Retroactive PPT Exemption

February is for lovers, and who doesn’t love a tax exemption? Some Michigan manufacturers who were not able to claim their 2021 ESA-PPT exemption due to COVID-19, have until March 14 to request approval from the State Tax Commission.

Eligible Michigan manufacturers can elect out of the personal property taxes and instead pay an Essential Services Assessment (ESA) at the state level. The ESA is a State specific tax on personal property that is exempt from property taxes at the local level because the property meets certain eligibility requirements, such as being qualified manufacturing or industrial personal property. In order to elect out of local personal property taxes and into the ESA regime, manufacturers must file the required forms with their local assessing office by February 20th of each year.

During calendar year 2021, some manufacturing businesses were not able to file the required paperwork by the due date as a result of COVID-19 restrictions.

On November 14, 2023, the Governor signed 211 PA 2023. As the legislation was not given immediate effect, that law went into effect February 13, 2024. The legislation allows manufacturers who did not elect out of local personal property taxes and into ESA due to the COVID-19 pandemic to retroactively claim eligible manufacturing personal property exemption for 2021.

If you have any questions as to whether your business can claim a retroactive 2021 ESA/PPT exemption, please contact your Paul McCord or your Fraser Trebilcock attorney.

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


Headshot of Fraser Trebilcock attorney Paul V. McCordFraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Fraser Trebilcock Shareholder Ryan Kauffman Participates in Arguments in Michigan Supreme Court

On Thursday, October 5, Fraser Trebilcock Shareholder Ryan Kauffman participated in arguments in the Michigan Supreme Court on cases brought against higher education universities related to the COVID-19 issue.

You can view the entirety of the argument by going to the Michigan Supreme Court’s YouTube page, or by clicking here (Mr. Kauffman’s argument starts at 43:40).

Fraser Trebilcock attorney Ryan Kauffman arguing in front of the Michigan Supreme Court.

Mr. Kauffman was also quoted in The Detroit News, which you can view here.


Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters. You can contact him at rkauffman@fraserlawfirm.com or 517.377.0881.

Five Stories That Matter in Michigan This Week – May 12, 2023

  1. Independent Contractor Bills Introduced in Michigan House of Representatives

Are your workers properly classified? There is a package of bills in the Michigan House of Representatives that businesses should be keeping an eye on.

Why it Matters: The multi-bill package (HB 4390 et seq.) would create one of the strictest standards for defining an independent contractor. In addition to the new, stringent definition for independent contractors in Michigan, the proposed legislation would also drastically increase the penalties for misclassifying a worker. Learn more.

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  1. COVID-19 Public Health Emergency Ends

The federal COVID-19 public health emergency order that’s been in effect since the onset of the pandemic expired on May 11.

Why it Matters: With the end of the public health emergency comes the expiration of certain health care coverage options. For example, according to reporting from Bridge Magazine, up to 400,000 Michigan residents may lose Medicaid coverage, and over the counter COVID tests will no longer be required to be fully subsidized by private insurance.

  1. May 24 Business Education Series

During this two-presentation dynamic program, attendees will learn about the SBA 504 Loan from Coty Gould with the MCDC (Michigan Certified Development Corporation), and Government Contracts from Mike Hindenach with APEX (formerly known as PTAC Procurement Technical Assistance Centers).

Why it Matters: The SBA 504 Loan presentation you will learn the basics of SBA 504 loan, the benefits and how to qualify and apply. MCDC is a non-profit certified by the US SBA to administer the SBA 504 Loan Program in Michigan. The SBA 504 loan provides small businesses with low-rate, long-term loans for building purchases, construction, and machinery and equipment. In addition, these loans require a smaller down payment than what traditional lenders can offer, allowing the business owner to preserve capital. Learn more and to register.

