Inside This Issue:

Labor & Employment Law Update

Prevailing Party Costs: A Sanction with No "Teeth?"

CMS Releases Two New Policy Memos Addressing "Off Label" Drug Use & Rated Ages Regarding Medicare Set-Aside Proposals

Contact Us:

FASI Website

E-Mail FASI Headquarters

Summer 2010

President's Message
--by Gail Shuffler, FASI President


FThe 41st annual FASI conference in Naples will take place in less than three weeks and it is does not seem possible that my third term as President is about to expire. It has been a wonderful experience for me and I have loved most of it.

We celebrated our 40th birthday as an organization and our 20th anniversary at the Ritz Carlton at last year's event. We have had ebbs and flows but have remained a remarkably viable and unique organization that has managed to gain some new  members, especially this past year. In my travels around the state and most recently as a speaker at the National Council of Self Insureds, I learned that we have an excellent reputation for being a dedicated group of professionals committed to working for the betterment of our part of the industry. We are also famed for our friendliness and warmth. One of the members who joined last year remarked that having each Board member make an effort to meet and greet them made for an extraordinary welcome. They also mentioned that being seated at meals with our Board members at the conference was an unusual and warm touch.

Even though the economy has taken a toll on many businesses, FASI has managed to survive rather well and actually gained some more new members this year. We are pleased to announce that Disney, Publix and Safeway are among the new members along with others which we will see in July.

We launched a new website that really looks great and have continued to snag some great speakers and presentations for the conference. We kept the legislature from creating too much havoc and helped the Division with the promulgation of new rules for self insurance. We have continued to use our individual and collective influence and contacts to further enhance the robustness of the self insurance industry in our state

We have honored one of the hardest working people I know, Ms. Bethan Hyde with the naming of our golf tournament for her in tribute to her many contributions, fundraising, bossing folks around, and otherwise just having people grateful for the opportunity to work with her in support of FASI. I am continually awed by this woman's ability to get things accomplished and if she ran BP that "damn hole" would have been plugged weeks ago. She is one of the reasons I became a member of FASI long ago. 

I am proud, humbled and honored that you have allowed me to serve and I will miss being the Prez but will support my successor with enthusiasm and continue to work for FASI in the years to come. I hope the Board will allow me to serve as Conference Co-Chair after this term.   

I look forward to seeing all of you and hopefully, your families in the upcoming days and thanks again for your support and hard work. I am really grateful.


Labor and Employment Law Update
--by Michael Spellman and the lawyers at Sniffen & Spellman, P.A.


211 East Call Street, Tallahassee, Florida 32301, (850) 205-1996, www.sniffenlaw.com

Supreme Court Round-up:

Arbitrator Authority

The United States Supreme Court issued an opinion in Rent-A-Center, West, Inc. v. Jackson, Case No. 09-497 (2010), on June 21, 2010, pertaining to an arbitrator’s authority to rule on the enforceability of an agreement.  Specifically, the Court addressed the question of “whether, under the Federal Arbitration Act (FAA or Act), 9 U. S. C. §§1–16, a district court may decide a claim that an arbitration agreement is unconscionable, where the agreement explicitly assigns that decision to the arbitrator.”  In Rent-A-Center, Defendant filed a motion to dismiss or stay the proceedings and to compel arbitration based on an arbitration agreement executed by the Parties.  In response, Plaintiff argued that the agreement was unenforceable and unconscionable under Nevada law.  The Court ultimately ruled in favor of the Defendant, holding that under the FAA, the district court is responsible for handling challenges to the enforceability of a precise agreement to arbitrate whereas the arbitrator should consider the enforceability of the agreement as a whole.

The full text of the opinion is available by accessing the following link: http://www.supremecourt.gov/opinions/09pdf/09-497.pdf

Employee Text Messages

On June 17, 2010, the United States Supreme Court addressed the issue of whether the City of Ontario violated an employee’s Fourth Amendment rights when it obtained and reviewed transcripts from a city-issued pager. City of Ontario v. Quon, Case No. 08-1332 (2010).  In City of Ontario, the City Police Chief reviewed the City’s text message limit to determine whether police officers were paying fees for work-related messages or whether the overages were for personal messages.  After reviewing the transcripts, the City learned that many messages were sexual in nature and unrelated to work.  Thereafter, Plaintiff and others sued the City. 

Although the Court did not specifically rule on the issue of Plaintiff’s expectation of privacy, it did hold that the City’s search of the pager was reasonable and, therefore, did not violate Plaintiff’s Fourth Amendment rights.  Specifically, the Court explained, “the search was motivated by a legitimate work-related purpose, and because it was not excessive in scope, the search was reasonable under the approach of the O’Connor plurality [O’Connor v. Ortega, 480 U. S. 709, 711 (1987)]. For these same reasons—that the employer had a legitimate reason for the search, and that the search was not excessively intrusive in light of that justification—the Court also concludes that the search would be ‘regarded as reasonable and normal in the private-employer context’ and would satisfy the approach of Justice Scalia’s concurrence. Id., at 732.”

