FOIA Exemption Denied When Requesting Party is not Party to Civil Litigation

If a public body in Michigan is a plaintiff or defendant in litigation, can the public body deny a Freedom of Information Act request by the legal counsel to another party to the litigation based on a FOIA exemption for requests pertaining “to a civil action in which the requesting party and the public body are parties”? According to the Michigan Court of Appeals in an unpublished opinion in the case of Jones Day v Dep’t of Environment, Great Lakes, and Energy, and at least as it relates to the facts of this case, the answer is no.

Background of the Case

The underlying litigation involves a lawsuit brought by the State of Michigan in state court against chemical companies alleging that the companies improperly released toxic synthetic chemicals called polyfluoroalkyl substances (“PFAS”), which found their way into Michigan’s water supplies.

The state lawsuit was transferred to federal court and combined with similar cases from other jurisdictions, and a case management order was entered that precluded participation in discovery.

Jones Day, a law firm representing a defendant company, proceeded to file a state FOIA request with the Department of Environment, Great Lakes, and Energy (“EGLE”) seeking documentation related to the Michigan PFAS Action Response Team.

EGLE denied the request, citing MCL 15.243(1)(v), the exemption cited above pertaining to parties to a civil litigation. Jones Day then filed a FOIA complaint in the Court of Claims, and the Court of Claims granted summary disposition in favor of EGLE. Jones Day appealed.

The Court of Appeals Decision

The Court of Appeals reversed the lower court decision. The Court of Appeals relied upon precedent from a previous case, Taylor v Lansing Bd of Water & Light, in which a friend of the plaintiff to a lawsuit against a public body made a FOIA request after the plaintiff’s own FOIA request was denied by the public body defendant on the basis of MCL 15.243(1)(v). In the Taylor case, the Court of Appeals ruled that the exemption could not be used where, as in the Jones Day case, the party making the FOIA request was not a “party.”

In the Jones Day case, the Court of Appeals, in reaching a similar result, explained that “the Legislature did not act to obviate the Taylor decision and prevent FOIA actions from being filed by best friends, counsels of record, or associates despite this Court’s recognition that a ‘distasteful’ result occurs without such a restriction of the term ‘party.’”

Accordingly, in light of this case, and the Michigan case law it relies upon, public bodies should be aware that the MCL 15.243(1)(v) exemption will likely be strictly construed. If the FOIA requester does not meet the precise legal definition of a “party” in litigation, and instead is merely a friend, agent or legal counsel to a party, then the exemption will likely be denied.

Morgan, Thaddeus.jpgThaddeus E. Morgan is a shareholder with Fraser Trebilcock and formerly served as President of the firm. Thad is the firm’s Litigation Department Chair and serves as the firm’s State Capital Group voting representative. He can be reached at or (517) 377-0877. 

Client Alert: Broker & Consultant Fee Transparency to Group Health Plans

As the health care arena continues to evolve following the ACA and its progeny, one common theme in the regulations has been to increase transparency in the marketplace. Following on that theme, the Department of Labor recently issued its Field Assistance Bulletin No. 2021-03 aimed at the fees charged by group health insurance brokerages and consultants. The language of the Bulletin sets forth the Department’s short to medium term enforcement policy in regard to the amendments made to ERISA section 408(b)(2)(B), which was included as part of the Consolidated Appropriations Act of 2021 (CAA). Taken together, these documents set forth one method the Department will take to achieve the government’s goal of requiring group health plan sponsors, who are charged to act in a fiduciary capacity, to consider the costs of the services provided by certain vendors.

Who is affected?

ERISA section 408(b)(2)(B) applies to all group health plans, regardless of group size, and includes both insured and self-funded plans; all of which are “covered plans.” The sole exception applies to certain small employer health reimbursement arrangements.

The new language applies to “covered service providers” who provide plan related services to “covered plans.” Covered service providers include individuals and entities that enter into a contract or arrangement to provide one or more of the following services to a covered plan:

  • Brokerage services with respect to selection of:
    • Insurance products (including vision and dental);
    • Plan management services, vendors, and administrative supports; and
    • Stop-loss, pharmacy benefit, wellness, and other plan services.
  • Consulting services related to the development or implementation of:
    • Plan design, insurance or insurance product selection (including vision and dental);
    • Plan management services, vendors, group purchasing organization agreements, and services; and
    • Stop-loss, pharmacy benefit, wellness, and other plan services.

