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New York Court Reaffirms Basic 3(a) and 3(d) Exclusion Principles and That Issuance of Title Policy Does Not Create Fiduciary Duty Banner Image

New York Court Reaffirms Basic 3(a) and 3(d) Exclusion Principles and That Issuance of Title Policy Does Not Create Fiduciary Duty

Month: December 2022

New York Court Reaffirms Basic 3(a) and 3(d) Exclusion Principles and That Issuance of Title Policy Does Not Create Fiduciary Duty

Posted on by Jessica Civetta

In Murphy v. Commonwealth Land Title Ins. Co., No. 20-CV-2793, LEXIS 144866 (E.D.N.Y. Aug. 12, 2022), the United States District Court for the Eastern District of New York (“the Court”) granted Defendant Commonwealth Land Title Insurance Co. (“Commonwealth” or “Defendant”) summary judgment, affirming as correct Defendant’s denial of a tender based upon policy exclusions and the lack of any manner of special fiduciary relationship.

The matter dates back to June 2002, at which time Plaintiff Edward Murphy (“Plaintiff”) purchased property in Sag Harbor, New York (the “Property”), executing a mortgage with Washington Mutual Bank, now JP Morgan Chase Bank (“Chase”).  In connection with this purchase, Plaintiff obtained a title insurance policy from Defendant which bore, among other provisions, the following two exclusions found in every title policy:

  1. An exclusion for all matters “created, suffered, assumed or agreed to” by the Insured–otherwise known as a standard 3(a) Exclusion; and
  2. An exclusion applicable to all encumbrances “attaching or created subsequent to [the] Date of [the] Policy”–commonly known as a standard 3(d) Exclusion.

Plaintiff subsequently defaulted on his mortgage, causing Chase to foreclose on the Property, which was later purchased post-foreclosure by Paul Luciano (“Luciano”).  In conjunction with Luciano’s purchase, Fidelity National Title Insurance Company (“Fidelity”) issued Luciano a title insurance policy.

In 2016, Plaintiff brought suit against Chase and Luciano for wrongful foreclosure and sought to vacate the foreclosure judgment as he was not served at his primary address.  Luciano submitted a claim under his policy to Fidelity who accepted the claim, provided coverage, and funded his defense.  Plaintiff submitted his own claim for coverage to Commonwealth, however, Plaintiff’s claim was denied based upon the exclusions contained in his policy.  In issuing the denial, Commonwealth explained that because the lawsuit had arisen due to Plaintiff’s own default, “[a]s such, the matter underlying the Lawsuit did not commence until after the Date of Policy of June 4, 2002, and therefore, attached or [was] created subsequent to the Date of Policy”–in other words, coverage was barred by operation of the 3(d) Exclusion.

Plaintiff brought suit against Commonwealth for its tender denial, alleging before the Court, among other claims, that the denial constituted a breach of fiduciary duty and violation of G.B.L. § 349 (deceptive business practices).  The claim was based on Plaintiff’s contention that because Commonwealth and Fidelity were owned by the same parent, the title insurer had effectively “pit two insureds against each other.”  The Court dispatched with these arguments, finding that Commonwealth had properly denied Plaintiff’s claim because Plaintiff’s default on its mortgage with Chase had triggered both the 3(a) and 3(d) Exclusions, and therefore Defendant had “no obligation to [P]laintiff . . . to begin with.”

As to the breach of fiduciary duty claims, the Court noted that insurance companies do not owe a fiduciary duty to their insureds absent “some special relationship.”  Edelman v. O'Toole-Ewald Art Assocs., Inc., 28 A.D.3d 250, 251 (App. Div. 1st Dep’t 2006).  The Court held that because Plaintiff had failed to allege any facts giving rise to a “special relationship” between the parties, no fiduciary duty existed and the suit necessitated dismissal.

Takeaway

This case serves to reaffirm settled title insurance principles governing the application of 3(a) and 3(d) Exclusions, as well as the well-settled principle that the issuance of a title policy alone is not sufficient grounds for the imposition of a “special” or fiduciary relationship between an insurer and insured.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Kevin Hakansson at khakansson@riker.com, James Mazewski at jmazewski@riker.com or Kori Pruett at kpruett@riker.com.