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  1. Sixth Circuit: Employee Must Alert Employer of Need for Reasonable Accommodation to Bring a Claim of Disability Discrimination

In the case of Hrdlicka v. General Motors, the Sixth Circuit Court of Appeals upheld a lower court ruling that an employee must sufficiently inform their employer of their need for a reasonable accommodation in order to prosecute a claim of disability discrimination under state and federal law.

Why it Matters: This case serves as an important reminder that while employers must be responsive and engaged when an employee requests a reasonable accommodation for a disability, there is also a responsibility for employees to inform their employers of a disability. In this case, the plaintiff’s “purported disability was unknown to either herself or General Motors until well after her employment was terminated.”

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  1. Limitations of Federal Bankruptcy Law for Marijuana Businesses

Under the federal Controlled Substances Act, marijuana remains classified as a Schedule I drug, making it illegal at the federal level. This creates a unique challenge for marijuana businesses operating legally within their state’s framework.

Why it Matters: Federal bankruptcy courts have been reluctant to provide relief to debtors engaged in activities that are illegal under federal law, even if those activities are legal under state law. As a result, marijuana businesses are often left without the benefits of bankruptcy protection, such as the automatic stay, discharge of debts, and court-supervised reorganization.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Labor, Employment & Civil Rights | Dave Houston
Cannabis Law | Sean Gallagher

Five Stories that Matter in Michigan This Week – July 29, 2022

  1. New Laws Phase Out COVID-19 Employer Liability Protections for Employers

Governor Whitmer recently signed three bills into law that initially roll back COVID-19 protections for both employers and employees and then repeal the laws outright on July 1, 2023. For example, one of the laws being repealed granted employers immunity from liability lawsuits if an employee was exposed to COVID-19 at work, provided the employer followed state and federal regulations.

Why it Matters: While these bills signal a continuing shift away from laws and regulations enacted during the onset of the pandemic, employers must keep in mind that they still have obligations to maintain safe working conditions pursuant to OSHA, MIOSHA and other federal, state and local laws and regulations.

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  1. Michigan Minimum Wage Increase May be on the Ballot in 2024

Organizers behind the Raise the Wage MI ballot initiative reportedly secured  more than 610,000 signatures and delivered them to Michigan officials in an effort to qualify the proposal for the 2024 ballot. The proposal would raise Michigan’s hourly minimum wage to $15 over the course of five years.

Why it Matters: Last week the Michigan Court of Claims ruled that the state legislature’s adoption and alteration of a 2018 ballot measure that would have raised the minimum wage to $12 by 2022 was unconstitutional. That ruling has been appealed, but even if it gets overturned, Michigan may still see a minimum wage increase if the Raise the Wage MI initiative is passed.

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  1. New Proposed Rule on Independent Contractor Classification Sent to White House

Earlier this month, a new proposed rule from the U.S. Department of Labor regarding the classification of workers as independent contractors was sent to the White House for review. The rule is expected to make it harder for employers to classify workers as independent contractors.

Why it Matters: Under the Fair Labor Standards Act, “employees” are entitled to minimum wage, overtime pay and other benefits. Independent contractors are not entitled to such benefits, nor must employers withhold taxes or pay the employer portion of social security taxes for independent contractors. Penalties for misclassifying workers as independent contractors can result in fines for employers.

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  1. New Michigan Budget Passed for Upcoming Fiscal Year

Governor Whitmer recently signed a $73 billion budget for the upcoming fiscal year beginning October 1, 2022. The budget was passed in the legislature with bipartisan support.

Why it Matters:  The budget funds a range of investments meant to support the Michigan economy, including: (i) $55 million to help employers train and upskill their new and existing workforce, (ii) $25 million for the Pure Michigan tourism campaign, (iii) an increase in per-pupil funding to $9,150 per student, and (iv) $55 million for Michigan Reconnect, a program that provides tuition-free paths to higher education or skills training.

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  1. New Law Intended to Crack Down on Organized Retail Crime in Michigan

Public Act 174 of 2022 defines the theft of a product with intent to resell in exchange for profit as a racketeering offense in Michigan.