The full text of the opinion is available by accessing the following link:

http://www.supremecourt.gov/opinions/09pdf/08-1332.pdf

Disparate-Impact Claims

On May 24, 2010, the Supreme Court issued an opinion addressing the question of “whether a plaintiff who does not file a timely charge challenging the adoption of a practice—here, an employer’s decision to exclude employment applicants who did not achieve a certain score on an examination—may assert a disparate-impact claim in a timely charge challenging the employer’s later application of that practice.”  Lewis v. City of Chicago, Case No. 08-974 (2010).  The Supreme Court ultimately answered the question in the affirmative and held that a plaintiff that fails to timely file a charge challenging the adoption of an employment practice may later assert a disparate-impact claim against his or her employer so long as the timely-filed charge challenges the later application of the employment practice.  Importantly, the Supreme Court acknowledged that its opinion may cause new issues for employers.  Specifically, the Supreme Court stated, “[e]mployers may face new disparate-impact suits for practices they have used regularly for years. Evidence essential to their business-necessity defenses might be unavailable (or in the case of witnesses’ memories, unreliable) by the time the later suits are brought.”

The slip opinion is available at the following link:

http://www.supremecourt.gov/opinions/09pdf/08-974.pdf

Supreme Court to Review “Cat’s Paw” Case

This month, the United States Supreme Court granted certiorari in Staub v. Proctor Hospital, a case originating in the Seventh Circuit Court of Appeals.  The issue in Staub is: “In what circumstances may an employer be held liable based on the unlawful intent of officials who caused or influenced but did not make the ultimate employment decision?” 

Staub sued his employer, alleging that he was discharged in violation of the Uniformed Services Employment and Reemployment Rights Act (USERRA).  Staub prevailed after a jury trial, but the Seventh Circuit reversed.  At trial, Staub proceeded under the “cat’s paw” theory, which holds that the discriminatory animus of a non-decision maker is imputed to the decision maker where the former has singular influence over the latter and uses that influence to cause an adverse employment action. 

In reversing, the Seventh Circuit held that, prior to admitting evidence of non-decision maker animus, a trial court “should determine whether a reasonable jury could find singular influence on the evidence to be presented.”  The court reasoned, “Allowing the jury to entertain the cat’s paw theory and decide whether there was singular influence, but only upon a prior determination that there is sufficient evidence of such a finding, is consistent with Federal Rule of Evidence 104(b).”  The Seventh Circuit concluded that the trial court erred in neglecting to make this primary determination, and found that there existed insufficient evidence of singular influence to allow evidence of non-decision maker animus to be presented to the jury. 

Other Courts:

Eleventh Circuit Denies Attorney’s Fees Request in FLSA Case Due to Plaintiff’s Counsel’s Failure to Give Defendants’ Counsel Advance Notice of Lawsuit

On April 14, 2010, the U.S. Court of Appeals for the Eleventh Circuit issued an opinion denying a rehearing en banc regarding Plaintiff’s counsel’s request for attorney’s fees.  Sahyers v. Prugh, Holliday & Karatinos, P.L., Case No. 08-10848 (11th Cir. 2010).  In Sahyers, the Defendants were a law firm and lawyers sued individually by Plaintiff – a former paralegal.  Plaintiff was represented by an attorney.  Before filing suit, Plaintiff’s counsel chose not to contact Defendants to advise them of Plaintiff’s intent to file a lawsuit seeking overtime under the Fair Labor Standards Act (“FLSA”).  After accepting an offer of judgment, Plaintiff moved for attorney’s fees and costs.  Plaintiff’s motion was denied by the Middle District of Florida and affirmed by the Eleventh Circuit.  The reason for the denial was that Plaintiff’s counsel did not attempt to resolve the case informally before filing suit against a fellow attorney. 

In the opinion denying the rehearing en banc, the dissent argued that denying a prevailing plaintiff’s request for attorney’s fees “as an informal sanction of [Plaintiff’s] lawyer for suing fellow lawyers without first attempting to resolve the dispute through informal means” disregards the mandatory language in the FLSA that reasonable attorney’s fees are to be paid to a prevailing plaintiff by the defendant.

The full text of the opinion is available by accessing the following link: http://www.ca11.uscourts.gov/opinions/ops/200810848RhrngOrd.pdf

Second Circuit Court of Appeals Finds No Individual Liability for ADA Retaliation Claims

The Second Circuit Court of Appeals has held that the anti-retaliation provision of the Americans with Disabilities Act (“ADA”) does not authorize suits against individual defendants. The court’s decision in Spiegel v. Schulmann, 06-5914-CV, issued on May 6, 2010, can be viewed on the Second Circuit’s website at: www.ca2.uscourts.gov/decisions. The Eleventh Circuit Court of Appeals, the Federal appellate court with jurisdiction over Florida, Georgia and Alabama, already passed upon this question some three years ago and, like the court in Spiegel, found that individuals may not be sued for retaliation under the ADA. See, Albra v. Advan, Inc., 490 F. 3d 826 (11th Cir. 2007).

