Late last week, the Departments of Labor (“DOL”), Health and Human Services (“HHS”) and the Treasury (collectively, the “Agencies”) issued a very welcome FAQ that will allow higher education institutions to continue subsidizing the cost of student health insurance coverage for graduate student employees, for at least the foreseeable future. Under the FAQ, the agencies have stated that the Affordable Care Act’s market reform requirements will not apply to these types of subsidy arrangements, pending further guidance. Colleges and universities may therefore continue to subsidize the cost of student health insurance coverage for graduate and other student employees. Importantly, the guidance only applies to higher education employers and does not, for example, allow other types of employers to subsidize the cost of individual insurance policies for employees.

As discussed in more detail in a prior alert, IRS Notices 2013-54 and 2016-17 effectively prohibited higher education institutions from subsidizing the cost of student health insurance coverage for any student employee. Many higher education institutions that have historically subsidized the cost of student health insurance coverage for graduate student employees have therefore been scrambling in recent months to restructure or eliminate their longstanding subsidy arrangements for graduate students.

The new FAQ indefinitely extends the Agencies’ non-enforcement position with respect to subsidy arrangements for student health insurance plans. While not necessarily permanent, the FAQ’s non-enforcement position allows higher education institutions to continue their longstanding student health insurance subsidy arrangements without change.