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There is no Such Thing as a 1099 Employee

On November 23, 2020

By: Andrew Silverio, Esq.

We couldn’t possibly count the number of inquiries we have received over the years about extending coverage to “1099 Employees” under a self-funded ERISA health plan.  So, it seems like a good idea to lay out some important concepts and issues that arise when discussing coverage under an ERISA plan for independent contractors.  First, there is no such thing as a “1099 employee”.  A 1099 worker is an independent contractor, which is by definition not an employee.  This may seem like a distinction which is relatively meaningless and semantic, but the difference has significant practical consequences. 

Whether a worker is properly classified as an independent contractor, who reports his or her income on a form 1099, or a true employee, who receives a W-2, is based on a multi-factor common law test.  Importantly, this common law test and the resulting question of how a worker is properly classified is a legal and factual question – this is not something that can be decided by an employer by simply documenting someone as a contractor as opposed to employee, or negotiated between the parties. These factors include the amount of control the company has over the work, the financial relationship between the parties (beyond regular pay, who covers business expenses, provides necessary equipment, etc.), and the type of relationship.  For example, is there a written contract governing the relationship?  Is the relationship continuous or for a defined period or project?  Does the worker receive benefits like vacation pay, health coverage, retirement benefits?  This last point is important – whether or not a worker is provided benefits like health coverage is actually a factor in the common law test of how they should be classified, so if an employer is looking at providing health coverage to 1099 workers, it must be aware that doing so can actually tip the scales and render them common law employees (triggering all the related legal and tax considerations).

The ERISA plan sponsor wishing to extend coverage to independent contractors also has various hurdles to consider that an employer purchasing a fully-insured group policy does not – namely, how ERISA defines an “employee benefit plan.”  Since independent contractors are not employees, covering them under an employee benefit plan, which exists for the benefit of employees and their dependents, can actually take the plan out of the realm of ERISA and into the realm of state law.  This could occur because the plan, now covering its own employees as well as those of another employer (even if those persons are self-employed) may be considered a multiple employer welfare arrangement (MEWA), which is subject to state law and regulation by the local department of insurance. This would have serious repercussions for an ERISA plan, as one of the main benefits of that status is the broad protections from state law such plans enjoy.

While we always appreciate the desire to be more generous with benefits, in the self-funded world the issue becomes very tricky when it comes to non-employees.  We would urge any plan sponsor to look carefully at all these different issues and consult with a local employment attorney with any questions about the proper classification of its workers.

The Boston Globe Names The Phia Group as a Top Place to Work for 2020

On November 20, 2020

For Immediate Release

11/21/2020

Canton, MA – The Boston Globe Names The Phia Group as a Top Place to Work for 2020.

It is with great honor and humility that The Phia Group announces it has been named by The Boston Globe as one of the ​Top Places to Work ​in Massachusetts.  In its 13th annual employee-based survey, The Boston Globe – having assessed anonymous employee feedback, and details about the company – determined that The Phia Group provides one of the most rewarding, meaningful employment experiences in the Commonwealth of Massachusetts​.

Each year, The Boston Globe publishes in its “Top Places to Work” ​issue, a list of employers it recognizes as being the most admired workplaces in the state, voted on by the people who know them best – their employees.  The survey measures employee opinions about their company’s direction, execution, connection, management, work, pay and benefits, and engagement.

When the results were tallied and analysis was completed, The Phia Group was ranked #27 of the top 55 medium sized companies.  “This was a particularly challenging year to be a great place to work, and the companies that made our list went above and beyond to keep their employees safe, engaged, and cared for,” said Katie Johnston, the Globe’s Top Places to Work editor. “From offering help with childcare to making the workplace more equitable, to holding virtual events, these employers showed that the best get better in crisis.” 

The rankings ​are based on confidential survey information collected by Energage (formerly Workplace Dynamics), an independent company specializing in employee engagement and retention, from more than 80,000 individuals at hundreds of Massachusetts organizations.  The winners share a few key traits, including offering progressive benefits, giving their employees a voice, and encouraging them to have some fun while they’re at it.

“This is one of the proudest days of my life.” The Phia Group’s CEO, Adam Russo, remarked.  “I say this team is like family; but we don’t usually get to choose who is a part of our family.  Our employees choose to be part of this family.

“Ensuring that people have access to the best health care at the lowest cost possible is our purpose.  It’s what we provide to our clients, and it’s what we provide to our own staff.” Adam continued.  “When your people are happy, your clients are happy.  It’s not always the easiest or quickest path to success, but it is a lot more permanent.” 