Why it Matters: This bipartisan legislation is intended to combat the increase in retail crime that has affected many retailers in many large cities across the country.


Related Practice Groups and Professionals

Business & Tax | Ed Castellani

Labor & Employment | Aaron Davis

Five Stories that Matter in Michigan This Week – July 22, 2022

  1. COVID, Force Majeure, and Frustration of Purpose

Courts have rejected COVID-related force majeure and frustration of purpose arguments on the reasoning that the pandemic and its effects were foreseeable. Now in its third year, disruptions related to the pandemic are no longer unforeseeable and businesses should take note.

Why it Matters: COVID-related frustration of purpose and force majeure are not cure-alls, and courts will not take these arguments at face value. However, with the right facts, frustration of purpose or force majeure arguments can be successful. Businesses should take positive steps to ensure that their interests are protected if/when COVID comes knocking again.

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  1. Proposed Short-Term Rental Legislation Remains Stuck in Michigan House

Local communities will be limited in their ability to regulate short-term housing rentals if a bill passed by the Michigan House of Representatives, House Bill 4722 (“HB 4722”), becomes law. However, the bill remains on hold in the Michigan House, as powerful interest groups—local governments and Michigan realtors, in particular—remain at odds over the bill.

Why it Matters: The bill restricts local communities from adopting or enforcing zoning ordinance provisions that have the effect of prohibiting short-term rentals. On the one hand, local governments argue that the bill would undermine local control over zoning. On the other hand, realtors argue that the bill would dampen the real estate market. A lot is at stake, as Michigan homeownersreportedly made more than $250 million from Airbnb rentals alone in 2021.

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  1. Decreased Costs Trending for Medical Marijuana Licenses

Last month the Cannabis Regulatory Agency (CRA) announced that medical marijuana facilities that need to renew their license or obtain a new license will pay less in fees for the upcoming fiscal year. Fees for each class and type of business have been reduced, a trend that started last year when the CRA reduced fees for this current fiscal year.

Why it Matters: As the number of medical licensees in the state continue to grow, associated costs of getting a new license or renewing are decreasing. If you have any questions or seeking to acquire a medical marijuana license, contact our cannabis attorneys.

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  1. New Law Allows Non-Profit Corporation to be a Member of Limited Liability Company

Senate Bill 926 was recently signed into law by Governor Whitmer, which changes the definition of a person in the limited liability company act, allowing nonprofit corporations to be members of limited liability companies (“LLC”).

Why it Matters:  Michigan now joins other states that allow nonprofits to create LLCs that do not involve any financial gain or profit to perform certain functions while still maintaining their nonprofit status.

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  1. Paid Sick Leave and Minimum Wage Laws Up in Air

Following the ruling by the Michigan Court of Claims recently, the “adopt and amend” strategy taken on by Michigan’s legislature in 2018 to find a compromise for two ballot initiatives which would have increased the minimum wage and enacted a paid sick leave law, was deemed unconstitutional.

Why it Matters: It is anticipated that the Michigan legislature will appeal the decision and request a stay. If the decision is not reversed, then changes will go into effect immediately. The state’s minimum wage will increase to $12 an hour, tipped employees will receive an increase, and nearly every size and type of business will receive 72 hours per year of paid sick time leave.


Related Practice Groups and Professionals

Litigation | Matthew Meyerhuber

Real Estate | Jared Roberts

Cannabis | Klint Kesto

Business & Tax | Ed Castellani

Labor, Employment & Civil Rights | Aaron Davis

Covid, Force Majeure, and Frustration of Purpose – Some Words of Caution

Courts generally show a pattern of skepticism toward force majeure and frustration of purpose arguments stemming from the Covid-19 pandemic. Here’s what businesses need to know to protect themselves.