In addition to providing covered services, the broker, consultant, or other covered service provider must reasonably expect $1,000 or more in direct or indirect compensation in connection with its contract or arrangement with the covered plan.

Additionally, the Bulletin clarifies that only covered service providers who are a party to the contract or arrangement with the covered plan are required to make the disclosure. In this way, the amended statute does not require affiliates or subcontractors, solely by virtue of offering services to the covered plan as an affiliate or subcontractor of the covered service provider, to individually make the disclosures, as they will not have entered into the contract or arrangement with the covered plan.[1]

What information must be disclosed?

Covered service providers must disclose to covered plans specified information regarding the services to be provided and the compensation the covered service provide reasonably expects to receive in connection with its services. At a minimum, this information must include:

  • A description of the services to be provided by the covered service provider;
    • Including, where applicable, information about those services for which the covered service provider will provide or reasonably expects to provide services directly to the covered plan as a fiduciary.
  • A description of the direct compensation that the covered service provider expects to receive in connection with the contract or arrangement with the covered plan. In most instances, such direct compensation will include some form of commission.
  • A description of all indirect compensation that the covered service provider, its affiliates, or subcontractors expect to receive.
    • Where a covered service provider employs the use of affiliates, subcontractors, or both, the disclosure should also include a description of the arrangement between the covered service provider and the affiliate or subcontractor.
    • Indirect compensation disclosures should also include (1) an identification of the services for which such indirect compensation will be received, (2) any formulae relied up in the calculation of such indirect compensation,  (3) identification of the payer of such indirect compensation, and (4) a description of the arrangement and any formula amongst and between the payer of the indirect compensation and the covered service provider, affiliates, or subcontractors.
  • A description of any compensation the covered service provider expects to receive in connection with the termination of the contract, along with a calculation of how any prepayments will be calculated and refunded.

In addition to describing the types of compensation, the covered service provider notice should also include the manner in which such compensation will be received.

Finally, a covered service provider must set forth the services that the covered service provider is rendering to the covered plan as a fiduciary.

When are the disclosures required?

The CAA amendments became applicable on December 27, 2021. Covered service providers, therefore, are required to make their fee disclosures for any new contracts or arrangements as of that date. The Bulletin clarifies that the “effective” date of the contract or arrangement is the date the contract or arrangement was executed, which may not necessarily be the beginning of a new plan year. Therefore, covered plans should consult with and collect the requisite information from their covered service providers for any contracts or arrangements that are written, renewed, or extended in 2022.

Furthermore, in order to meet the objectives of the policy (i.e. allowing covered plans to perform cost-benefit analysis related to the fees charged and services provided by their brokers and consultants), covered service providers are required to make the disclosures set forth above “reasonably in advance” of the date on which the contract or arrangement is entered into, extended, or renewed. Furthermore, any change in such disclosures are required to be made as soon as practicable.

How does a covered plan ensure disclosure?

While the disclosures contemplated by the statutory provision are intended to come from the covered service provider, the fiduciary responsibility rest with the covered plan sponsor. The primary enforcement mechanism, therefore, is to deem nonconforming deals to be prohibited transactions under the statute. However, no such determination shall be made provided covered plans meet the following requirements:

  • “The responsible plan fiduciary did not know that the covered service provider failed or would fail to make required disclosures and reasonably believed that the covered service provider disclosed the information required to be disclosed.
  • The responsible plan fiduciary, upon discovering that the covered service provider failed to disclose the required information, requests in writing that the covered service provider furnish such information.
  • If the covered service provider fails to comply with a written request…within 90 days of the request, the responsible plan fiduciary notifies the Secretary of the covered service provider’s failure…”


As plan fiduciaries consider their options this year, whether its with a new carrier or a renewal, they should begin working with their brokers and consultants to gain a better understanding of the fees that are charged and prepare to answer inquiries about the reasonableness thereof.