New Jersey Appellate Division Holds Unrecorded Mortgages Enforceable and Sufficient to Trigger Statutory Interest Caps Under N.J.S.A. 31:1-1

Posted on by Jessica Civetta

In the recently-issued decision of Deutsch v. Iedu Tech., No. A-1541-21, LEXIS 2309 (App. Div. Nov. 23, 2022), the New Jersey Appellate Division reaffirmed the principle that unrecorded mortgages are enforceable in certain circumstances.

In August 2016, Defendants Iedu Technology, LLC, Xiu Quin Liu, and Juijun Wang (collectively “Defendants”) borrowed $500,000 from Plaintiff Jacob Deutsch (“Plaintiff”), executing a promissory note (“the note”) bearing an eighteen percent interest rate per year.  The note required Defendants to pay $7,500 per month of interest-only payments for one year, following which the entire loan balance would come due on August 30, 2017.  In the event Defendants defaulted, the note provided that the entire loan amount would be payable, along with interest, costs of collection, and attorneys’ fees.

As collateral to secure payment, the note granted Plaintiff mortgages on five real properties that Defendants’ owned in Jersey City, New Jersey.  However, these mortgages were never recorded.  Defendants made the required interest payments owed on the note from September 2016 through January 2017, in February 2017 paid Plaintiff $100,000, and in March 2017 paid Plaintiff a further $142,600.  Subsequent to issuing this March payment, Defendants consulted with an attorney who advised them that the note was usurious and illegal, claiming the maximum interest rate statutorily permitted for such loans had been exceeded.  Defendants thereafter ceased remitting all payments owed on the note.

In March 2020, Plaintiff filed suit seeking a judgment for the loan amount along with interest, attorneys’ fees, and costs, to which Defendants asserted the usurious nature of the loan as a defense.  Plaintiff ultimately moved for summary judgment, arguing that there was no evidence Defendants had ever intended to grant Plaintiff a security interest in any of the mortgaged properties as the mortgages were never recorded, and thus the mortgages should be treated as nonexistent and of no force and effect.

The crux of Plaintiff’s argument hinged upon the application of N.J.S.A. 31:1-1, which establishes a maximum interest rate of sixteen percent “for written contract[s] specifying a rate of interest.”  However, under N.J.S.A. 31:1-1(e), loans “in the amount of $50,000[] or more” are exempted from this sixteen percent rate cap, unless the loan is one “where the security given” on the loan “is a first lien on real property” used for residential purposes.  In such an instance, the “minimum threshold for first liens on residential property is six percent” with the maximum set at the value of the “Monthly Index of Long Term [U.S.] Government Bond Yields . . . for the second preceding calendar month plus an additional [eight percent] per annum.”  N.J.S.A. 31:1-1(b).[¹]

As the note was for more than $50,000, if it was deemed to not fall within the categorization of being secured by a “first lien on real property,” Plaintiff’s eighteen percent rate would be valid.  Plaintiff accordingly argued that Defendants’ mortgages should be treated as of no force and effect.

The trial court agreed with Plaintiff’s contention, granting Plaintiff summary judgment and awarding him a judgment for the loan principal, interest, attorneys' fees, and costs of suit.  The trial court reasoned that Defendants’ “unrecorded mortgages [were] of no force and effect” because the fact they were never recorded betrayed that defendants never “intended to give any security on any properties listed in the” note, for authority relying on the language of N.J.S.A. 46:26A-12 which provides that mortgages have no effect “unless . . . evidenced by a document that is first recorded.”

Defendants appealed, contending the lower court had erred because N.J.S.A. 46:26A-12 was only intended to apply to bona fide purchasers, subsequent judgment creditors, and purchasers for value, and because of this the mortgages should be considered enforceable and the note usurious.  The Appellate Division agreed, “reject[ing] the finding [that] defendants never intended the mortgages to apply,” explaining that Defendants were correct that N.J.S.A. 46:26A-12 was only legislatively intended to apply to a select group of purchasers and creditors, none of which were involved in this matter, and that the trial court’s interpretation had impermissibly “expanded the statute, rendering it meaningless.”  Thus, the mortgages, “although unrecorded, were effective as between the parties.”