Subcontractor Immunity Under Florida’s Workers’ Compensation Law

On May 12, 2010, the Third District Court of Appeal in Florida issued an opinion holding that the 2003 amendment to Section 440.10, Florida Statutes, does not retroactively apply to claims that arose before the amendment.  Ramcharitar v. Derosins, Case No. 3D09-1313 (Fla. 3DCA 2010).  In Ramcharitar, a flight operations manager for American Airlines sued an American Airlines’ subcontractor and the subcontractor’s employee for injuries he suffered on the job.  The lower court granted summary judgment in favor of the Defendants holding that they were immune from tort liability under Florida’s Workers’ Compensation Law.  On appeal, Defendants reasserted, among other things, that the 2003 amendment to Section 440.10 should be applied retroactively and, alternatively, that the 2003 amendment was remedial in nature and did not affect substantive rights.  In rejecting these arguments, the Court held that “because [Defendants] were not immune from suit under the version of section 440.10 in effect at the time of [Plaintiff’s] injury, as interpreted by Abernathy; because there is no clear legislative intent that the 2003 revision of the statute be applied retroactively to this case; and because the 2003 revision is not remedial, summary judgment should not have been entered in their favor.”

Class Action Suit against Wal-Mart Based on Gender Discrimination to Continue

The Ninth Circuit Court of Appeals, sitting en banc, recently upheld a lower court’s decision to allow certification of a class of female employees of Wal-Mart in a lawsuit filed alleging that Wal-Mart had a policy of paying women less than men for the same jobs and giving them fewer promotions.  The size of the class of affected plaintiffs could be as many as one million, counting all current female employees of Wal-Mart since 2001, and could rise as high as two and a half million if former employees are allowed to be included within the class.  The plaintiffs claim that an analysis of salary and personnel data revealed that women were paid less than men in every region of the country; that the pay disparity existed in most of the different Wal-Mart job categories; and that it took women longer to enter management jobs than men.  Wal-Mart has denied the allegations, and argued that the class should not have been certified because each worker’s situation may differ.  Wal-Mart also argued its due process rights were violated by forcing it to defend the suit with such a class.

The case is styled Dukes v. Wal-Mart Stores, Inc., and the Court’s decision is available at: http://www.ca9.uscourts.gov/datastore/opinions/2010/04/26/04-16688.pdf

Administrative and Executive Exemptions under the FLSA

In the case of Bond v. Ripa & Associates, LLC, 2010 WL 457324 (M.D. Fla.), the Middle District of Florida recently discussed the requirements for administrative and executive exemptions under the FLSA in a case where the defendant employer sought summary judgment on plaintiff’s claims of failure to pay overtime. 

To qualify for the executive exemption, the court noted that an employee must: (1) be compensated on a salary basis at a rate of not less than $455 per week; (2) be an employee whose “primary duty” is management of the enterprise that employs him, or a customarily recognized department or subdivision thereof; (3) customarily and regularly direct the work of two or more other employees; and (4) have the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees are given “particular weight.”  29 C.F.R. Section 541.100(a). 

To qualify for an administrative exemption, the court set out the necessary qualifications; namely, that an employee must (1) be compensated on a salary basis at a rate of not less than $455 per week; (2) be an employee whose primary duty is the performance of office or non-manual labor directly related to the management or general business operation of the employer or its customers; and (3) be an employee whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. Section 541.200(a). 

Based on plaintiff’s deposition testimony that he spent 80% of his time in non-managerial duties and had few non-managerial type duties, and that he was afforded little discretion, the court held that there was a genuine issue concerning whether he was properly classified as exempt from the FLSA’s minimum wage and overtime requirements under the executive or administrative exemptions, and therefore denied the defendant’s motion for summary judgment on the plaintiff’s overtime claim.

Legislation and Agency Actions:

Federal Trade Commission Postpones Enforcement of Identity Theft Red Flags Rule

On May 28, 2010, the Federal Trade Commission (“FTC”) issued a news release “further delaying enforcement of the ‘Red Flags’ Rule through December 31, 2010, while Congress considers legislation that would affect the scope of entities covered by the Rule.”  The Red Flags Rule requires creditors and financial institutions with covered accounts to create and utilize written identity theft programs.  The purpose of the program is to recognize certain indicators of identity theft (i.e. red flags) and to have appropriate response procedures to address the red flags.

The full news release is available by accessing the following link:

http://www.ftc.gov/opa/2010/05/redflags.shtm

The FTC’s website pertaining to the Red Flags Rule is available by accessing the following link:

http://www.ftc.gov/redflagsrule

Federal Contractors and Subcontractors Must Notify Employees of their Rights under the National Labor Relations Act Beginning June 21, 2010

Pursuant to Executive Order 13496, beginning as of June 21, 2010, all federal contractors and subcontractors must provide their employees with notice of their rights under the NLRA.  A copy of the notice and other information related to Executive Order 13496 is available at the following link:  http://www.dol.gov/olms/regs/compliance/EO13496.htm

U.S. Department of Labor Issues Fact Sheet Regarding For Profit Private Sector Internships

The U.S. Department of Labor (“DOL”) has issued a fact sheet (Fact Sheet #71) to help determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (“FLSA”). The fact sheet is limited to interns in the for-profit private sector. Non-profit or governmental employers are governed by a different set of standards relative to internships. A copy of the new fact sheet may be viewed at: http://www.dol.gov/whd/regs/compliance/whdfs71.htm. DOL indicated that it intends to begin enforcing rules relating to internships in the private sector. As such, private sector employers are well advised to review the fact sheet and audit any internship programs that are offered.