[1] Affiliates and subcontractors should review the nature of their relationship to covered plans to ensure that their services do not extend beyond the scope of the services provided on behalf of a covered service provider, thus possibly triggering the need for the affiliate or subcontractor itself to disclose.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients in business transactions, civil matters, regulatory compliance, and employee matters. Bob also has a background in employee benefits, having been a licensed agent since 2014. You can reach him at 517.377.0848 or at

Aaron L. Davis works in employee health and welfare benefits. He is also Chair of the firm’s labor law practice and serves as Firm Secretary. He has litigation experience in a diverse range of employment matters, including Title VII, the Age Discrimination and Employment Act, the Americans with Disabilities Act, the Family Medical Leave Act, and the Fair Labor Standards Act. You can reach him at 517.377.0822 or email him at

Five Stories that Matter in Michigan This Week – May 27, 2022

Five Stories that Matter in Michigan This Week – May 27, 2022; Legal, Legislative, and Regulatory Insights

The Republican-led Michigan Senate and House recently passed $2.5 billion in tax cuts, with a party-line vote in the Senate and a more bipartisan vote in the House. The legislation was passed shortly after Governor Whitmer suggested sending $500 rebates to “working families” in Michigan. The proposed tax cuts would include an expansion of Michigan’s Earned Income Tax Credit from 6% to 20% in the 2022 tax year; increasing personal tax exemptions by $1,800; and reducing the personal income tax rate from 4.25% to 4% starting in 2023, among other things.

Why it Matters: The jockeying between the governor and legislature revolves around the broader debate over what to do with the billions of dollars the state has available in the form of unexpected surplus, due in large part to federal pandemic relief funding. How the money is spent, or returned to Michigan residents in the form of tax cuts or rebate checks, is sure to be a key issue in the November elections.


The Michigan legislature recently voted to put the issue of term limits for lawmakers on this year’s November ballot. The plan would permit lawmakers to serve 12 years in Lansing, and all of that time could be spent in the House or Senate, or it could be divided between the two chambers. Voters will also be asked to approve or reject a requirement that state-level office holders submit annual financial disclosures to address conflicts of interest. If approved by voters, elected officials would have to disclose their assets, income and liabilities, and their involvement in any businesses, nonprofits, labor organizations or educational institutions.

Why it Matters: In 1992, Michigan voters voted in favor of a constitutional amendment for term limits. Since then, Michigan House members have been limited to three two-year terms and Michigan Senate members to two four-year terms—a maximum of 14 years between the two chambers. Accordingly, if the new term limit proposal is passed by Michigan voters, it would represent the first substantive change to term limits in 30 years.


The Michigan Supreme Court heard oral arguments in a case with significant implications for criminal cases against nine former government officials stemming from the Flint water cases, as well as for criminal procedure, more generally, in Michigan. The criminal defendants, including former Governor Rick Snyder, argue that their constitutional rights were violated when a single grand juror indicted them.

Why it Matters: Beyond the question of whether a one-person grand jury is constitutional, this case also raises interesting separation of power issues, given that the grand juror was a sitting judge.


In a cash-out merger, the shareholders of the target company cash out and aren’t involved in the ongoing operations of the acquiring company. But what happens when not all the shareholders are happy about the deal? As you might suspect, litigation often ensues, and that’s exactly what happened in a case, Murphy v. Inman, recently decided by the Michigan Supreme Court. It’s an important case because the Court clarified the rights of shareholders bringing claims against directors after a cash-out merger.

Why it Matters: This decision gives shareholders, boards of directors—and their respective advisors—much needed clarity on how actions taken during corporate transactions will be viewed by the courts. First, the Court adopted a two-question test, based on reasoning from Delaware courts, to determine whether a claim should be derivative or direct. Second, it made clear that boards of directors do owe fiduciary duties directly to shareholders during a cash-out merger.


Three significant developments related to the production and consumption of energy happened recently. First, Governor Whitmer announced a roadmap for making Michigan carbon neutral by 2050. Second, the Attorney General’s office reached a settlement with Consumers Energy that would result in Consumers ending its use of coal by 2025. Third, Governor Whitmer petitioned the U.S. Department of Energy to keep the Palisades Nuclear Plant in southwest Michigan open, arguing that its closure would cost the state 600 well-paying jobs.

Why it Matters: Energy continues to be a major political and economic issue around the world (the war in Ukraine), in the United States (high gas prices), as well as here in Michigan. Energy inflation, together with ongoing efforts to transition from fossil fuels to renewable energy, pose ongoing challenges and opportunities for politicians, policymakers and business leaders alike.