Additional information can be found at Globe.com/TopPlaces.

To learn more about The Phia Group, what it is doing to empower plans and enable all employers to be best places to work, please contact Garrick Hunt by email at ghunt@phiagroup.com or by phone at 781-535-5644.

About The Phia Group:

The Phia Group, LLC, headquartered in Canton, Massachusetts, and with offices in Hartford, Boise, and Louisville, is an experienced provider of health care cost containment techniques offering comprehensive claims recovery, plan document and consulting services designed to control health care costs and protect plan assets.  By providing industry leading consultation, plan drafting, subrogation and other cost containment solutions, The Phia Group is truly Empowering Plans.

About Boston Globe Media Partners LLC:

Boston Globe Media Partners, LLC provides news and information, entertainment, opinion and analysis through its multimedia properties. BGMP includes The Boston Globe, Globe.com, Boston.com, STAT and Globe Direct.

Desperately Looking Forward to 2021

On November 16, 2020

The end (of 2020) is near, and we are anxiously looking forward to 2021.  Between the Presidential Election, the COVID-19 Pandemic, and the ACA’s “Day in Court” before SCOTUS, any one of these ongoing topics would be enough to keep us busily planning for what is to come.  Suggesting that 2021 is poised to be one of the busiest years in our industry’s history might be an understatement.  At times, it may be overwhelming to keep up with everything that is impacting us – as employers, as service providers, and as human beings.  That’s why The Phia Group is proud to invite you to enjoy another webinar, where we will be discussing these and other hot topics, forecasting what we expect to see in 2021, and giving you a head start as you – like we – plan, and look forward, to 2021.

Click Here to View Our Full Webinar

To obtain a copy of our webinar slides, please reach out to mpainten@phiagroup.com.

The Dangers of Politicizing Health

On November 16, 2020

By: Ron E. Peck

As I – like so many others – anxiously watched election day results on television, a commercial played more than once.  The advertisement displayed a mask (not a fun Halloween mask, but rather, one of the protective masks with which we have all become familiar).  The voice advises that this is a mask.  It protects the wearer and others around them.  It is not a political statement.  It is a mask.

The advertisement struck me, but not for the reasons they likely intended.  It moved me for two reasons.  First, I was saddened that the message even needs to be sent.  Second, I was even more saddened by the fact that the message was wrong.  Love it or hate it, masks – like so many other things – have become a political statement.

This is one example of what I fear; the politicizing of health. 

Many important decisions are made by politicians on a daily basis.  Yet, there are some decisions that transcend politics.  If a school is under siege by a shooter, police respond, rescuers do all that they can to save lives, and we all watch horror stricken.  Yes, in the aftermath people will politicize every aspect of the tragedy; debating mental health, gun control, and the like.  How did it happen?  How can we prevent it?  Yet, in the moment – as the emergency is unfolding – we set aside political rhetoric, unify, and act.

Today we are dealing with the COVID-19 pandemic.  As with a school shooting, there is an emergency that is presently in effect.  Some people question the numbers; how many people actually have the disease, how many fatalities are attributable to the disease, and so forth.  Yet, everyone agrees that there is a disease, it is fatal for some, and there are certain behaviors we can alter temporarily to potentially reduce the risk.  Whether you believe masks are effective or not, as an example, the cost of wearing one is small.  In other words, if you think there is – at best – a 10% chance masks are effective, isn’t it worth it – even then?  The point is that, when performing an objective cost-benefit analysis, the cost of engaging in some simple acts is so low, it’s worth engaging in those acts – even if you think the benefit is minimal.

Yet, once the act (or lack of action) is politicized, a thumb is applied to the scales and the cost is increased. 

Masks and COVID-19 are one example.  Looking at the bigger picture, health care in these United States of America is too expensive.  Insurance premiums or contributions to self-funded health plans are too expensive – in part because they need to pay for the excessive medical bills, but also in part because premiums and contributions have become a privatized tax, whereby we all pool our money to cover costs arising from inefficiencies or losses elsewhere.

I absolutely believe payers can do more to reduce costs without negatively impacting the consumer experience.  I absolutely believe providers can do more to reduce what they charge for care.  I absolutely believe patients can do more to limit damages and through proactive measures reduce the burden they place on both payers and providers.  Yet, as with masks, so too has health care – how it is accessed, administered, and paid – been politicized.  Demanding that everyone assess their behavior, processes, and implement changes that will improve care, improve benefits, and reduce costs should not be a political issue.  Yet, it has become one. 