DOL, IRS and HHS Issue Regulations Implementing Expansion of Group Health Coverage to Adult Children

The U.S. Department of Labor, Internal Revenue Service and Department of Health and Human Services have issued joint regulations implementing recent health care reform legislation that requires group health plans and insurers of group or individual health coverage that offer dependent coverage to continue to offer such coverage for adult children until they reach the age of 26. In addition to the regulations, the agencies have promulgated a “Fact Sheet” and a set of “FAQs.” These documents may be viewed at:

Regulations: http://edocket.access.gpo.gov/2010/pdf/2010-11391.pdf

Fact sheet: http://www.dol.gov/ebsa/newsroom/fsdependentcoverage.html

FAQs: http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html

Changes in Florida’s Unemployment Compensation Laws

On May 17, 2010, Governor Crist approved several changes to Florida’s Unemployment Compensation Laws. Temporary state unemployment benefits are extended from February 27, 2010, to June 2, 2010. This extension for private sector employees is completely funded by federal funds. It is estimated that the cost of this extension for state and local government employees will cost the State $1.1 million and local governments $2.6 million. These amendments require those seeking unemployment compensation to register with the workforce information system and report to local one-stop centers. In addition, employers must timely respond to notices of claims within 20 days to avoid the benefits automatically being charged to the employer’s account. This change like others in the amendments is designed to reduce overpayments and, in turn, reduce the burden of socialized costs on Florida employers.

U.S. Department of Labor Discontinues Fact-Specific FLSA Guidance

On March 24, 2010, the U.S. Department of Labor’s Wage and Hour Division (“DOL”) announced it was discontinuing the practice of issuing opinion letters explaining how the Fair Labor Standards Act applies to specific employment situations. Instead, DOL will occasionally issue “Administrator Interpretations” which broadly summarize the agency’s general interpretations of the FLSA. The “Administrator Interpretations” will only be issued when “further clarity regarding the proper interpretation of a statutory regulatory issue [relates]… to an entire industry, category of employees, or to all employees.” In the future, DOL will respond to requests for opinion letters by “providing references to statutes, regulations, interpretations, and cases that are relevant to the specific request but without any analysis of the specific facts presented.”

Increase in Wages Exempt from Garnishment

On May 26, 2010, Sections 222.11 and 77.041, Florida Statutes, were amended to allow for an increase in the amount of wages which are exempt from garnishment. With an effective date of October 1, 2010, the amendments increase the amount of disposable income exempt from garnishment from $500 a week to $750 a week. Only one who provides more than one-half of the support for a child or other dependant qualifies as a head of family and receives the exemption from garnishment. In addition, the amendments provide a form that must be used to waive one’s exemption from garnishment.

Amendment to the FLSA: Nursing Mothers

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act into law.  The Act, among other things, amends the FLSA to provide a reasonable break time for nursing mothers.  Employers with less than 50 employees are not subject to the Act if the Act “would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.”

The full text of the Act is available at the following link:

http://www.calvert.house.gov/UploadedFiles/Health_Care_Reform_Bill_-_Passed_Into_Law.pdf

New U.S. Department of Labor Poster Required for Federal Contractors and Subcontractors

As of June 21, 2010, federal contractors and subcontractors are required to post employee rights under the National Labor Relations Act (“NLRA”). The poster must be placed conspicuously in plants and offices where employees covered by the NLRA perform contract-related activity, including all places where notices to employees are customarily posted both physically and electronically. The size of the poster must be 11x17 inches or larger. The DOL poster can be found at: http://www.dol.gov/olms/regs/compliance/EmployeeRightsPoster11x17_Final.pdf

The Hire Act of 2010 is Passed by Congress and Signed into Law

The U.S. Congress has passed new legislation that was recently signed into law by the President providing that any private employer hiring a new employee between the present and January 1, 2011 is exempt from paying the employer’s share of the new employee’s payroll tax effective with the employee's first paycheck.  However, the employee must (1) certify by signed affidavit that he or she has not been employed for more than 40 hours during the previous 60-day period ending on the date the individual begins employment; and (2) must not be hired to replace another employee of the employer unless the prior employee left voluntarily or was terminated cause.  A copy of the form affidavit is available at: http://www.irs.gov/pub/irs-pdf/fw11.pdf.

Florida Commission on Human Relations Issues Annual Report

The Florida Commission on Human Relations, the State of Florida’s Fair Employment Practices Agency, has released its annual report. (http://fchr.state.fl.us/publications/annual_reports). According to the FCHR, the top 5 sectors against which charges of discrimination were filed during FY 2008-09 are: (1) Service; (2) Hospitality; (3) Retail; (4) Industry; and (5) State Government. The FCHR also reported the percentage of charges filed by claim, as follows: Retaliation (22%); Race (21%); Disability (19%); Sex (16%) and Age (11%). Given the spike in retaliation claims nationwide, it is not surprising that claims of retaliation led all protected classes.

U.S. Department of Labor Takes Position on Unpaid Interns

The U.S. Department of Labor has recently taken a public position on the issue of pay for unpaid interns. The DOL has indicated that it intends to renew its focus on Companies which offer unpaid internships to young workers or students.  The DOL has cautioned state agencies that in order for internships to be unpaid, they must meet six criteria: (1) the training must be similar to what would be given in school or at an academic institution; (2) the training must be for the benefit of the trainees; (3) the trainees must not take the place of regular employees, and must work under close observation; (4) the employer may not derive an immediate advantage from the trainees; (5) the trainees should not be entitled to a job at the end of the training; and (6) the trainees are not entitled to wages for the time spent training.  Given the DOL’s renewed focus, employers are well advised to take appropriate steps to ensure they are properly classifying interns, trainees and summer clerks. 