Related Practice Groups and Professionals

Mergers & Acquisitions | Edward Castellani

Criminal | Election Law | Klint Kesto

Energy, Utilities & Telecommunication | Michael Ashton

Taxation | Mark Kellogg

Former Student Falsely Accused of Sexual Misconduct Wins $5.3 Million Jury Award for Defamation and Civil Conspiracy

A jury in South Carolina awarded a former Clemson University student $5.3 million in connection with defamation and civil conspiracy claims he brought against three individuals stemming from false allegations of sexual misconduct.

While the lawsuit against the individuals did not include a Title IX claim, the underlying circumstances did involve a Title IX investigation. In fact, the male student did bring suit against Clemson for violations of Title IX and the Due Process Clause of the 14th Amendment to the U.S. Constitution, and Clemson settled for an undisclosed amount.

This case is noteworthy because it resulted in such a large damage award based on accusations of sexual misconduct, and the resulting fallout from the investigation, which is something colleges and universities must frequently address.

The Facts of the Case

The case involved a female student who accused a male student of sexual misconduct. The male student alleged that their sexual encounter was consensual, and that his accuser only alleged misconduct and filed a Title IX complaint with the school (alleging she had been sexually assaulted while under the influence of alcohol), after her boyfriend learned of the encounter.

The accuser and her boyfriend allegedly began calling the male student a “rapist” to their friends. And the male student was suspended from Clemson and expelled from the university.

The Implications

This case demonstrates that Title IX investigations can be fraught with risks. Such cases often involve allegations like the ones described above, and colleges and universities need to carefully handle such investigations, including any actions they take on the basis of allegations made by the parties involved.

If you have any questions about this case, or Title IX issues in general, please contact Ryan Kauffman.

Fraser Trebilcock Attorney Ryan Kauffman

Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters and representing higher education institutions. You can contact him at or 517.377.0881.

Term Limits and Financial Disclosure Requirements will be on the November Ballot in Michigan

In 1992, Michigan voters voted in favor of a constitutional amendment for term limits. Since then, Michigan House members have been limited to three two-year terms and Michigan Senate members to two four-year terms— a maximum of 14 years between the two chambers.

Those limits may change in light of a vote by the Michigan legislature on May 10 to put the issue of term limits on this year’s November ballot. The plan would permit lawmakers to serve 12 years in Lansing, and all of that time could be spent in the House or Senate, or it could be divided between the two chambers.

Voters will also be asked to approve or reject a requirement that state-level office holders submit annual financial disclosures to address conflicts of interest. If approved by voters, elected officials would have to disclose their assets, income and liabilities, and their involvement in any businesses, nonprofits, labor organizations or educational institutions.

No discussion or debate of the plan took place in either the House or the Senate.

According to reports, the Michigan Legislature worked with the advocacy group Voters for Transparency and Term Limits to bring these issues before Michigan voters in November. The resolution passed 76-28 in the House, and by a 26-6 vote in the Senate.

We will continue to keep you informed about these developments, as well as other issues in the lead up to the November elections.

Fraser Trebilcock attorney and former Michigan State Legislator Klint Kesto has nearly two decades of experience working in both the public and private sectors, including serving as Co-Chair of the CARES Task Force. You can reach him at or 517.377.0868.

Michigan Cannabis Regulatory Agency Abandons Plan to Allow Hemp to be Synthetically Converted to THC

Citing safety concerns and the lack of scientific and public health data, on April 15, 2022, the Michigan Cannabis Regulatory Agency (CRA) dropped its plan to allow hemp to be synthetically converted to THC.

The decision was handed down just days after the regulatory body was renamed from the Marijuana Regulatory Agency and assumed authority over hemp-derived products, pursuant to Governor Whitmer’s Executive Order No. 2022-1.

According to draft rules proposed earlier this year, hemp growers would have been permitted to sell hemp to marijuana processors, who could then convert it to THC for use in edibles, vaping cartridges, and other products being sold in the licensed marijuana market.

While safety was cited as the primary reason for dropping the proposal, issues related to business and competition likely also influenced the CRA’s decision. Specifically, hemp growers, including out-of-state growers, could have posed a new competitive threat to the state’s existing marijuana industry.