The Appellate Division also rejected “the finding [that] defendants never intended the mortgages to apply to the properties listed in the note,” as the language of the note “specifically provided that a mortgage would secure defendants' payment,” listed the properties to be encumbered, contained unambiguous terms, explicitly stated the mortgages were given to secure the loan, and gave “plaintiff the power to file a deed in lieu of foreclosure on any of the listed properties if defendants defaulted on the loan—a power only available to a party who had been given a mortgage.”  Thus, the “language of the note unambiguously created a mortgage between the parties” which was valid and enforceable despite being unrecorded.

The Appellate Division therefore found the note usurious.  As the mortgages were construed to be valid, the interest cap applicable to security interests given as “a first lien on real property” was triggered.  The interest rate charged by the note was calculated as violating the maximum permissible percentage rate allowed, and the matter accordingly reversed and remanded.

Takeaways

This decision reaffirms a basic principle that unrecorded mortgages are enforceable between the parties and that lenders have to comply with the requisite consumer protection statutes even if they are holding the instruments creating those liens in escrow to be acted upon only in the event of default.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Kevin Hakansson at khakansson@riker.com, James Mazewski at jmazewski@riker.com or Kori Pruett at kpruett@riker.com.

 

[¹] N.J.S.A. 31:1-1 et. seq. governs civil usury on certain non-institutional loans as banks and lenders of consumer credit are exempt.  See N.J.S.A. 17:9A-58; 12 U.S.C. § 85; Saul v Midlantic Nat. Bank/South, 240 N.J. Super. 62, 74, 80-81 (App. Div. 1990).

Arkansas Court of Appeals Holds Insured’s Negligent Recording of Its Mortgage Can Trigger 3(a) Exclusion to Preclude Coverage

Posted on by Christie Bowness

In the recently-decided matter of First National Bank of Izard County v. Old Republic National Title Insurance Company, No. CV-20-310, (Ark. Ct. App. Nov. 2, 2022), the Arkansas Court of Appeals (“the Court”) held that the negligent recording of a mortgage by the Insured, as to the timing of its recordation with other recorded instruments, precluded coverage under the Title Policy’s Section 3(a) “created, suffered, assumed and agreed to” exclusion.

The dispute stems from the dissolution of a two-owner, non-party LLC, wherein one of the business partners (the “selling partner”) sold their business interests and real property interests to the other (the “purchasing partner”).  The terms of the sale contained two important documents: (1) an LLC Membership Interest Purchase Agreement that set forth the terms and conditions of the transaction (the “Purchase Agreement”); and (2) a Memorandum summarizing the terms of the Purchase Agreement (the “Memo”), as the Purchase Agreement had been designated confidential.  Importantly, the Purchase Agreement contained a provision granting a reversionary interest in the real property to the selling partner, which was indicated and summarized in the Memo.

At the closing, Plaintiff First National Bank of Izard County (“Plaintiff”) agreed to issue loans to the purchasing partner which were to be secured by mortgages on the real property involved in the transaction.  In connection with these loans Plaintiff purchased title insurance policies from Defendant Old Republic National Title Insurance Company (“Defendant”).  The policies each contained standard Paragraph 3(a) restrictive exclusions which stated as follows:

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damages, cost, attorneys’ fees or expenses which arise by reason of:

    1. Defects, liens, encumbrances, adverse claims or other matters: (a) created, suffered, assumed, or agreed to by the Insured Claimant[.]

Post-closing, Plaintiff assumed responsibility for the duty of publicly recording the transaction documents, having its employee mail the closing documents–including the Memo–to the County Clerk for recording.  However, upon receiving the mailed documents, the County Clerk proceeded to record the Memo–and its reversionary interest to the selling partner–four minutes ahead of Plaintiff’s mortgages, thus giving that interest priority over the mortgages.

The purchasing partner later defaulted on his mortgage loans and Plaintiff commenced a foreclosure action against him.  In accordance with his reversionary interest, the selling partner filed an answer in the action asserting that he possessed a superior property interest to Plaintiff by virtue of his right of reversion.  This caused Plaintiff to submit a claim for coverage and defense with Defendant, who denied coverage.  Plaintiff brought suit against Defendant in connection with the denial.