Guidance on Small Employer Tax Credit for Providing Health Care Coverage

As part of the Patient Protection and Affordable Care Act (PPACA) signed into law in March 2010, small businesses and tax-exempt organizations that provide health care coverage to for their employees may qualify for tax credits. Recently the IRS issued guidance on the eligibility and structure of these new tax benefits which come into effect in the 2010 tax year.  The amount of tax credit available to small employers is determined by the number of employees, average employee salaries, and amount of health premiums paid. The IRS’s frequently asked questions on these new tax credits are available at: http://www.irs.gov/newsroom/article/0,,id=220839,00.html

Sovereign Immunity Caps in Florida

On Tuesday, April 27, 2010, Florida Governor Charlie Crist signed SB 2060 into law.  The law changes the statutory limits of liability for the State of Florida and its agencies and subdivisions under Section 768.28, Florida Statutes.  Prior to SB 2060, sovereign immunity caps in cases involving tort claims were $100,000 for claims and judgments by any one person and $200,000 for collective claims arising out of the same incident or occurrence.  With the enactment of SB 2060, the caps have now been increased to $200,000/$300,000.  The increased caps will apply to claims arising on or after October 1, 2011.



Prevailing Party Costs: A Sanction with No "Teeth?"
--by Scott B. Miller, Esq., Hurley, Rogner, Miller, Cox, Waranch & Westcott, P.A.

For those who are actively involved in the litigation of workers' compensation claims, most of you have experienced the frustration of receiving the voluntary dismissal from the claimaint's attorney on the eve of trial. The feeling of victory is fleeting when you soon realize that under Florida Law, a voluntary dismissal is without prejudice as long as a prior dismissal has not been taken on the same isssues. Therefore, the claimant is free to re-file the same Petition and initiate the same litigation immediately following the dismissal. Click here to read more.


CMS Releases Two New Policy Memos Addressing "Off Label" Drug Use & Rated Ages Regarding Medicare Set-Aside Proposals — Assessing CMS' May 14, 2010, & June 8, 2010, Policy Memos

--by Mark Popolizio, J.D., Vice President of Customer Relations - NuQuest/Bridge Pointe

The Centers for Medicare & Medicaid Services (CMS) has released two new policy memos dated May 14, 2010 (hereinafter May Memo) and June 8, 2010 (hereinafter June Memo) addressing the separate issues of (a) off label and/or unlabeled outpatient drug uses and (b) rated ages in relation to the agency’s Workers’ Compensation Medicare Set-Aside (MSA) program. These newly released memos are the agency’s 13th and 14th policy memos regarding its workers’ compensation MSA process.

A copy of the May Memo may be obtained at
http://www.nuquestbridgepointe.com/docs/uploads/may_14_2010_cms_memo.pdf.

A copy of the June Memo may be obtained at: http://www.nuquestbridgepointe.com/news/uploads/june_8_memo-1.pdf

The May Memo revises specific aspects of CMS’ prescription drug policy regarding MSAs as set forth in its April 3, 2009 policy memorandum, and in a document entitled “CMS Prescription Drug Set-Aside Guidance for Submitters Effective: June 1, 2009” (RX Guidance Document).[i]

Through the May Memo, CMS intends to “clarify” when off label and/or unlabeled drugs are considered covered by Medicare Part D and, thus, appropriately includable as part of a MSA proposal. CMS’ new off label drug use policy commences June 1, 2010 as that date is more specifically referenced in the May Memo.   

In the May Memo CMS also replaced its previously required rated age “certification statement” with a more stringent statement.  However, this change was short lived as CMS thereafter released its June Memo further “revising” the rated age “certification statement” required to be included as part of MSA proposals.

This article dissects and analyzes the newly released memos in an effort to understand CMS’ new policies and their potential impact on the MSA process. As part of this analysis, it is absolutely crucial to keep in mind that these new policies are in their infancy, and it remains unknown at this time how CMS will actually interpret and apply the new policies. This is particularly pertinent regarding CMS’ changes related to off label drug usage.

On this latter point, it is important not to forget the hard lesson learned last year in relation to CMS’ release of its RX policies (or, for that matter, any number of other instances over the past decade) that there can be a world of difference between what may seem to be indicated in writing from how CMS will ultimately interpret and apply the policies in practice. Thus, jumping to general conclusions should be avoided until the industry has the benefit of learning first hand how CMS intends to apply its new policies.

With this understanding, the author outlines the analysis as follows:

Part I: CMS’ New “Off Label” Drug Use Policy & MSAs – A Step in the Right Direction   

Part II: CMS’ Rated Age “Certification Statement” -- Understanding What Is Required

PART I

CMS’ New “Off Label” Drug Use Policy & MSAs –

A Step in the Right Direction

Brief Background & CMS’ New Approach

In order to more fully assess the changes made by the May Memo, it is first necessary to understand how CMS has been approaching off label drug usage up until this point. 