Currently, licensed businesses are permitted to extract THC oil from marijuana. If the CRA’s plans to allow hemp to be synthetically converted to THC were to proceed, it could lead to the existing producers going out of business.

If you have any questions about the impact of this decision by the CRA, or the cannabis industry in general in Michigan, please contact Klint Kesto or your Fraser Trebilcock attorney.

Fraser Trebilcock attorney and former Michigan State Legislator Klint Kesto has nearly two decades of experience working in both the public and private sectors, including serving as Co-Chair of the CARES Task Force. You can reach him at or 517.377.0868.

$400 Car Insurance Refunds – Will the Estates of Your Deceased Relatives Miss Out?

If you had a vehicle insured at 11:59 p.m. on October 31, 2021, you are eligible to receive a $400 refund if the insurance met the minimum insurance requirements for operating a vehicle on Michigan roads.

This refund is part of 2019 bipartisan auto reform legislation that requires the Michigan Catastrophic Claims Association to issue refunds of $400 per eligible vehicle no later than May 8, 2022.

Many Michigan drivers have already received their refunds by check or automatic deposit from their insurer. However, recently deceased individuals with qualifying vehicles are also eligible. Insurance companies may have mailed checks to an invalid address or directly deposited funds into a closed checking account.

If you are the personal representative of a decedent’s estate, contact the decedent’s insurance company to ensure that the refund is mailed to the personal representative’s address or deposited to the estate’s bank account.

If you require assistance, the experienced probate attorneys at Fraser Trebilcock can provide the guidance you need. Please contact us.

This alert serves as a general summary and does not constitute legal advice. Please contact us with any specific questions.

Heidi L. Pierce is a paralegal at Fraser Trebilcock focusing on estate planning and trust administration. You can contact her at 517.377.0858, or at

Client Alert: Transparency Rules Are In Full Force – Be Sure You Are Ready!

As you know, both the Affordable Care Act from 2010 (ACA) and the Consolidated Appropriations Act of 2020 (CAA, 2021) contain various transparency rules and requirements upon group health plans. Some of the rules are similar; others vary and have different effective dates.

Thankfully, the Departments of Labor, Treasury, and Health and Human Services (collectively, the Departments) issued FAQ Part 49 to reconcile some of these issues.


In November of 2020, the Departments promulgated numerous rules to create greater transparency in health coverage requirements as required under the ACA. The rules disseminate price and benefit information directly to consumers and to the public, enabling consumers to evaluate health care options and to make cost-conscious decisions. The Departments rely on the legal authority provided in 2715A of the Public Health Service Act (42 USCA § 300gg-15) and section 1311(e) of the Patient Protection and Affordable Care Act (42 USCA 18031(e)(3)). While the rules went into effect January 11, 2021, the Departments were set to begin enforcement January 1, 2022.

Meanwhile, on December 27, 2020, the Further Consolidated Appropriations Act, 2021 (PL 116-260) (CAA, 2021) was signed into law. The CAA, 2021, in part, provides protections against surprise billings and also contains numerous transparency rules. These rules are similar to the ACA transparency in coverage rules, but have varying terms and effective dates.

The Departments have decided to delay enforcement of certain provisions to reconcile contradictions between the ACA’s transparency in coverage rules and those provided under CAA, 2021. See FAQ Part 49.

Below is a summary of the Departments’ guidance as well as new dates by which plans and issuers must comply.


Machine Readable Files

As it pertains to public disclosure, the ACA rules require that certain non-grandfathered group health plans and health insurance issuers offering non-grandfathered coverage in the group and individual markets disclose in three machine readable files on a public website:

  • their in-network provider rates for covered items and services (enforcement begins July 1st, 2022);
  • out-of-network allowed amounts and billed charges for covered items and services (enforcement begins July 1st, 2022); and
  • negotiated rates and historical net prices for covered prescription drugs (enforcement deferred until further notice).

