahead
Employers' retiree health programs are somewhat successful in meeting their number one objective—supporting employees' financial needs in retirement—according to Retiree Health Care Strategies, a new survey conducted by Watson Wyatt and the Washington Business Group on Health (WBGH).  [December 1999]

New Research in Human Capital, Health & Productivity and Pay Practices
This article discusses four recent studies conducted by Watson Wyatt Worldwide in the areas of human resources practices, disability management, executive pay and the effective use of strategic rewards. [November 1999]

House Approves Managed Care Reform Bill
Although House approval is significant, managed care reform is far from being a done deal. [November 1999]

Stop and Go on Health Care Reform
The Senate passed the Patients’ Bill of Rights Plus Act (S.1344) on July15, 1999. The vote on the Republican-sponsored bill capped off months of political posturing and negotiations between Democratic and Republican leaders. Predictably enough, the debate highlighted contentious policy divisions: patient protection versus cost-containment, state versus federal regulation of health insurance, and access to health care versus quality standards. [September 1999]

Supreme Court Narrows Application of ADA
On June 22, 1999, the Supreme Court ruled in three cases dealing with the effect of the Americans with Disabilities Act (ADA) on employees who can correct or compensate for their impairments. Ruling that the ADA was not intended to protect workers with treatable impairments or medical conditions such as bad eyesight or hypertension, the Court narrowed the application of the ADA. [August 1999]

President Releases Medicare Reform Plan
President Clinton has released a Medicare reform proposal aimed at safeguarding the program’s financial solvency until 2025. The proposal would devote 15 percent of budget surpluses over the next 15 years — almost $800 billion — to Medicare. [August 1999]

Health Care Reform Rx: A Dose of the Market
The Senate recently completed debate over the delicate balancing act between the role of regulation and the market in the U.S. health care system. Senate Republicans ultimately voted to impose a limited set of new regulations on certain managed health care plans.  [August 1999]

Smoking Cessation Programs: Not Just for Your Good Health Anymore!
Citing reports from the Surgeon General on the dangers of smoking, the IRS has revoked a 20-year old revenue ruling, for the first time allowing taxpayers to deduct their costs for smoking cessation programs as medical expenses. [August 1999]

Privacy Legislation Deadline Looming on Capitol Hill
As the August 21 deadline for enacting privacy legislation approaches, medical records privacy is increasingly playing center stage on Capitol Hill. It's going to be a tough debate to resolve in such a narrow time frame—medical records privacy is a complicated and contentious issue [July 1999]

Crisis in Yugoslavia Raises USERRA Issues for Employers
As the conflict in Yugoslavia continues, questions regarding employment and benefits rights for returning veterans may arise. The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) governs many of the reemployment, health care, defined contribution and other employment issues for these workers. [July 1999]

Advanced Medicine for Aging Populations
Population aging poses health care challenges, given that consumption of medical goods and services increases with age. [July 1999]

Germany, the Netherlands and Japan: The Elder Statesmen of Long-Term Care
After more than a year of work, the National Bipartisan Commission on the failed to achieve consensus on a reform plan and threw in the towel in mid-March [June 1999]

Health Care Costs:Up, Down and Around the World
Among the most welcome news to employers over the past several years has certainly been the dramatic slowdown in the growth rate of health care spending [May 1999]

Where in the World Is Health Care Reform?
U.S. interest in other nations' health care systems peaked during the national health care reform debate at the start of the decade, as analysts looked to Canada's single-payer system, and to Germany and Japan's mandated social insurance systems as potential reform models [April 1999]

Health Care Quality: Déjà Vu
When the 106th Congress convened in early January, the health care quality debate got off to a quick start, picking up almost where it left off last year. Key figures from last year's debate are back—and their bills remain largely the same as well [March 1999]

NMHPA Notice Requirements
The Newborns’ and Mothers’ Health Protection Act of 1996 (NMHPA) was enacted to provide minimum hospital stays for mothers and newborn children following childbirth. The NMHPA amended the Internal Revenue Code, ERISA and the Public Health Service Act (PHSA). The IRS, Department of Labor (DOL) and Department of Health and Human Services (HHS) share oversight and enforcement. On September 9, the DOL issued an interim rule amending the summary plan description (SPD) requirements for ERISA-covered group health plans regarding the NMHPA. [December 1998]

Health Care Debate: Heading for Consensus or Standoff?
Health care quality has ranked high on the legislative agenda since the 105th Congress convened in early 1997. And interest in health care quality legislation isn't likely to waver, with Election Day approaching and polls showing that many Americans support reforms (as long as they don't significantly increase costs). [July 1998]

Market-Based Restructuring: Employers' Health Care Strategies
This article is the second of a two-part series. Part one, in last month's Insider, examined the health care market's lessons for policymakers, looking at the separate influences of private and public forces. It concluded that in the near future, market forces would continue to dominate change in the health care market, and that large employers and purchasing coalitions are the engines driving that change. [July 1998]

Unmanaged Competition: A Vehicle for Health Care Market Reform?
This article is the first of a two-part series. Part one recaps the successes and limitations of market-based restructuring. Part two, in next month's Insider, will look at the implications for employers. [June 1998]

Democrats Introduce Their Own Patients' Bill of Rights
Key House and Senate Democrats have introduced their own health care quality bill. The Patients' Bill of Rights Act (S.1890,1891/H.R.3605) is based on recommendations by President Clinton's Advisory Commission on Quality and Consumer Protection in the Health Care Industry. [May 1998]

Physician Preferences and Health Plan Selection
In recent years, Watson Wyatt has developed the Value Creation ProcessTM, which helps employers identify health plans that offer the greatest value to all interested parties.  [April 1998]

Benefits-Related Legislation in 1998: All Talk?
Debates on health care, Social Security and retirement income are expected to continue when the 1998 congressional session opens in late January, but will it be all talk and no action?  [January 1998]

Quality Commission Releases Patient Bill of Rights
In November, President Clinton''s Advisory Commission on Quality and Consumer Protection in the Health Care Industry released a bill of rights, which outlines seven patient rights along with a list of patient responsibilities. [January 1998]