Understanding the Legal Rights of Working Cancer Survivors and Employees with Cancer: Part 2
Lorna Sills Katica
Offering a Severance Package to an Employee with Cancer
*This article is the second of a two-part series on the legal rights of cancer survivors and employees with cancer. Part one can be read here.
When an employee with cancer is presented with a severance package, he or she may not be up to engaging in an intense business negotiation. Furthermore, regardless of employees’ state of health, they should be given the opportunity to conduct a careful and necessary review of their benefits and other issues. It is important to note that employees 40 years old or older must be given certain time periods for review.
An employee with cancer or a cancer history may request benefits records. A request for employee benefits records is authorized by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1024(b)(2003), also known as ERISA. Failure to allow access to such records may result in fines. Section 1024 of ERISA states that “[t]he administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.” 29 U.S.C. § 1024(b)(4). Section 1132(c) provides the enforcement mechanism for this requirement:
Any administrator … who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper. 29 U.S.C. § 1132(c).
If enforcement of this provision via litigation becomes necessary, Title 29 U.S.C. section 1132(g)(1) allows courts to award attorneys fees and costs to either party in ERISA cases. Section 1132(c) addresses an administrator’s failure to provide information “which [the] administrator is required by this subchapter to furnish to a participant or beneficiary.” 29 U.S.C. § 1132(c). The language “under this subchapter” ( i.e., ERISA) covers documents identified in Section 1024, namely “the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.” See 29 U.S.C. § 1024(b)(4). The obligation to provide claims-related documents arises by federal regulation. 29 C.F.R. § 2560.503-1(h)(2)(iii).
An employee is entitled to access to records of employee benefit plans of the company, or any affiliated companies, in which the employee either participated during the term of his employment, has been eligible to participate, or is eligible to participate during the term of his employment with the company, and any material modifications or amendments to the same, including but not limited to: any 401(k), 403(b) or similar retirement plans, and any severance pay plans of the company or any of its affiliated companies. See 29 U.S.C. § 1021(a). Perhaps one of the most overlooked issues in severance packages is whether or not the company has a severance pay plan governed by ERISA. If the plan is a “qualified employee benefit plan” within the meaning of ERISA, then it is enforceable pursuant to ERISA, and all plan documents must be disclosed pursuant to ERISA. If the plan was a policy, then the payment of severance pay may be optional only, and the severance policy may not be enforceable.
If the company had a severance pay plan pursuant to ERISA, it can retroactively modify the severance pay plan so as to deny the employee severance pay under the plan, since severance pay plans are not “vested benefits” under ERISA. See Loskill v. Barnett Banks, Inc. Severance Pay Plan, 289 F.3d 734 (11th Cir.2002).
However, if the company learns about cancer treatment, special care should be exercised to avoid any retaliatory actions with regard to benefits. The company may not legally amend or modify any employee benefit plan governed by ERISA so as to result in a retroactive reduction in vested benefits. See 29 U.S.C. § 1054(g)(1); see also Gilley v. Monsato Co., Inc., 490 F.3d 848 (11th Cir.2007); Central Laborer Pension Fund v. Heinz, 541 U.S. 739 (2004); Sejman v. Warner-Lambert Co. Inc., 889 F.2d 1346 (4th Cir.1989); Sutton v. Weirton Division of Natural Steel Corp., 724 F.2d 406 (4th Cir.1983).
Employees may also request records showing the calculation of vested and/or unvested employee benefits in which employees have an interest under any employee benefit plan of the company. See 29 U.S.C. § 1024(b), 29 U.S.C. § 1025. Pursuant to ERISA §1023 any and all records showing actuarial calculations for any employee benefits of the employee are also subject to disclosure.
Medical Insurance Continuation
For those in cancer treatment, retention of medical insurance benefits is critical. Under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), plan participants and beneficiaries generally must be sent an election notice not later than 14 days after the plan administrator receives notice that a qualifying event has occurred.
If the employee was 60 years old at the time of the commencement of COBRA period (note that this may be after the termination date), under Ga. St. Ann. § 33-24-21.1, the employee will be entitled to continuation of coverage running concurrent with COBRA, which coverage continues until age 65, generally when the employee is eligible for federal Medicare (or permanent disability).
Also, under O.C.G.A. 33-24-21.1(c), “any group member or qualifying eligible individual whose coverage has been terminated and who has been continuously covered under the group contract or group plan, and under any contract or plan providing similar benefits which it replaces, for at least six months immediately prior to such termination, shall be entitled to have his or her coverage and the coverage of his or her eligible dependents continued…for the fractional policy month remaining, if any, at termination plus three additional policy months…”
Healthcare Reform’s Upcoming Changes for Cancer Patients
The Patient Protection and Affordable Care Act (PPACA) is the most significant health care legislation since the advent of Medicare and Medicaid in 1965. Over the next few years, PPACA will roll out changes which will impact the rights of cancer patients to care and benefits, by providing that:
1. Cancer patients who participate in certain clinical trials for new treatments of cancer are guaranteed insurance coverage. Effective in 2014, PPACA mandates individual, group and self-insured plans to provide insurance coverage for routine care costs for patients in clinical trials for the prevention, detection and treatment of cancer and other life-threatening diseases. The law covers all four phases of clinical trials. Prior to PPACA, routine care costs for clinical-trial patients could be denied as experimental.