See 85 FR 72158 (Nov. 12, 2020). Machine-readable files are defined as: a digital representation of data or information in a file that can be imported or read by a computer system for further processing without human intervention, while ensuring no semantic meaning is lost. The files must be accessible free of charge, without having to establish a user account, password, or other credentials, and without having to submit any personal identifying information such as a name, email address, or telephone number. Plans and issuers have flexibility to publish the files in the locations of their choosing based upon their superior knowledge of their website traffic and the places on their website where the machine-readable files would be readily accessible by intended users.

Generally, the machine-readable files must contain the following content elements:


– name and identifier for each coverage option (Ex: EIN or HIOS ID)

– billing codes or other common payer code identifiers (Ex: a CPT code, HCPCS code, DRG or NDC)

– national provider identifiers (NPI), tax identifier numbers (TIN) and place of service codes


– rates that apply to each item or service that is associated with the last date of the contract term or the contract expiration date for each provider as identified by NPI, TIN, and Place of Service Code

– For contractual arrangements under which a plan or issuer agrees to pay an in-network provider a percentage of billed charges and is not able to assign a dollar amount to an item or service prior to a bill being generated, plans and issuers may report a percentage number, in lieu of a dollar amount.

– In situations in which alternative reimbursement arrangements are not supported by the schema, or in instances where the contractual arrangement requires the submission of additional information to describe the nature of the negotiated rate, plans and issuers may disclose in an open text field a description of the formula, variables, methodology, or other information necessary to understand the arrangement.


– historical out-of-network allowed amounts for covered items and services


– negotiated rates for prescription drugs (rates for prescription drugs should not be included in the other two files)

– historical net prices of prescription drugs (the retrospective average amount a plan or issuer paid for a prescription drug, inclusive of any reasonably allocated rebates, discounts, chargebacks, fees, and any additional price concessions received by the plan or issuer with respect to the prescription drug)

PRACTICE NOTE: While the ACA rules do not apply to grandfathered plans, the CAA, 2021 transparency rules do!

Price Comparison Tools

Plans and issuers are required to develop price comparison information for a list of health-related items and services and make it available to plan participants, beneficiaries, and enrollees through an internet-based self-service tool, and in paper form upon request. See 26 CFR 54.9815-2715A2(b), 29 CFR 2590.715-2715A2(b), and 45 CFR 147.211(b).

  • Departments have provided a list of 500 items and services that plans and insurers must include in their self-service tools. Enforcement will begin January 1, 2023. A list of the items can be found in table 1 of the preamble of the final rule.
  • By January 1, 2024, plans and insurers must include the price information for all items and services in their self-service tool.

To fulfill the requirements of the cost-sharing rules, several items of content are required, including: an estimate of the cost sharing liability; a participant’s, beneficiary’s, or enrollee’s accumulated amount; in net-work rates (including negotiated rates, underlying fee schedule rates and prescription drug rates); out of network allowed amounts; items and services content list; notice of prerequisites of coverage; and a disclosure notice.

PRACTICE NOTE: The CAA, 2021 added price comparison tool requirements as well (by telephone or Internet website) of the plan or issuer with respect to plan year, geographic region and participating providers to compare the amount of cost-sharing  required for a specific item/service.  See PHSA 2799A-4; IRC 8919; ERISA 719.

Insurance Identification Cards

Plans and issuers are required to include applicable deductibles, applicable out-of-pocket maximum limitations, and telephone numbers and web addresses for individuals to receive consumer assistance on plan ID cards issued to participants, beneficiaries and enrollees. This requirement has been in effect since January 1st, 2022. The Departments have not issued further guidance on an enforcement date but expresses that plans and issuers are expected to implement the ID card requirements using a good faith, reasonable interpretation of the law. See Code section 9816(e), ERISA section 716(e), and PHS Act section 2799A–1(e), as added by section 107 of division BB of the CAA.

Good Faith Estimates

Providers and facilities, upon an individual’s request or scheduling of items or services, are required to inquire if the individual is enrolled in a health plan or health insurance coverage, and to provide a notification of the good faith estimate of the expected charges for furnishing the scheduled item or service and any items or services reasonably expected to be provided in conjunction with those items and services, including those provided by another provider or facility, with the expected billing and diagnostic codes for these items and services. See PHS Act section 2799B–6, as added by section 112 of division BB of the CAA.

Providers and facilities must provide this good-faith estimate information to the plans of individuals who have coverage. And for those who don’t have coverage or who don’t wish to make an insurance claim with their coverage, this information must be provided to the individual. As of now, enforcement is deferred.