Definitions

First, we need to get our terminology straight. Frustration of purpose and force majeure, while related concepts, are distinct in some important ways. Force Majeure is an event mentioned explicitly in a contract that discharges the parties of at least some of their responsibilities. Frustration of purpose, on the other hand, is a contract defense alleging that the basic purpose of the contract being litigated has been frustrated by an event not reasonably foreseeable to the parties. Michigan Courts use a three-part test to assess frustration of purpose: 1) the contract must be at least partially executory; (2) the frustrated party’s purpose in making the contract must have been known to both parties when the contract was made; (3) this purpose must have been basically frustrated by an event not reasonably foreseeable at the time the contract was made, the occurrence of which has not been due to the fault of the frustrated party and the risk of which was not assumed by him. Molnar v. Molnar, 110 Mich. App. 622, 313 N.W.2d 171 (1981).

Primary issues: Causation and Foreseeability.

It’s hard to deny that the COVID-19 pandemic involved possibly the most significant disruption of global commerce since World War II. As of this writing, the WHO reports over six million lives have been lost to COVID-19. Sweeping restrictions on travel and trade across the globe have also come at an enormous and self-evident economic cost. So—why isn’t COVID persuasive as a force majeure or frustration of purpose event?

One issue is causation. It can be challenging to prove that the pandemic caused a disruption when intervening factors like government action come into play.

For example, Michigan saw strict government shutdown mandates related to COVID. Though these shutdowns may have saved numerous lives, they inarguably caused some markets to collapse overnight. Suddenly, college towns were empty; theaters, bowling alleys, and dine-in restaurants were shuttered. Did the pandemic cause this? Or did government action cause it? Alternatively, did a business decline for an entirely different reason? Was it already doomed, with a shutdown being only the final nail in the coffin? The same issue comes up with Covid-related supply chain disruptions. Did the pandemic cause it? Labor shortages and strikes? Both?

In a contract case where the defendant suffered a loss of business amid the COVID pandemic, causation issues might render their force majeure or frustration of purpose defenses ineffective. Whether initiating or defending a lawsuit, a party making a frustration of purpose or force majeure argument has a burden of proof to meet.

Another problem is that COVID-19 and its effects have arguably been foreseeable, negating frustration of purpose and force majeure arguments.

Erin Webb, a legal analyst writing for Bloomberg, noted in a November 2021 article titled ANALYSIS: No Longer Unforeseeable? Force Majeure and Covid-19 that courts have rejected Covid-related force majeure and frustration of purpose arguments on the reasoning that the pandemic and its effects were foreseeable.

“Since early 2021, with Covid-19 the new normal and the coronavirus feeling a lot less’ novel,’ courts have increasingly expected parties to have adjusted to pandemic-related issues—from supply chain disruptions to the challenges of remote work. So, for those still wishing to explore such defenses, careful factual research and analysis early in a case will be more important than ever,” writes Webb.

In short, with the pandemic being in its third year, disruptions related to the pandemic are no longer unforeseeable.

Another older version of this reasoning is that a decline in business, even if resulting from conditions such as a pandemic and stay-at-home order, is an inherent risk of doing business that the parties assume. “The tenant is not relieved from the obligation to pay rent if there is a serviceable use still available consistent with the use provision in the lease. The fact that the use is less valuable or less profitable or even unprofitable does not mean the tenant’s use has been substantially frustrated.” Mel Frank Tool & Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802, 808 (Iowa 1998)

For a frustration of purpose argument to succeed, the entire basic purpose of the contract must be frustrated. This has happened in some cases. See, for example, Bay City Realty, LLC v. Mattress Firm, Inc., No. 20-CV-11498, 2021 WL 1295261 (E.D. Mich. Apr. 7, 2021). The case involved a frustration of purpose defense to the landlord’s breach of contract claim. The court found in favor of the tenant/defendant on the frustration of purpose issue, holding that the Governor’s order shuttering non-essential businesses frustrated the primary purpose of the Lease (retail sales of mattresses).