CMS initially addressed off label drug usage in the 2009 RX Guidance document (Point #5) which states as follows: 

#5. Off-label use: Off-label use of medications in the United States is both legal and common. Once a drug has been approved for sale by the Food and Drug Administration (“FDA”) for one purpose, physicians are free to prescribe it for any other purpose that in their professional judgment is both safe and effective. Physicians are not limited to prescribing a drug only for official, FDA-approved indications.

In practice, CMS has basically been requiring the inclusion of any off label drug usage as part of the MSA calculation, regardless of whether or not said usage is approved under the FDA, or otherwise covered under Part D. For obvious reasons, legitimate questions surfaced regarding the propriety of this practice. From a practical standpoint, CMS’ approach has drastically raised the amount of the RX calculation in many instances.

Per the May Memo, the inclusion of off label drug usage as part of a MSA proposal will now be determined by a more circumscribed and limited standard. As part of the agency’s attempt to “clarify” this issue, it has provided the following definition and guidance in terms of what are to be considered covered Part D drugs:

Definition of Covered Part D Drugs:

A “covered Part D drug” is “a drug that may be dispensed only upon a prescription and that is described in [certain referenced sections under the United States Code; citations omitted).”

For a Part D drug to be covered by Medicare, and thus included properly in a WCMSA, the drug should be prescribed for an outpatient use that is approved under the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. § 301 et seq.], or supported by one or more citations included or approved for inclusion in any of the compendia described in subsection (g)(1)(B)(I) of 42 U.S.C. Section 1396r-8. (Emphasis by CMS).

This statement can be interpreted to indicate that effective June 1, 2010 (as that date is more specifically defined by CMS) whether or not “off-label” usage will need to be allocated will depend on whether such use is (a) prescribed for an outpatient use that is approved under the FDA, or (b) supported by one or more citations included or approved for inclusion in any of the compendia.[ii]

This interpretation has been confirmed to NuQuest by CMS. In relation thereto, CMS advised NuQuest that if a particular drug is FDA approved, but not for the prescribed use, then the compendia should be consulted for any applicable supporting citations. If one of the compendia cites the drug for the prescribed off label usage then it is considered Medicare allowable and includable as part of the MSA calculation. If, by contrast, the usage is not supported by the compendia then the drug will be considered as not allowable and properly excludable from the MSA proposal.

On the surface, CMS’ new policy can be viewed as a step in the right direction in terms of potentially reducing the RX calculation. For example, this could have a significant impact in reducing costs in regard to certain expensive drugs, such as Actiq or Fentora.

While this new policy is an improvement, it is important to note that the new policy does not necessarily ban all off-label usage from possible inclusion in a MSA proposal. Furthermore, there is the possibility that interpretational differences could arise between the MSA preparer and CMS in terms of whether or not the compendia support a particular off-label usage.

Implementation of CMS’ New Off-Label Drug Use Policy

CMS’ new policies regarding off-label drug use are effective June 1, 2010 as more specifically outlined in this section.

The May Memo addresses how CMS will handle the situation where a settlement prior to June 1, 2010 contained non-covered Part D drugs as part of a MSA. Furthermore, CMS addresses how it will address cases not settled prior to June 1, 2010 but which include non-covered Part D drugs as part of the MSA.

In the May Memo, CMS states as follows regarding implementation of its new off label drug use policy (the author has numbered the listed situations for easier identification):

1. Effective June 1, 2010, for those workers’ compensation (WC) settlements effectuated prior to June 1, 2010, and where the settlement included non-covered Part D drugs as part of the WCMSA, CMS will consider funds spent for those non-covered Part D drugs by beneficiaries and claimants as being an appropriate expenditure of funds as part of the WCMSA.

2. For those WC claims that were not settled prior to June 1, 2010, and where the settlement includes non-covered Part D drugs as part of the WCMSA, CMS will consider a re-pricing of those cases that included non-covered Part D drugs. Once CMS performs a re-pricing of the WCMSA, beneficiaries and claimants may not use funds from their WCMSA to pay for non-covered Part D drugs. Doing so constitutes an inappropriate expenditure of WCMSA funds.

3. For those WC settlements resolved on or after June 1, 2010, and where the settlement does not include non-covered Part D drugs as part of the WCMSA, beneficiaries and claimants may not use funds from their WCMSA to pay for those non-covered Part D drugs. Again, doing so constitutes an inappropriate expenditure of funds as part of the WCMSA.

As will be noted, situation #1 contemplates the instance where the MSA included non covered Part D drugs regarding a settlement prior to June 1, 2010. In this situation CMS indicates that it will consider funds spent for those non-covered Part D as being proper expenditures from the MSA. By contrast, if the MSA did not include non-covered Part D drugs and the case settled prior to June 1, 2010, CMS has advised NuQuest that in that particular instance if a claimant is prescribed a non-covered Part D drug for their related injury, he/she cannot use funds from their MSA to pay for those drugs. This important distinction should be duly noted.

With regard to situation #2, for those cases that were not settled prior to June 1, 2010 which contained non-covered Part D drugs, CMS is allowing the industry to resubmit any MSA previously reviewed by the agency for re-pricing. Accordingly, it would make sense to determine which cases may be eligible for re-pricing as this could potentially reduce the MSA allocation amount.