Advanced Explanation Of Benefits

When plans and issuers receive a good faith estimate from a provider or facility regarding a covered individual’s request or scheduling of an item or service, the plan or issuer must send the participant, beneficiary, or enrollee an advanced explanation of benefits. The explanation must contain:

  1. the network status of the provider or facility;
  2. the contracted rate for the item or service, or if the provider or facility is not a participating provider or facility, a description of how the individual can obtain information on providers and facilities that are participating;
  3. the good faith estimate received from the provider;
  4. a good faith estimate of the amount the plan or coverage is responsible for paying, and the amount of any cost-sharing for which the individual would be responsible for paying with respect to the good faith estimate received from the provider; and
  5. disclaimers indicating whether coverage is subject to any medical management techniques.

Note: The last content element for the explanation is a disclosure advising recipients that the information provided based on the good faith estimate is only an estimate of costs and that all items and services are subject to change. See Code section 9816(f), ERISA section 716(f), and PHS Act section 2799A-1(f), as added by section 111 of division BB of the CAA.

As of now, enforcement is deferred.

Prohibition on Gag Clauses on Price and Quality Information – CAA, 2021

The CAA, 2021 prohibits group health plans and issuers from entering into agreements with health care providers, networks or association of providers, TPAs, or other services providers which offer access to a network of providers if that agreement directly or indirectly restricts a group health plan or insurer from:

  • Providing provider-specific cost or qualify of care to referring providers, the plan sponsor, participants or beneficiaries, or individual eligible to become participants or beneficiaries under the plan;
  • Electronically accessing de-identified claims data, including financial information, provider information, service codes, or other data included in claim or encounter transactions; or
  • Sharing such information or data with a business associate.

Group health plans must annually submit to the Secretary an attestation that such plan is in compliance with these rules.

However, in FAQ Part 49 Q/A-7, the Departments indicated that they will not be issuing regulations on this issue. Instead, plans and issuers are expected to implement these requirements using a good faith and reasonable interpretation of the statute. Additionally, the Departments to intend to issue guidance explain how plans should submit their attestation starting in 2022.

Accurate Provider Directory Information – CAA, 2021

The CAA, 2021 also added the requirements that plans must provide accurate provider directories and update them regularly. See new Code section 9820(a) an d(b), ERISA section 720(a) and (b), and PHSA section 2799A-5(a) and (b). Plans must respond to participant and beneficiary requests about provider network participation status. If a participant, beneficiary, or enrollee receives services or is furnished an item from an out-of-network provider but was incorrectly given information that the provider was in-network, only in-network levels can be charged by the plan and the plan must count these cost-sharing amounts toward any in-network deductible or in-network out-of-pocket maximum. This is effective for plan years beginning on or after January 1, 2022.

In FAQ Part 49, Q/A-8, the Departments indicate that they will not be providing regulations prior to the effective date. Plans must use good faith efforts to comply. Plans will not be penalized if the plan sponsors limit cost-sharing to in-network amounts if wrong information is given as above.

Balance Billing Disclosures – CAA, 2021

Code section 9820(c), ERISA section 720(c), and PHS Act section 2799A-5(c) were added by CAA, 2021 and require plans to make certain disclosures regarding balance billing protections to participants, beneficiaries, and enrollees. In general, plans must make publicly available, post on a public website of the plan, and include on each Explanation of Benefits information regarding the No Surprise Billing law including relevant state laws and contact information for state and federal agencies in case of violations. The Departments issued a model notice to assist with the disclosure requirements. These rules are effective for plan years beginning on or after January 1, 2022.

FAQ Part 49 Q/A-9 similarly states that regulations were not to be issued prior to the effective date and plans must use a good faith, reasonable interpretation of the law.

Continuity of Care – CAA, 2021

Continuity of care protections are set forth in CAA, 2021. These ensure continuity of care in cases of an individual with benefits under a group health plan when termination of certain contractual relationships result in change in provider or facility network status. See Code section 9818, ERISA section 718, and PHSA sections 2799A-3 and 2799B-8.