Force majeure clauses—should we use them for pandemics?

Paula M. Bagger, writing for the American Bar Association, covers this topic in greater detail in a March 2021 article titled The Importance of Force Majeure Clauses in the COVID-19 Era. Bagger warns that “we must not ignore the potential applicability of force majeure to our commercial agreements.”

Possible solutions are not as simple as slapping the word “pandemics” into a force majeure clause. For one, some courts may reason that the parties actually foresaw listed events, even though such reasoning goes somewhat against the logic of a force majeure clause, which lists potential unforeseen events.

Writes Erin Webb: “Some courts have found that the parties’ ability to name a risk—like a pandemic or a government shutdown risk—in a force majeure clause means that the risk was not only foreseeable at the time of contracting, but actually foreseen, defeating other defenses to nonperformance, such as impossibility of performance or frustration of purpose.”

This reasoning may be particularly applicable to Covid-19, given evidence that Covid-19 will be endemic to the human population in the future. If we expect Covid, we can no longer expect to use it as an excuse.

Furthermore, going back to causation, a force majeure clause mentioning a pandemic may not adequately address the issues accompanying the COVID-19 pandemic. More open-ended catch-all-type statements may be better.

However, it is essential to consider one’s own goals when drafting a force majeure clause. For example, if you’re a commercial landlord, you may not want a force majeure clause to encompass pandemics like COVID-19 – it could give a delinquent tenant ammunition in its efforts not to pay you. Conversely, if you’re a commercial tenant, you might want an out if business dries up.

Conclusion

COVID-related frustration of purpose and force majeure are not cure-alls, and courts will not take these arguments at face value. However, with the right facts, frustration of purpose or force majeure arguments can be successful. Businesses should take positive steps to ensure that their interests are protected if/when COVID comes knocking again. For all your business needs regarding frustration of purpose and force majeure clauses, the attorneys at Fraser Trebilcock can help.


Matthew J. Meyerhuber is an attorney at Fraser Trebilcock focusing on general litigation, cannabis law, environmental law, and real estate. Matthew can be reached at mmeyerhuber@fraserlawfirm.com or 517.377.0885. 

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.

BACKGROUND

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.

DEPARTMENTS’ GUIDANCE

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:

FOR ALL FILES

– 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

FOR IN-NETWORK RATE FILES

– 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.

FOR ALLOWED AMOUNT FILES

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

FOR PRESCRIPTION DRUG FILES

– 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.

PRACTICE TIPS AND TAKEAWAYS…

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 lharrington@fraserlawfirm.com.


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 elatchana@fraserlawfirm.com.

Client Alert: Federal Worker Vaccination Requirement Reinstated!

On April 7, 2022, the United States Circuit Court of Appeals for the Fifth Circuit reinstated President Biden’s executive order (EO-14043) requiring the COVID-19 vaccination of federal employees.

Executive Order 14043 was issued September 9, 2021 mandating all agencies as defined by 5 U.S.C. 105 (excluding the Government Accountability Office) to implement programs requiring COVID-19 vaccination for all of its Federal employees (those defined by 5 U.S.C. 2105), with the exceptions of religious and medical accommodations. Employees were expected to have been fully vaccinated by November 22, 2021 – meaning having received all doses of a vaccination series by November 8th. If employees failed to comply, employer agencies were directed to implement disciplinary action up to and including removal or termination.  

Nonetheless, months after many federal employees had already complied with the vaccination requirement, on January 21, 2022 the United States District Court for the Southern District of Texas ordered a nationwide preliminary injunction prohibiting the enforcement of the Order finding that the public’s interest could be better served through less restrictive measures. See Feds for Med Freedom v Biden, No. 3:21-CV-356, 2022 WL 188329 (SD Tex, January 21, 2022), vacated and remanded No. 22-40043, 2022 WL 1043909 (CA 5, April 7, 2022).