In deciding the competing summary judgment motions, the trial court noted that in the process of doing so, Plaintiff: (1) was in possession of all relevant documentation; (2) failed to fully review the documented materials; (3) at all times had an employee present at the closing, who also served as a witness and notarized each of the transaction documents; and (4) had that same employee mail the materials to the County Clerk with an attached note instructing the Clerk as to the specific order in which the materials were to be recorded.  It was never conclusively established if the employee had misnumbered the order in which the documents were to be filed, or if the County Clerk had mistakenly failed to comply with the filing order indicated. The trial court granted summary judgment to Defendant finding Exclusion 3(a) was applicable, as Plaintiff had assumed responsibility for ensuring the mortgage was properly recorded before the right of reversion.

Plaintiff appealed, with the Court ultimately affirming the propriety of the denial on the basis of the 3(a) exclusion.  The Court reasoned that the “suffered” terminology used in the 3(a) exclusion was synonymous with “permit,” holding that by undertaking to record the property interests and failing to exert sufficient power over both its employee and the recording process itself, Plaintiff had “permitted” the creation of the reversionary interest, noting that Plaintiff had, at all times, possessed adequate “power to prohibit the [Memo] from having priority” which it had failed to exert.  Thus, the denial of Plaintiff’s claim was upheld as warranted.

Takeaways

This is an interesting and potentially far-reaching holding which should be viewed in light of other decisions interpreting 3(a) exclusions.  While many courts interpret these exclusions as only being triggered by intentional actions, see Home Fed. Sav. Bank v Ticor Tit. Ins. Co., 695 F.3d 725, 733 (7th Cir. 2012) (“the clear majority view . . . is that the exclusion applies only to intentional misconduct); Feldman v Urban Commercial, Inc., 87 N.J. Super. 391, 401 (App. Div. 1965), this decision is one of a growing body of caselaw extending exclusion 3(a) to negligent actions, in this instance negligent recording.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Kevin Hakansson at khakansson@riker.com, James Mazewski at jmazewski@riker.com or Kori Pruett at kpruett@riker.com.

Good Faith Estimate Extension and HIPAA Update

Posted on by Christie Bowness

HHS Extends Good Faith Estimate Enforcement Discretion Period Under No Surprises Act

The Centers for Medicare & Medicaid Services ("CMS") recently announced in an FAQ that the U.S. Department of Health and Human Services (“HHS”) is extending enforcement discretion, pending future rulemaking, for situations where Good Faith Estimates (“GFEs”) for uninsured or self-pay individuals under the No Surprises Act do not include expected charges from co-providers or co-facilities.

Under the No Surprises Act’s 2021 Interim Final Rule, a “convening provider/facility” (as defined under the No Surprises Act) is responsible for providing a GFE that must include the charges reasonably expected from any co-providers or co-facilities involved in the patient’s treatment. The Interim Final Rule set the enforcement discretion period for this requirement to expire on January 1, 2023.

According to CMS,

“this exercise of enforcement discretion was necessary to allow time for providers and facilities to develop mechanisms for convening providers and facilities to request, and co-providers and co-facilities to provide, complete and accurate pricing information for the convening provider or facility to incorporate into the GFE for uninsured (or self-pay) individuals.”

Furthermore, per CMS’s announcement,

“By extending this exercise of enforcement discretion, HHS aims to promote further interoperability across the health care industry and encourage providers, facilities, and other industry members to focus resources towards adopting interoperable processes for exchanging information.”

CMS has provided additional FAQs for uninsured and self-pay patients found here.

HHS Issues Bulletin on HIPAA Compliance Obligations for Tracking Technology

The HHS Office for Civil Rights (“OCR”) issued a Bulletin highlighting the obligations of covered entities and business associates under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy, Security, and Breach Notification Rules when using online tracking technologies.

In its Bulletin, HHS explains that:

“a tracking technology is a script or code on a website or mobile app used to gather information about users as they interact with the website or mobile app. After information is collected through tracking technologies from websites or mobile apps, it is then analyzed by owners of the website or mobile app (“website owner” or “mobile app owner”), or third parties, to create insights about users’ online activities. Such insights could be used in beneficial ways to help improve care or the patient experience.  However, this tracking information could also be misused to promote misinformation, identity theft, stalking, and harassment.”