FAQ Part 49, Q/A-10 states that while these requirements are also effective January 1, 2022, regulations won’t be issued until later. Such guidance will include prospective applicability date to afford plans and other entities with a reasonable amount of time to comply with any new requirements. Plans are again expected to use a good faith, reasonable interpretation of the law.

Grandfathered Health Plans – CAA, 2021

While certain provisions of the ACA are not applicable to grandfathered health plans, the CAA, 2021 does not include such an exception. Therefore, while transparency rules under the ACA were not applicable, grandfathered plans must be prepared to comply under the CAA. See FAQ Part 49, Q/A-11.

Prescription Drug Pricing – CAA, 2021

Under the CAA, 2021, Plan sponsors must submit numerous information regarding prescription drug expenses to Departments including:

  • Plan year beginning and ending dates;
  • Enrollment census information, including the number of enrollees and each state where the plan is offered; and
  • Specific information regarding the 50 most frequently dispensed brand drugs (and the total number of paid claims for each), the 50 most expensive drugs annually (and the annual amount spent for each), and the 50 drugs with the greatest yearly increase in expense from one plan year to the next (and the change in cost for each drug per year).

Plans must also report other information, including the average monthly premiums, prescription expenditures and impact of drug manufacturer rebates on expenditures.

In FAQ Part 49, Q/A-12, the Departments state that the intend to issue regulations to address these pharmacy benefit and drug cost reporting requirements. Until such guidance is issued, the Departments strongly encourage plans to start working to ensure they are in a position to report the 2020 and 2021 plan year data by December 27, 2022.


Undeniably, plan sponsors will not have the detailed information to comply and must rely on their insurers and TPAs. However, this regulatory guidance makes clear thatplan sponsors are ultimately responsible and must ensure the transparency rules are followed!

The transparency rules do set forth protections for insured arrangements when the group health plan requires the insurer to provide such information via a written agreement. If insurer fails to comply, then the insurer violates transparency disclosure requirements, not the group health plan.

It’s a bit more difficult for self-funded arrangements. The group health plan here too can enter into a written agreement requiring the TPA to provide the information. However, the plan is still responsible if the TPA fails to comply.Therefore, it is imperative to have an indemnification agreement with the TPA.

Plans failing to comply with the transparency rules could be subject to an enforcement action under ERISA and to the $100 per day excise tax penalty under Section 4980D of the Code (which applies to any failure to comply with the ACA’s market reforms).

Therefore, plan sponsors should immediately ensure their insurers and/or TPAs are prepared to comply with these rules and should enter into written agreements with each, as well as add indemnification language to protect themselves from potential penalties due to noncompliance.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.

Lauren  D.  Harrington is an associate attorney at Fraser Trebilcock focusing on Employment Law. You can reach her at 517.377.0874, or email her at

Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or

City of Detroit Votes to Approve Licensed Adult-Use Recreational Cannabis Sales

The Detroit City Council recently voted to allow adult-use cannabis sales in the city, following a preliminary injunction issued by U.S. District Judge Bernard Friedman in June 2021 that halted Detroit’s controversial recreational marijuana licensing program indefinitely.

On April 5, 2022, the Detroit City Council members voted to approve the revised ordinance that will go into effect beginning April 20, 2022. Under the ordinance, a limited 100 recreational marijuana licenses will be made available, half of which will be set aside and reserved for “social equity applicants.”

The revised ordinance also now allows for licenses of microbusinesses and consumption lounges. Separately, licenses issued for growers, processors, or secured transporters are not limited under the ordinance.

In November 2020, the City of Detroit announced its rules for allowing licensed adult-use recreational marijuana sales, which included controversial provisions aimed at giving preferential treatment to applicants if they fit into the criteria. These rules gave rise to a lawsuit filed on March 2, 2021, in Wayne County Circuit Court. In April 2021, Detroit officials were barred from receiving any more marijuana business applications, followed by the licensing program’s total suspension in June 2021.

At Fraser Trebilcock we have a strong litigation department that has handled multiple lawsuits in the cannabis field and are able to assist you if you believe you are entitled to relief. If you have any questions or require assistance, please contact Paul Mallon or your Fraser Trebilcock attorney.

mallon-paulPaul C. Mallon, Jr.  is Shareholder and Chair of Fraser Trebilcock’s cannabis law practice. You can reach him at or (313) 965-9043.