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The ERISA Edit: News on ESG, NSA, and Wit

Employee Benefits Alert

Biden Revives Environmental, Social, Governance (ESG) Rule with First Presidential Veto

On March 20, 2023, President Biden carried through on his promise to veto legislation passed earlier this month that quashed the U.S. Department of Labor's (DOL) 2022 amendment to the Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights regulation (ESG Rule), 87 F.R. 72,822 (Dec. 1, 2022). It is unlikely that there will be enough votes in Congress to override this veto, as the legislation received only 50 votes in the Senate and 216 votes in the House and a two-thirds vote of both the House and the Senate is needed to override a presidential veto. The fate of the ESG Rule will likely be decided in the courts, where two lawsuits are pending seeking to vacate the rule. 

New Guidance for Determining Health Plan Payments of No Surprises Act Claims

On March 17, 2023, the Departments of Health and Human Services (HHS), Labor, and Treasury issued two guidance documents that set forth the agencies' latest interpretation of what No Surprises Act (NSA) independent dispute resolution (IDR) arbitrators may consider when determining how much plans and issuers must pay out-of-network (OON) providers for NSA-covered items and services. The guidance closely aligns to the NSA statutory text in stating that, when considering which offer to accept for the OON rate, the IDR entity must consider the qualified payment amount (QPA) for the item or service and other information submitted by a party related to its offer, so long as it does not contain prohibited factors. The additional information listed in the guidance that arbitrators must consider if submitted replicates the factors listed in the NSA for determining OON payment rates, including the provider's level of training and experience, the acuity of the patient, the complexity of furnishing the item or service, and the market share and good faith efforts (or lack thereof) to enter into network agreements of the plan and provider or facility, among other things. The new guidance eliminates the prior requirement that the IDR entity consider only "credible" supplemental information submitted by the parties, which providers had objected to in their successful legal challenges to the NSA implementing regulations. Two additional lawsuits challenging the portions of those regulations governing QPA calculations and batching of claims for IDR arbitration, as well as an increase in the fee that both parties to an arbitration must pay, are still pending. 

The guidance is a win for providers, who have sought to convince arbitrators that they should be paid OON rates higher than the QPA based on the additional factors set forth in the NSA. The effect this guidance will have on health plan costs and the size and composition of provider networks is something to watch. If the guidance results in higher payment rates as expected, more OON providers are likely to invoke the arbitration process instead of negotiating with payers on rates, despite the arbitration fees and arbitrator costs associated with the IDR process. The payment of higher OON rates may create an incentive for some providers and facilities to stay out of or leave networks. There is also the risk that OON payments will be based on how many human and other resources a provider or facility devotes to the IDR process, and not on what the market rates are for certain healthcare items and services for a particular specialty and location. 

Before the guidance, some provider groups were expressing concern to lawmakers that payers were manipulating QPA calculations downward, giving them too much of an upper hand in negotiating in-network provider rates, risking the providers' ability to continue to practice. It will be interesting to see if those concerns gain any further traction on Capitol Hill following this issuance of the new guidance. Click here and here for the guidance.

DOL Weighs in on Ninth Circuit's Reprocessing of Claims Ruling in Wit v. UBH

On March 20, 2023, the DOL filed an amicus brief supporting the plaintiffs' request for rehearing en banc of the decision of the U.S. Court of Appeals for the Ninth Circuit in Wit v. United Behavioral Health, Nos. 20-17363, 20-17364, 21-15193, 21-15194 (9th Cir., March 20, 2023). The DOL focused only on the portion of the Ninth Circuit decision that addresses whether reprocessing of claims is an available ERISA remedy and argued that the January 26, 2023, appellate decision conflicts with precedent in the Ninth Circuit and in every other circuit on whether remand to a plan for a redetermination of benefits is appropriate when a plan denies a claim as being contrary to plan terms. According to the DOL, "[ERISA's] authorization of actions to enforce plan rights, in connection with a suit arising from a denial of benefits, comfortably encompasses a request for a remand to the plan to redetermine the claim for benefits under the proper standards." It argues that the DOL claims regulation "make[s] clear that participants have plan-conferred rights to have their claims adjudicated in conformance with the plan's terms. It follows, then, that when a plan administrator denies a participant's claim for benefits using a standard inconsistent with the plan's terms, that participant may sue under section 502(a)(1)(B) "to enforce . . . rights under the terms of the plan," i.e., to have their claim re-adjudicated under the proper standard." Fifteen states and the District of Columbia, as well as a host of trade associations including the American Psychological Association, American Medical Association, and American Psychiatric Association, have also filed amicus briefs in support of the plaintiffs' rehearing request.

Judge Allows Jury Trial in ERISA Class Action Fee Litigation

A federal district judge in Connecticut denied Yale University's request to strike the plaintiffs' jury demand in an ERISA class action lawsuit against the university as plan administrator of the Yale University Retirement Account Plan. The plaintiffs allege that Yale was imprudent for failing to negotiate reasonable plan administrative and recordkeeping fees or offer lower-cost share classes. Finding that the remedy sought by plaintiffs was legal in nature – the recovery of damages out of the defendant's assets generally – and not an equitable recovery of particular funds or property in the defendant's possession, the court held that the Seventh Amendment right to a jury trial attached to plaintiffs' claims. On Monday, Yale asked the court for permission to appeal the jury demand ruling to the Second Circuit. Most courts that have addressed the issue have ruled that jury trials are not available for ERISA fiduciary breach cases, a view also adopted by the DOL. The case is set for trial in May 2023. Vellali v. Yale University, No. 3:16-cv-1345 (D. Conn, Mar. 17, 2003). 

Upcoming Speaking Engagements and Events

Joanne Roskey and Dawn Murphy-Johnson will present, "No Surprises Act Enforcement: How to Prepare for a DOL Audit," a PLI webinar on March 30, 2023, at 1 p.m. ET, discussing the NSA and how it impacts ERISA plans and their administration.

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