The Bulletin makes clear that both user-authenticated and unauthenticated webpages and mobile apps that use tracking technology could put various regulated healthcare entities at risk of violations under the HIPAA privacy rule. As such, HHS lists the following compliance obligations regulated entities must observe under the HIPAA Privacy, Security, and Breach Notification including:

  • Ensuring that all disclosures of protected health information ("PHI") to tracking technology vendors are specifically permitted by the Privacy Rule and that, unless an exception applies, only the minimum necessary PHI to achieve the intended purpose is disclosed.
  • Establishing a Business Associate Agreement (“BAA”) with a tracking technology vendor that meets the definition of a “business associate.”
  • Addressing the use of tracking technologies in the regulated entity’s Risk Analysis and Risk Management processes, as well as implementing other administrative, physical, and technical safeguards in accordance with the Security Rule (g., encrypting ePHI that is transmitted to the tracking technology vendor; enabling and using appropriate authentication, access, encryption, and audit controls when accessing ePHI maintained in the tracking technology vendor's infrastructure) to protect the ePHI.
  • Providing breach notification to affected individuals, the Secretary, and the media (when applicable) of an impermissible disclosure of PHI to a tracking technology vendor that compromises the security or privacy of PHI when there is no Privacy Rule requirement or permission to disclose PHI and there is no BAA with the vendor. In such instances, there is a presumption that there has been a breach of unsecured PHI unless the regulated entity can demonstrate that there is a low probability that the PHI has been compromised.

Note that a regulated entity’s failure to comply with the HIPAA Rules may result in a civil money penalty.

NJ Appellate Division Holds That HOA Declaration Trumps Prior Recorded Mortgage in Certain Instances

Posted on by Christie Bowness

The New Jersey Appellate Division, in a published opinion, recently held that in certain instances, a recorded homeowners’ declaration of covenants can trump a prior mortgage. See  Fulton Bank of N.J. v. Casa Eleganza, LLC, 473 N.J. Super. 387 (App. Div. 2022).  In Casa Eleganza, Plaintiff Fulton Bank of New Jersey (“Plaintiff”) acquired title via mortgage foreclosure sale to a portion of the residential community Iron Gate at Galloway (“the Property”).  The defaulted mortgage Plaintiff had foreclosed on was originally recorded on June 8, 2007, following which, on June 25, 2007, the Irongate at Galloway Homeowners’ Association (the “HOA”) recorded a Declaration of Covenants (the “HOA Declaration”) encumbering the Property.

Plaintiff sold the Property to a third party. However, at closing, the HOA demanded that Plaintiff pay it $12,651.35 for capital contributions, HOA fees, legal fees, and unpaid landscaping bills that had been incurred during the time Plaintiff held title.  Plaintiff refused to pay and moved to “divest” the land from the HOA’s covenants, contending that the HOA had no ability to seek these damages as the HOA Declaration had been recorded after the recording of the original mortgage.  Plaintiff argued that as New Jersey is a “race–notice” jurisdiction, only the terms of the original mortgage could govern, and the Property thus had to be treated as unencumbered by the HOA Declaration’s obligations.

Plaintiff’s action was dismissed by the trial court, which refused to discharge the sums owed by holding that such an outcome would be inequitable and antithetical to the purpose and characteristics of common interest communities and homeowner associations.  The matter then proceeded to the New Jersey Appellate Division where the dismissal was affirmed, again in reliance upon the unique nature of common interest communities, but also upon the “equitable subrogation” doctrine.

In doing so, the Appellate Division first observed that common interest communities–like Iron Gate at Galloway–constitute a unique class of real property ownership, as they are designed to diffuse property maintenance and upkeep expenses among the community at large, ensure certain standards and uniformity of behavior amongst owners, and assist in preserving property values.  The Court noted that to make this ownership concept possible and ensure its continuance, it was necessary that properties located within these communities were able to be subjected to declarations which ran with the land in perpetuity and bound both current and future owners.

While New Jersey employs a “race-notice” approach to the recording of property interests, the Court nevertheless held that the HOA Declaration was operative and bound the Property despite it having been recorded after the original mortgage. In doing so, the Court noted in order to effectuate and preserve the aforementioned common interest goals, and in light of the fact the community would have never been approved by the township in the first place absent the creation of the HOA, the Court held that equity demanded a modification of the normal sequence of priority and the enforcement of the HOA Declaration.  The Court also held this outcome was necessary to prevent innocent property owners from suffering the consequences of the unpaid HOA bill, as Plaintiff could not be permitted to force itself into a position “better than any other purchaser responsible for assessments and HOA responsibilities during a period of ownership.”