PART II

CMS’ Rated Age “Certification Statement” –

Understanding What Is Required

CMS has also significantly revised its rated age policy and the corresponding rated age “certification statement” that must be included as part of a MSA proposal. To better appreciate and understand the new policy directives, it is helpful to view these changes in wider context. 

This saga begins with CMS’ August 25, 2008 memo, requires analysis of the short lived policy statements contained in the May Memo, and ends with the CMS’ recently released (and current) policy proclamations as contained in the June Memo

August 25, 2008 Policy Memo

CMS’ rated age policy as outlined in the August 25, 2008 memo stated as follows:

To protect the Medicare Trust Fund, a set-aside arrangement should be funded based on the life expectancy of the individual unless the State law specifically limits the length of time that WC covers work-related conditions.

Unless a submitter furnishes acceptable proof of a Rated Age for a claimant, CMS will estimate the claimant’s remaining life expectancy using Actual Age. Acceptable proof of Rated Ages includes independent rated ages on the letterhead of an insurance carrier or settlement broker and a statement from the submitter that all rated ages obtained on the claimant have been included.

This policy remained in effect until CMS’ release of the May Memo this year.

May 14, 2010 Policy Memo

Through the May Memo, CMS then rescinded the August 25, 2008 memo replacing it with a more stringent rated age “certification statement.” 

CMS’ rated age policy as contained in the May Memo states as follows:

The previous Rated Age (RA) statement from the submitter that all rated ages obtained on the claimant have been included is now rescinded.

Hereafter, to mitigate confusion and eliminate ambiguous statements concerning RA, all WCMSA submitters must include the following certification statement in association with RA information:

“Our organization certifies that all rated ages obtained on the claimant, at any time during that individual claimant’s lifetime, have been included as part of this submission to the Centers for Medicare & Medicaid Services.”

The CMS will not accept any variation or substitute wording. If a submitter is including RA information in its WCMSA proposal, the new certification language must be included as written, with no exceptions. If this appropriate statement is not included as part of the WCMSA proposal, CMS will not accept the RA provided. Instead, CMS will estimate the claimant’s remaining life expectancy using Actual Age.  (Emphasis Added)

This policy change immediately raised several legitimate questions and issues in that a literal interpretation of the statement would essentially require a submitter to attest to absolute facts over a claimant’s “lifetime” that would be difficult or impossible to ascertain in many instances. 

In this regard, placing a requirement on a submitter to certify that all rated ages ever possibly obtained over the claimant’s “lifetime” was widely viewed as unreasonable and impractical. In essence, the submitter would be placed in the peculiar position of having to affirm or discover facts and information that were wholly unrelated to the subject claim that could span several years or decades, which would very likely not even be obtainable due to discovery limitations, privacy preclusions, or informational purging, and which would likely be outside of the submitter’s control. Furthermore, the submitter would be forced to rely upon information and recollections of third parties which may be faulty, despite even the best intentions. For example, the claimant him/herself may have not even been aware that somewhere over the scope of his/her life someone had requested a rated age.

Aside from issues of access and reasonableness, sound questions were raised as to what legitimate purpose would be served of having to discover and then inform CMS of rated ages that were obtained years prior to the subject claim, and for reasons totally unrelated to a specific claim that was being evaluated for MSA purposes in 2010. For example, what bearing or relevance would a rated age from 1994 have with respect to a claim being evaluated for MSA purposes in 2010? These questions became even more baffling in light of the fact that CMS, ironically, has basically been using a median rated age based on what the agency considers “valid” rated ages which typically fall within a very limited time period.

As such, the policy announced in the May Memo was roundly criticized on a number of levels, particularly with respect to issues concerning practicality, reasonableness and enforceability.

June 8, 2010 Policy Memo (CMS’ Current Rated Age Policy)

It is widely believed that the type of questions and issues raised by the May Memo discussed above served as the catalyst for CMS to re-examine its policy and thereby revise same via the June Memo. 

Thus, through the June Memo, CMS’ current rated age policy and the related certification statement that must be included as part of a MSA proposal is as follows:

Effective immediately the Rated Age (RA) certification required by the May 14th memorandum is revised to:

“Our organization certifies that all rated ages we have obtained and/or have knowledge of regarding this claimant, and generated at any time on or after the Date of Incident for the alleged accident/illness/injury/incident at issue, have been included as part of this submission of a proposed amount for a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) to the Centers for Medicare & Medicaid Services.” (Emphasis Added).

As will be noted, the new statement is more reasonably limited in terms of scope (all rated ages we have obtained and/or have knowledge of regarding this claimant, and generated at any time on or after the date of incident), and in terms of relation (for the alleged accident/illness/injury/incident at issue”) than the “lifetime” attestation requirement contained in the May 14, 2010 memo.

It should be noted that CMS will not permit any modification to the certification statement.  Furthermore, all other requirements regarding acceptable proof of a rated age remain.  On these points, the June Memo states:

The CMS will not accept any variation or substitute wording. If a submitter is including RA information in its WCMSA proposal, the revised certification language must be included as written, with no exceptions. If this specific language is not included as part of the WCMSA proposal, CMS will not accept the RA provided. Instead, CMS will estimate the claimant’s remaining life expectancy using Actual Age. For the convenience of those already in the process of submitting a proposal, CMS will continue to accept the certification language required by the May 14, 2010 memorandum for proposals received up through and inclusive of June 30, 2010.