I have always believed that, before we fight over the pie, we should first identify ways to make the pie larger.  Abraham Lincoln is credited with having said, “Discourage litigation.  Persuade your neighbors to compromise whenever you can.  As a peacemaker the lawyer has superior opportunity of being a good man.”  Certainly providers will need to sacrifice some revenue, if the cost of care is to be reduced.  How much profit can be salvaged, however, by first identifying and eliminating waste?  Likewise, payers will reduce their incoming revenue when they cap premiums or contributions, however, they too can recoup those losses by adjusting their procedures, coordinating benefits with other payers, and delivering their services in a more focused, effective fashion.  Lastly, patients need to be mindful of their own physical health, lest poor health should become financial crisis.  Just as routine $50 oil changes avoid a $4,000 engine replacement, so too can patients take action to reduce the financial burden placed on the system.

Ultimately, the question of “how” we pay for health care should be subservient to the question of what health care should cost… and to answer that question, we need to first consider all that goes into determining what the price ought to be.  The discussion of how we pay for health care may be political, just as deciding who will pay for dinner may be a matter for debate.  Before my father and I argue over who can pick up the tab, however, let’s first ensure we were not charged for a cheesecake we most certainly didn’t order!  That bit of common sense is certainly not political, nor should it be.

Empowering Plans: P96 - Election Aftermath – Where Things Stand

On November 13, 2020

In this episode of the Empowering Plans Podcast, Ron Peck, Brady Bizarro, and Nick Bonds reunite to discuss their developing thoughts on the presidential election results. They speculate as to what moves a Biden administration can make on health care with a potentially Republican-controlled senate, and what effects those moves could have in the self-funded industry. They also discuss California v. Texas and try to anticipate how the Supreme Court might rule on the fate of the ACA. Lastly, they talk through the exciting news of a potentially viable coronavirus vaccine.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

The Phia Group Announces the Continued Offering of Free Health Benefits to Employees and Their Families in 2021

On November 12, 2020

For Immediate Release

November 13, 2020
 

Canton, MA – In 2020, The Phia Group, LLC shocked the industry by announcing their intent to cover the entire cost of health benefits for their employees and families.  Now, The Phia Group is pleased to announce that it will – in 2021 – continue to offer these no-cost benefits to employees and their families. 
 

“This past year has been difficult for everyone.  Between the pandemic, politics, and a complete lack of predictability, the one thing we don’t want our people to worry about is the cost of maintaining their own, and their families’ health,” remarked The Phia Group’s CEO, Adam V. Russo, Esq.  “When we first implemented this program a year ago, our primary goal was to make health care more affordable for our team members – and we accomplished that mission; but that victory is almost outweighed by the residual benefits.  Recruitment of the best talent has been substantially bolstered by this unrivaled benefit, retention of existing talent has never been better, and employee morale is up, despite the 2020 roller coaster.  Not to mention how highly the company is now held in our employees’ spouses’ esteem – which is, of course, the true benchmark of success.”
 

Employees who have been in enrolled in The Phia Group’s self-funded health benefit plan for a fixed number of years will, upon renewing enrollment in 2021, have their contributions paid for by The Phia Group – including coverage for dependents.  This remarkable achievement continues to be made possible thanks to the application and utilization of cost containment measures developed and provided by The Phia Group, combined with proactive efforts on the part of its own plan membership to be cost-conscious “consumers” of healthcare.
 

Ron E. Peck, Esq., Executive Vice President and General Counsel of The Phia Group explained, “2020 was going to be an experiment for us.  We asked whether, by combining plan-based cost-containment efforts with member education, could we keep health care expenses at a level our plan could afford without shifting the burden onto our plan members and their families.  The answer is ‘yes’.”
 

“We are very proud to be able to offer our employees and their families the types of benefits you’d be hard pressed to find anywhere else, and at the same time act as living proof that we can empower plans.” Adam concluded.
 

For more information regarding The Phia Group, it’s benefit plan, and the services that make these incredible results possible, please contact Garrick Hunt by email at ghunt@phiagroup.com or by phone at 781-535-5644.

About The Phia Group:

The Phia Group, LLC, headquartered in Canton, Massachusetts, and with offices in Hartford, Boise, and Louisville, is an experienced provider of health care cost containment techniques offering comprehensive claims recovery, plan document and consulting services designed to control health care costs and protect plan assets.  By providing industry leading consultation, plan drafting, subrogation and other cost containment solutions, The Phia Group is truly Empowering Plans.