Routine care costs are “all items and services consistent with the coverage provided in the plan (or coverage) that is typically covered for a qualified individual who is not enrolled in a clinical trial.” This includes hospital visits, imaging or laboratory tests, and medications. Routine care costs do not include:
- “The investigational treatment, device, or service itself,” which is usually covered by the trial’s sponsor, such as NCI or a pharmaceutical company
- “Items and services provided solely to satisfy data collection and analysis needs and that are not used in the direct clinical management of the patient,” and
- “A service that is clearly inconsistent with widely accepted and established standards of care for a particular diagnosis”
2. Cancer survivors with pre-existing conditions who are non-eligible retirees over 55 years old will have insurance coverage through high-risk pools. Insurers may not set annual or lifetime limits, nor may they drop coverage. In sum, once an employee discovers that he or she has cancer, there will no longer have to be a concern about losing their insurance coverage.
3. Children with pre-existing conditions, including cancer, may not be excluded from coverage, and may be covered by their parents’ plans up until age 26.
4. The 2010 Medicare Part D gap in drug prescription coverage (known as “the doughnut hole”) will eventually be closed, rendering some drugs for cancer treatment more affordable. Medicare beneficiaries reaching the “doughnut hole” of medicine costs of $2700 to $6154 will receive a $250 subsidy. By 2020, Medicare will cover up to 75% of oral medication costs.
5. Many preventive health care screenings are now 100% covered for all new insurance plans or policies issued on or after September 23, 2010. This includes screenings for breast, cervical and colorectal cancer. Breast cancer mammography screenings are covered every one to two years for women over 40. Likewise, breast cancer chemoprevention counseling for women at higher risk is included, as is cervical dysplasia screening for sexually active females. Also, Medicare will cover 100% of comprehensive health risk assessments, including cancer screenings. That means that if an employee participates in a group health insurance plan, or is Medicare eligible, he or she will not have to out of pocket one penny to have these potentially life-saving cancer screening exams.
6. Insurance companies may no longer impose lifetime limits on benefits, and annual limits will in most cases be prohibited.
7. Plans may not rescind coverage when the insured gets sick or if the insured made a prior unintentional mistake on an application for insurance, whether or not the plan is a “grandfathered plan” within the meaning of PPACA.
8. There will be a new internal and external review process for medical claims in non-grandfathered insurance plans. This applies to group and individual plans, and is effective for health plans or policies created or purchased on or after March 23, 2010. Although “grandfathered plans” are excluded, grandfather status may be lost if there is non-compliance with new guidelines. In general, for non-grandfathered plans, the rules provide that if an employee appeals a denial of a claim, the plan must render a decision within 72 hours of an urgent care denial, within 30 days for non-urgent care not yet received, and within 60 days for denials of claims for services already received. A denial on appeal may then entitle the employee to an independent external review of the decision. Also, under the new law, rescission of insurance coverage is appealable and will be handled under the same process. Plan sponsors may be fined if there is a failure to comply with the new appeals standards and procedures. Under DOL Technical Release 2010-2, the Department of Labor has extended the grace period until July 1, 2011, for those plans making good-faith efforts to comply with the new procedures. Internal appeals rights in the health care reform law take effect when the plan starts a new plan year or policy year on or after September 23, 2010. External review rights will take effect by January 1, 2012. Some states already have an external review process.
If an employee has cancer, many laws that are designed to protect job security and employment benefits apply. Due to the ever-increasing trend in working cancer survivors, it is best to seek counsel to know and understand how these laws apply, and do the “homework” on benefits and legal rights of employees with cancer. Also, even absent any adverse employment action, an employee with cancer may seek information about medical insurance coverage for treatment, and may file appeals of denied claims. All employees will likely take advantage of new free health care screenings for cancer. Also, the new health care reform law will soon impact insurance benefits, the claims process and cancer treatment options.
- For employees 40 years old or older, the Age Discrimination in Employment Act (“ADEA”), and the Older Workers Benefit and Protection Act (“OWBPA”) require a certain time frame (21 days or 45 days if the termination was part of a group lay-off) for review of the severance package, and an additional time period (7 days) for rescission of a severance agreement after signature.
- 29 U.S.C. § 1023(a), (b).
- HealthCare.gov, “Appealing Health Plan Decisions,” http://www.healthcare.gov/law/features/rights/appealing-decisions/index.html (accessed May 1, 2012).
- Plans should make sure that they fall within the definition of a “Grandfathered Plan” under PPACA. The Departments of Health and Human Services, Labor, and Treasury have issued regulations on Grandfather Status. See a summary of the regulation at HealthCare.Gov, May 8, 2012, “Fact Sheet: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans” http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html (accessed May 1, 2012). Generally, if a plan makes a substantial change which reduces benefits or increase costs, grandfather status will be forfeited. The standard for determining if Grandfather Status is preserved is established by a strict set of guidelines. Unintentional loss of Grandfather Status will throw the plan into the newly revised medical appeals process. Loss of Grandfather Status will have other ramifications; a plan which loses its Grandfather status must provide additional benefits to the insured, including coverage of recommended preventive care services without cost sharing, and guaranteed access to OB-GYNs and pediatricians.
About the Author:
Lorna Sills Katica is an attorney in Atlanta, Georgia with over 25 years of experience in health care law, and labor and employment law. She has handled matters involving disabilities, employee benefits, medical insurance, ERISA cases and health care law compliance. She also specializes in laws affecting students with disabilities and special needs.