Note:

All other requirements of acceptable proof of a Rated Age for a claimant are unchanged. Acceptable proof of Rated Age is demonstrated through inclusion of independent rated ages on the letterhead of an insurance carrier or settlement broker.

Overall, the revised certification statement contained in the June Memo is a much more reasonable, workable and realistic standard, and should help alleviate the concerns raised by the May Memo in regard to the continued feasibility of using rated ages as a possible tool to help reduce MSA allocation amounts.

Conclusion

CMS’ new off label drug use policy is certainly a welcomed step which could play a pivotal role in potentially reducing the RX calculation in certain situations.  However, it is important to remember that this new policy relates to only one limited aspect of the overall RX calculation process, which may or may not even be applicable in a given case.

Unfortunately, a host of other issues and challenges still need to be overcome toward obtaining a greater degree of consistency and reasonableness in relation to CMS’ overall approach to the RX calculation process. Also, as cautioned above, how CMS will actually interpret and apply the new policy is a very important factor that remains unknown at this time. Thus, until this other shoe drops judging the true impact and effectiveness of this new policy really cannot be stated with any degree of accuracy.

On this note, caution and prudence should be exercised with respect to claims of “silver bullets” or other “cure all” solutions to this particular issue, or the RX problem in general. These claims have an understandable allure to an industry struggling to find answers. However, due diligence, serious probing and level-headed assessment should be employed before blindly jumping aboard any magic carpets.

The truth of the matter is that the complexity of the issue, coupled with CMS’ inconsistent and erratic practices, have created a process and problem whose magnitude simply defies and dwarfs any alleged “magic wand” answers. Any claims or approaches to the contrary should be closely scrutinized, as they would seem to cut against the grain of an informed, knowledgeable and reasoned assessment of current realities.

NuQuest will continue to develop logical, reasoned and realistic approaches to assist the industry in meeting the continuing and changing challenges posed by CMS’ RX policies.  

NuQuest is working closely with a team of respected and knowledgeable pharmacists from Progressive Medical, Inc. to analyze the compendia to determine whether or not a particular off label use would be properly includable as part of a MSA proposal as part of its commitment to provide its customers with only exemplary professional services.  Furthermore, NuQuest is, and will continue to, carefully review prior MSAs it has completed to provide its customers with recommendations as to whether or not re-pricing is appropriate.

About the Author

Mark Popolizio, J.D. is the Vice President of Customer Relations for NuQuest/Bridge Pointe.   Prior to joining NuQuest, Mark practiced workers’ compensation and liability legal defense for 10 years. During this time, he developed a national Medicare practice which included Medicare Set-Asides and Medicare Compliance. Mark also served as Vice President of the National Alliance of Medicare Set-Aside Professionals (NAMSAP) from 2006-2008 and remains active with NAMSAP concentrating on educational and legislative matters.

Mark is very active on the national MSA/Medicare educational and training circuit. He is a regularly featured speaker on MSA/Medicare issues before carriers/TPAs, state bar associations and industry specific organizations. Mark has also published several articles on MSA/ Medicare issues. Mark can be reached at 786-457-4393 or via e-mail at mpopolizio@nqbp.com.

NuQuest/Bridge Pointe is a national MSA/Medicare compliance service provider which offers a host of services and products to assist the claims industry in meetings its obligations under the Medicare Secondary Payer Statute.  NuQuest’s services include MSA allocations, MSA and custodial account administration services (professional administration and self-administration support services), and Medicare conditional payments.



[i] For a detailed survey of these documents and CMS’ RX policy in general, the reader may wish to consult the author’s article Prescription Drugs & The MSA — Understanding CMS’ New RX Drug Policies, Practical Approaches for Claims Handling & Settlement, NuQuest/Bridge Pointe “Settlement News,” December, 2009.

This article can be obtained at

http://www.nuquestbridgepointe.com/news/uploads/december_2009_settlement_news.pdf

CMS’ April 3, 2009 Memorandum may be obtained at

http://www.nuquestbridgepointe.com/docs/uploads/cms_memo_4-6-2009.pdf

CMS’ RX Guidance Document may be obtained at

http://www.nuquestbridgepointe.com/news/uploads/msarxguidance.pdf

[ii] The WCRC advised that they essentially use two compendia, Drugdex Drug Point Micromedex, Thomson Reuters and AHFS Drug Information. 2010. A third series, U.S. Pharmacopoeia Drug Information has reportedly been discontinued and the WCRC is no longer using same. The WCRC also advised that at this time it has no plans to provide the industry access to the compendia.


If you have questions or comments about the FASI E-Newsletter, please contact: Bill Kautter at bkautter@kmgnet.com (800-226-3274) or Newsletter Chair John Darin at jdarin@znoskoreas.com.

Please note that letters and comments sent to the publisher are automatically considered for use in upcoming issues unless you expressly request that they not be used. You may request that you remain anonymous in the case that your letter or comments are used. We reserve the right to edit for brevity and/or clarity.

This eNewsletter is automatically sent to all FASI members as an added, free benefit of membership.

FASI, 222 S Westmonte Dr #101, Altamonte Springs, FL 32714, 800-226-3274.