Empowering Plans: P95 - 2020 Election Results (So Far) – Our Takeaways

On November 9, 2020

In this episode of Empowering Plans, Ron and Brady are joined by Attorney Nick Bonds to discuss the 2020 election results. For now, it looks like we will have a new president in 2021. What will that mean for the healthcare industry? If the Senate stays in Republican control, is a public option likely? Will Obamacare be replaced? What will happen to popular issues such as prescription drug reform and surprise billing bans? We are covering all of the angles and breaking down all of the possibilities.

Click here to check out the podcast!  (Make sure you subscribe to our YouTube and iTunes Channels!)

Discretion vs. Actual Decisions

On November 2, 2020

By: Jon Jablon, Esq.
 

The concept of “discretionary authority” within a plan document can be somewhat esoteric. After all, Plan Administrators have to make decisions sometimes; even if the SPD doesn’t explicitly provide the Plan Administrator with the discretionary authority to interpret the provisions of the SPD (which it always should), practically speaking, the Plan Administrator could not possibly administer the plan without exercising some degree of discretion.
 

Let’s break down what discretionary authority really is, and what it really isn’t. The easiest way is to give a real-life example of something that our consulting department has worked on extensively; here are the facts: a VIP of the plan was driving while intoxicated after an evening work function. The police report would later provide that despite being intoxicated (as tested at the scene), the driver was obeying all traffic rules and did not cause the accident; instead, the accident was caused when a pickup truck slid on some ice, through a stop sign, and t-boned the intoxicated driver’s car. Again – not the intoxicated driver’s fault. But, the SPD language provides that the plan will not pay any expenses for injuries sustained while a plan member is driving while intoxicated. Not caused by the intoxication – but simply while the driver is intoxicated. This is not uncommon, and of course is designed to disincentivize employees from driving while intoxicated.
 

Eventually, it came time for the Plan Administrator to review the claims and the circumstances under which they arose. The Plan Administrator cited the Plan’s standard discretionary authority language – giving the Plan Administrator the discretion to interpret the terms of the plan and decide questions of fact – and ultimately determined that the member’s intoxicated driving, while not ideal, did not cause the accident, and the Plan subsequently paid the claims. The issue arose when stop-loss denied the claim down the line; the carrier’s denial noted not that the claim was not payable due to a strict interpretation of the SPD (which should have been the reason), but instead the carrier gave the denial reasoning that the Plan Administrator did not have the discretion to make this determination. That incensed the Plan Administrator, since the Plan Administrator felt that the discretionary authority language in the SPD was proof that it did, in fact, have this discretion. (After all, what is that language for, if not to give discretion to the Plan Administrator?!)
 

Despite the carrier’s odd choice of wording, the carrier is technically correct. A Plan Administrator’s discretion is not absolute; it extends to applying the terms of the SPD or making factual determinations. In this case, the SPD was clear, and the Plan Administrator incorrectly used its discretion to override the terms of the SPD, which is not the purpose of that language. By that logic, the Plan Administrator would have the authority to arbitrarily pay or deny any claims, which is certainly not the intent of ERISA. And what about stop-loss?! Just imagine how a plan could ever be underwritten if that were the case. The fact is, the Plan Administrator’s discretion may be broad, but it does not allow the Plan Administrator to choose to cover something that is explicitly excluded.
 

Instead, the function of the discretionary authority language is for the Plan Administrator to be able to interpret provisions that may be ambiguous or unclear in any way. It’s effectively an extension of plan language, rather than a vehicle for changing plan language; ideally, the SPD language will be drafted as clearly as possible, but it’s just not realistic to expect the language to perfectly account for every conceivable situation. A good way to conceptualize discretionary authority is like a court making decisions about what it felt the drafters of the Constitution actually meant. The courts can’t change the Constitution, but they can decide what they think it means. Same goes for the Plan Administrator.
 

If you need help interpreting plan language, or if you need help understanding the extent of a Plan Administrator’s discretion, or anything else, please don’t hesitate to get in touch with The Phia Group’s consulting department, at PGCReferral@phiagroup.com.

National Disability Employment Awareness Month: A Personal Perspective

On October 29, 2020

By: David Ostrowski

This October marks the 75th observance of National Disability Employment Awareness Month, a milestone that is being commemorated with a wide spectrum of events and activities, focused on the theme of “Increasing Access and Opportunity.” The slogan means many different things to many different people. Please allow me the opportunity share how it impacts my family.

As parents of a six-year girl, Colby, who has a significant form of non-verbal autism, my wife and I are not worried about saving for college. We do not have fantasies of our daughter becoming a neurosurgeon or corporate attorney or high school biology teacher. In short, we do not expect her ever to be financially independent.  

