On August 16, 2017, the Department of Labor (“DOL”) filed a lawsuit against Macy’s Inc. Health and Welfare plan
(and its third party administrators) under ERISA Title I.
Specifically, the complaint alleges:
• The health plan and its fiduciaries failed to follow the written terms of the health plan’s Summary Plan Description
(SPD) when reimbursing out-of-network claims; and
• The wellness program that includes a tobacco surcharge violated the HIPAA wellness program rules.
The complaint alleges breach of fiduciary duty and asks, in part, for readjudication of all out-of-network claims
administered outside plan terms and for restitution of all the tobacco surcharges imposed.
Failure to Amend SPDs
According to the DOL’s complaint, Macy’s changed the reimbursement threshold for out-of-pocket claims from
“the lesser of the provider’s normal charge for a similar service or supply or between 75%-80% of usual and customary
charges” to the Medicare Allowable Rate when it is less than the provider’s normal charge for a similar service or supply.
Allegedly, the SPD was not amended to include language describing that the reimbursement for out-of-network claims
would be the Medicare Allowable Rate when less than provider’s normal charge. Additionally, the health plan participants
were not provided a copy of any summary of material modification reflecting the change in reimbursement.
DOL Sues Health Plan Alleging SPD and
Wellness Program Failures
Published: August 23, 2017
CA Insurance License 0F98081
Terry Denesha | Denesha Insurance Agency | (661) 201-0571 | [email protected]
This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You
should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2017 Emerson Reid, LLC. All Rights Reserved.
DOL Sues Health Plan Alleging SPD and Wellness Program Failures Published: August 23, 2017 | Page 2
Wellness Program Failures
The DOL alleges the tobacco cessation wellness program
sponsored by Macy’s did not meet the requirements of
the wellness regulations to provide a nondiscriminatory
wellness program for the years 2011 to present day.
Briefly, the employer imposed a surcharge on an
employee’s premium for individuals who were smokers.
While such surcharges are permissible, there are specific
guidelines that must be followed to comply with HIPAA
wellness regulations.
Specifically, the DOL alleges the wellness rules were
violated because the program:
• Required covered members participating in a
tobacco cessation program to be tobacco free for
six consecutive months in order to avoid a premium
• Did not allow individuals who completed the
tobacco cessation program to avoid the entire
surcharge (i.e., retroactively correct the application
of a surcharge); and
• From 2011-2013, the materials describing the
wellness program failed to include a notice of
a reasonable alternative standard to avoid the
Why is this Important?
The recent filing by the DOL of this complaint signals
the agency has not backed away from pursuing ERISA
violations against employer-sponsored health plans.
It also highlights the importance for plans to keep
documents up-to-date to ensure administration is
consistent with the written terms of the plan. Finally,
it highlights the importance of following the rules when
it comes to wellness programs, specifically offering a
reasonable alternative to achieve the reward without
conditioning it on satisfying the original standard
(e.g., non smoker status) and making the full reward
available upon completion of the alternative.
It will be interesting to see Macy’s response and to follow
developments in this litigation and any actionable items
for plan sponsors. We will continue to keep you apprised.
DOL Sues Health Plan Alleging SPD and Wellness Program Failures

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.