In so holding the Court relied upon the concept of “equitable subrogation,” a doctrine which, although “rarely applied,” allows a court to “alter the ordinary sequence of priority to satisfy principles of equity” when payment of another creditor’s debt puts another creditor or a property owner in a more advantageous priority on a property than the creditor/owner normally would have been.  See Sovereign Bank v. Gillis, 432 N.J. Super. 36, 44 (App. Div. 2013); U.S. Bank Nat’l Ass’n as Tr. v. Deely, 466 N.J. Super. 387, 397 (App. Div. 2021).  The principle rests on unjust enrichment grounds.  Likewise, the Court reasoned that here the Plaintiff knew it was foreclosing on a property in a common interest community.

Takeaways

Despite New Jersey being a race-notice jurisdiction, a court still retains significant discretion and can look to modify conventional sequences of priority in an effort to safeguard principles of its perceived notions of equity, particularly with regard to common interest communities.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Kevin Hakansson at khakansson@riker.com, James Mazewski at jmazewski@riker.com or Kori Pruett at kpruett@riker.com.

Prior Authorizations, 340B, and a National Provider Directory

Posted on by Christie Bowness

CMS Proposes Streamlining The Prior Authorization Process

The Centers for Medicare & Medicaid Services (“CMS”) recently announced that it would issue a proposed rule seeking to streamline the prior authorization process, estimating that such changes will save hospitals and physician practices more than $15 billion over a 10-year period.

Changes under the proposed rule (CMS-0057-P) would generally apply to Medicare Advantage organizations, state Medicaid and Children's Health Insurance Program ("CHIP") agencies, Medicaid managed care plans, CHIP managed care entities, and qualified health plan insurers on the federally facilitated exchanges. Specific changes under the proposed rule include:

  1. Requiring the implementation of a Health Level 7 Fast Healthcare Interoperability Resources standard application programming interface to support electronic prior authorization;
  2. Requiring certain payers to include a specific reason when denying requests, publicly report certain prior authorization metrics and send decisions within 72 hours for urgent requests and seven calendar days for standard requests; and
  3. Adding a new electronic prior authorization measure for eligible hospitals and critical access hospitals under the Medicare Promoting Interoperability Program and for Merit-based Incentive Payment System eligible clinicians under the promoting interoperability performance category.

Additionally, CMS stated the proposed rule would also improve access to health data by (i) expanding the current patient access interface to include information about prior authorization decisions, (ii) allowing providers to access their patients' data by requiring payers to build and maintain a provider access interface, and (iii) requiring payers to exchange patient data using a payer-to-payer interface when a patient moves between payers or has concurrent payers.

CMS has issued a fact sheet summarizing the proposed rule and policy changes it is seeking under CMS-0057-P.

HHS Proposes Updates to 340B Updates

The U.S. Department of Health and Human Services (“HHS”) published a proposed rule (87 FR 73516) seeking to adjust its rules governing resolution disputes about overcharging, duplicate discounts and diversions. Specifically, the proposed rule seeks to enhance the efficiency of 340B dispute resolution by reducing formality and costs associated with the process as established under the 340B Administration Dispute Resolution (85 FR 80632) enacted in December 2020.

HHS has stated five goals in its proposed revision:

  1. Move the ADR process away from a trial-like proceeding and establish a more conventional administrative process;
  2. Revise the ADR panel structure to consist of 340B program subject matter experts from the Health Resources and Services Administration's Office of Pharmacy Affairs;
  3. Ensure parties attempt to resolve disputes in good faith prior to invoking the ADR process;
  4. Align the ADR process to statutory provisions on overcharges, duplicate discounts and diversion; and
  5. Include a reconsideration process for parties dissatisfied with the 340B ADR panel decision.

Comments are due by January 30, 2023.

CMS Proposes National Healthcare Directory

CMS published a Request for Information (87 FR 61018) on its plans to develop a national directory of healthcare providers and services. Describing the proposed platform as a “centralized data hub,” CMS envisions the national directory cutting administrative costs for healthcare providers while streamlining the process of connecting providers with patients.