But we do have hope that Colby can have access to a fulfilling career opportunity thanks to the phenomenal school that she has been attending for the past three years. It is here that students (aged 3-22) on the autism spectrum disorder learn, grow, and develop. Whether they communicate with limited verbal skills, or, in the case of our daughter, with electronic devices, the students work with dedicated teachers to reduce challenging behaviors and acquire the tools to one day become productive members of the national workforce. As students enter their late tweens and early twenties, the focus shifts towards developing vocational skills necessary for a wide range of jobs that keep America running.

Whether or not students are able to live and work independently, schools that focus on the needs of severely disabled children ensure that graduates have abundant opportunities for parlaying their developed skills towards succeeding in professional careers. Countless former students are currently serving as critical members of society through stocking shelves, bagging groceries, greeting visitors, and managing cash registers. It is through these schools that young adults with significant intellectual disabilities can realize their potential and find professional work that provides fulfillment, appropriate challenges, and, perhaps most importantly, enjoyment.

As the calendar soon flips to November and Halloween gives way to Election Day, the legacy of National Disability Employment Awareness Month endures … largely due to the schools that transform young adults with disabilities into highly functioning and valuable employees. 

ACB – The New Supreme

On October 27, 2020

By: Nick Bonds, Esq.

Amy Coney Barrett, President Trump’s nominee to fill the Supreme Court vacancy left by the late, great, Notorious RBG, is essentially now on a glide path to confirmation. By the time you’re reading this the Senate will have voted on her appointment. Like the committee vote, the full Senate vote is expected to fall along party lines, but with some Republicans announcing their intent to vote with Senate Democrats, and Vice President Pence potentially sidelined by coronavirus among his staff, the vote may come down to the wire.

Even so, the balance of probabilities says that Judge Barrett will soon become Justice Barrett, and her appointment will go down as one of the fastest in recent memory – merely 30 days from announcement to confirmation. Judge Barrett made it through her hearings before the Senate Judiciary Committee, implacable and polite, declining to answer quite a few of the questions lobbed her way by committee members(citing the Ginsburg rule), and letting few details slip as to how she may rule in the future. Even so, her prior history on a number of the issues leave us some clues, a vague outline, of how she may approach the marquee cases soon to come before the highest court in the land.

The case casting the biggest shadow over the confirmation hearings was almost certainly California v. Texas, the most recent challenge to the constitutionality of the Affordable Care Act (ACA). That case comes down to a question of severability, essentially arguing that by zeroing out the penalty associated with the individual mandate the ACA is no longer a viable exercise of Congress’ taxing power and is therefore unconstitutional. The challengers go on to argue that the individual mandate is inseverable from the rest of the ACA, and the entirely of the law must be struck down as a result.

When asked by Senator Lindsey Graham to weigh in on the principle of severability, Judge Barrett indicated that “the presumption is always in favor of severability.” Though keeping her cards held close, Judge Barrett seems to be at least nodding in the direction of excising the individual mandate and preserving the remainder of the ACA.  

The full downfall of the ACA would have sweeping implications for the American economy and healthcare system, and this subtle indicator from the future Justice is cold comfort to the ACA’s defenders. While still a professor at Notre Dame Law School, Judge Barrett was critical of Chief Justice Robert’s rationale in previous ACA cases, writing that the Chief Justice stretched the ACA beyond its plausible meaning to save the statute. Even so, Judge Barrett participated in a recent moot court hearing of the California v. Texas case, where Judge Barret and a panel of seven other judges found the individual mandate unconstitutional but refrained from striking down the ACA in its entirety.

Confirmation testimony aside, another set of tea leaves to divine how Justice Barrett might rule is her history on the 7th Circuit. Judge Barrett’s tenure there lasted three years, and she was arguably the most conservative judge on her circuit. While Judge Barrett did lean towards the middle on cases involving labor, employment discrimination, and criminal law, her views swung hard back toward conservatism on gun, voting, abortion, and civil rights cases. Indeed, Judge Barrett’s positions on a number of those issues skew even more conservative than those of her mentor, the late Justice Antonin Scalia. Though the two also share a pronounced independent streak, it is entirely possible her positions on the Supreme Court will find room to his right.

The Supreme Court is set to hear arguments in California v. Texas on November 10, in time for Justice Barrett to take her seat. Though there appears to be a fair chance that the ACA will live to fight another day, Justice Barrett’s conservative bearing will have profound implications for future decisions over abortion, birth control, sex and gender identity discrimination, and Medicare, among others. We’ll keep our eyes on the Court, and keep you posted on how its decisions will impact employee benefit plans.

Oyez! Oyez! Oyez!