Yesterday, the District Court’s Order was overturned by the Fifth Circuit in Feds for Med Freedom v Biden, No. 22-40043, 2022 WL 1043909 (CA 5, April 7, 2022). The question at issue was whether the Civil Service Reform Act of 1978 (“CSRA”), 5 U.S.C. § 1101 et seq., deprived the District Court of jurisdiction and whether Plaintiffs were required to pursue their dispute through the administrative procedure set-out in the CSRA. The Court answered in the affirmative.

For background, the court provided in part:

Under the CSRA, certain federal employees may obtain administrative and judicial review of specified adverse employment actions, such as removals, suspensions for more than fourteen days, pay or grade reductions, and furloughs lasting thirty days or less. Once an employing agency finalizes an adverse action, the aggrieved employee may appeal to the Merit Systems Protection Board (“MSPB”). If the employee prevails on appeal, the MSPB can order the agency to comply with its decision and award “reinstatement, backpay, and attorney’s fees.” 5 U.S.C. §§ 1204(a)(2), 7701(g)). “An employee who is dissatisfied with the MSPB’s decision is entitled to judicial review in the United States Court of Appeals for the Federal Circuit” under § 7703. The Federal Circuit’s jurisdiction over such appeals is “exclusive.” 28 U.S.C. § 1295(a)(9). If an employee appeals to the Federal Circuit, then that court must “review the record and hold unlawful and set aside any agency action, findings, or conclusions” that are “(1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; (2) obtained without procedures required by law, rule, or regulation having been followed; or (3) unsupported by substantial evidence.” 5 U.S.C. § 7703(c)(1)–(3).

Feds for Med Freedom v Biden, at *3 (CA 5, April 7, 2022). Nowhere within the CSRA is there an opportunity for judicial review by a US District Court. After an evaluation of whether Plaintiff’s would have succeeded on the merits, the Court vacated the District Court’s preliminary injunction and ordered dismissal of the case.

As of today, Executive Order 14043 is reinstated nationwide, and federal employees are required to be fully vaccinated. The Safer Federal Workforce Task Force, designated to provide guidance on enforcement, has yet to publish new information. It is expected that new guidance with new deadlines is forthcoming, but as of now, all federal employers can review currently available information here: 

For assistance with implementing the requirements of EO 14043, please contact your Fraser Trebilcock attorney.

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 lharrington@fraserlawfirm.com.


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 elatchana@fraserlawfirm.com.

Despite Supreme Court Vaccine Mandate Defeat, OSHA Still has Authority to Regulate COVID-19 Workplace Safety

The major headlines about the Occupational Safety and Health Administration (OSHA) and COVID-19 over the last few weeks have all been focused on the fact that on January 13, 2022, the United States Supreme Court blocked OSHA’s vaccine mandate for employers with 100-plus employees. On January 25, 2022, OSHA officially withdrew the mandate.

But that doesn’t mean that OSHA has no role in enforcing workplace safety in connection with COVID-19. A stark reminder of OSHA’s enduring enforcement powers is a recent case in which significant fines were proposed by OSHA against an Ohio-based auto supplier because it failed to follow its own policies and federal guidance related to COVID-19 health and safety protocols.

OSHA’s Investigation and Allegations

According to a January 14, 2022, news release from OSHA, a complaint was lodged against the auto supplier alleging that it ignored guidelines to limit employee exposure to COVID-19 and that several employees became sick. OSHA then launched an investigation.

During its first inspection of the facility, OSHA found that 65 employees had tested positive for COVID-19. A few days later, 88 had tested positive. Five employees were hospitalized and two died, and OSHA determined that at least one of the deaths was work-related.

While investigators determined that the company issued a corporate-wide social distancing policy in March 2020 and trained employees in May 2020 on precautions for returning to work that included social distancing and mask wearing, OSHA found that the company did not adhere to these policies during the COVID-19 outbreak and OSHA inspection.