Certain healthcare providers are already required by law to maintain online healthcare directories of providers and services. For example, in 2015, CMS established a requirement that Qualified Health Plan ("QHP") issuers on the Federally-facilitated Exchanges publish an easily-accessible, up-to-date, accurate, and complete provider directory online. Even when not required by law to establish a directory, providers participating in federal benefits programs who choose to establish a provider directory must ensure that their directory conforms to CMS’s marketing rules. Regulations at 42 CFR 422.111(b)(3), for example, require Medicare Advantage organizations to disclose a description of the number, mix, and distribution (addresses) of providers from whom enrollees may reasonably be expected to obtain services.

 

New Guidelines on Pain Management, HIPAA Update and the Family Fix

Posted on by Christie Bowness

CDC Issues New Guidelines on Opioid Prescription and Pain Management Treatment

The Centers for Disease Control and Prevention (“CDC”) recently released updated clinical practice guidelines (the “Guidelines”) on opioid prescribing and providing pain care for adults with chronic pain.

This update came as a result of a systematic review to evaluate and reassess the 2016 CDC Opioid Prescribing Guideline as new evidence became available. According to the CDC, the new evidence reviews conducted on behalf of the CDC affirmed the appropriateness of the recommendations in the 2016 CDC Opioid Prescribing Guideline for using opioids to treat chronic pain and, based on that review, the CDC determined that an update to the 2016 CDC Opioid Prescribing Guideline was warranted.

This updated clinical practice guideline also includes a new topline recommendation for patients who are already receiving ongoing opioid therapy for pain. The CDC specifically described how “the clinical practice guideline outlines how clinicians and patients should work together in assessing the benefits and risks of continued opioid use and if or when to taper opioids to a lower dosage or discontinue opioids altogether in accordance with the HHS Tapering Guide.”

The CDC has released a Fact Sheet on the updated Guidelines.

Proposed Rule Updating Versions of the Retail Pharmacy Standards for Electronic Transactions Under HIPAA

The Department of Health and Human Services (“HHS”) issued a Proposed Rule on November 9, 2022 which seeks to adopt updated versions of the retail pharmacy standards for electronic transactions adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). The Proposed Rule would also broaden the applicability of the Medicaid pharmacy subrogation transaction to all health plans.

According to HHS, “These updated versions would be modifications to the currently adopted standards for the following retail pharmacy transactions:

  • health care claims or equivalent encounter information;
  • eligibility for a health plan;
  • referral certification and authorization; and
  • coordination of benefits.”

HHS further provides that “industry stakeholders reported that there is a need to expand the use of the current Medicaid Subrogation Implementation Guide Version 3.0 (Version 3.0) beyond Medicaid agencies, and the use of a subrogation standard that would apply to other payers would be a positive step for the industry.”

Per HHS, “Subrogation” occurs when one payer has paid a claim that is subsequently determined to be the responsibility of another payer, and the first payer seeks to recover the overpayment directly from the proper payer. Furthermore, according to HHS, HIPAA regulations currently require only Medicaid agencies to use Version 3.0 in conducting the Medicaid pharmacy subrogation transaction.

Under the Proposed Rule, all health plans would be required to use the Pharmacy Subrogation Implementation Guide for Batch Standard, Version 10, to transmit pharmacy subrogation transactions. According to HHS, this would allow better tracking of subrogation efforts and results across all health plans, and support cost containment efforts.

Covered entities should be aware that the Proposed Rule would require covered entities to comply 24 months after the effective date of the final rule. According to the Proposed Rule, small health plans would have 36 months after the effective date of the final rule to comply.

CMS has issued a Fact Sheet on the Proposed Rule.

“Family Glitch” Fixed by IRS

The Internal Revenue Service’s (“IRS”) Final Rule takes effect on December 12, 2022 and will remove the so-called “Family Glitch” problem with the Affordable Care Act Marketplace coverage. The “Family Glitch” is a problem under the ACA whereby if one family member has an affordable offer of coverage from an employer, then all family members are ineligible for premium tax credits to purchase Marketplace coverage, even if the cost of coverage for the whole family is greater than 9.83 percent of family income.

The regulations will remove the applicability of the Family Glitch. HHS aims to implement the rules for the 2023 plan year and will provide training on the new rules to agents, brokers, and other assisters so applicants will better understand their options before enrolling, including the trade-offs if applicants are considering split coverage.

The White House released a Fact Sheet on this update.

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