OSHA cited the company and proposed penalties of $26,527.

Implication for Employers

Given that we have now been dealing with the COVID-19 pandemic for two years, employers (and their employees) are understandably fatigued and finding it difficult to remain vigilant in terms of maintaining COVID-19 safety protocols. Many welcomed the Supreme Court’s ruling blocking OSHA from enforcing its large employer vaccine mandate. However, it’s important for employers to remember that OSHA—as well as other federal, state and local regulatory authorities—are still investigating violations of safety protocols, and levying penalties when appropriate.

Indeed, as demonstrated by the Ohio auto supplier case described above, OSHA still has the authority to regulate workplace safety—notwithstanding the Supreme Court’s ruling. OSHA’s authority derives from several provisions of federal law, including 29 C.F.R. § 1910.132-140 (Personal Protective Equipment), 29 C.F.R. § 1904 (Recording and Reporting Occupational Injuries and Illnesses), and 29 U.S.C.A. § 654 (General Duty Clause).

Accordingly, vigilance remains essential. If your business hasn’t audited its COVID-19 protocol compliance recently, or is uncertain of its obligations, please contact your Fraser Trebilcock attorney.

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


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 elatchana@fraserlawfirm.com.


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 lharrington@fraserlawfirm.com.

FAQs Spell Out Employer-Sponsored Health Plan Requirements for Reimbursing Over the Counter COVID Tests Effective as of January 15, 2022

Effective January 15, 2022, employer-sponsored group health plans and health insurers are required to provide reimbursement to plan participants, or to provide coverage to plan participants, for over-the-counter (“OTC”) COVID-19 self-tests. No cost sharing (such as deductibles), prior authorization or other medical management requirements can apply.

These and other explanations of coverage requirements for OTC COVID-19 testing are addressed in guidance issued in a “Frequently Asked Questions” format on January 10, 2022. The FAQs were prepared jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the “Departments”) regarding implementation of the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and the Affordable Care Act.

Some of the important issues addressed in the FAQs include the following:

  • A plan or insurer is not required to provide coverage by reimbursing sellers of OTC COVID-19 tests directly (i.e., direct coverage). Instead it may require a participant, beneficiary, or enrollee to submit a claim for reimbursement to the plan or insurer. However, the FAQs state that plans and insurers are strongly encouraged to provide direct coverage for OTC COVID-19 tests without requiring participants, beneficiaries, or enrollees to provide upfront payment and seek reimbursement.
  • To the extent a plan or insurer provides direct coverage for tests, it may not limit coverage to only tests that are provided through preferred pharmacies or other retailers, and must take reasonable steps to ensure that participants have adequate access to tests through an adequate number of retail locations (including in-person and online locations).
  • Reimbursement of tests from non-preferred pharmacies or other retailers may be limited to no less than the actual price, or $12 per test (whichever is lower); however plans and insurers may elect to provide more generous reimbursement up to the actual price of the test.
  • A plan or insurer may limit the number of tests covered to no less than 8 tests per 30-day period.
  • Plans and insurers are permitted to address suspected fraud and abuse. The FAQs state, for example, that a plan or insurer may require (i) an attestation that the OTC COVID-19 test was purchased by the participant for personal use, not for employment purposes, and (ii) reasonable documentation (such as a UPC code) of proof of purchase with a claim for reimbursement.

The Centers for Medicare and Medicaid Services also issued a set of FAQs on January 10, 2022, explaining to consumers “How to get your At-Home Over-The-Counter COVID-19 Test for Free.”

We will continue to keep you updated regarding new developments on these issues. Given the nationwide lack of availability of tests, and many insurers indicating that they cannot meet the January 15 deadline, it may be a rocky start for this program.

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


Elizabeth 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 elatchana@fraserlawfirm.com.


Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.


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 lharrington@fraserlawfirm.com.