The Departments of the Treasury, Labor, and Health and Human Services recently issued proposed regulations that generally expand the definition of HIPAA excepted benefits. This is welcome news for employers because excepted benefits are generally exempt from the health reform requirements that were added to ERISA, the Internal Revenue Code, and the Public Health Services Act by the Patient Protection and Affordable Care Act (ACA). The proposed regulations specifically address how employee assistance programs (EAPs), limited wraparound coverage, and limited-scope dental and vision benefits may qualify as excepted benefits.
EAPs as Excepted Benefits. EAPs are typically programs offered by employers that provide employees with a wide range of benefits, often including short-term substance abuse or mental health counseling, financial counseling, and legal services. Unless the EAP qualifies as an excepted benefit, to the extent it provides benefits for medical care, the EAP would generally be considered group health plan coverage subject to HIPAA and ACA requirements. To qualify as an excepted benefit, the EAP must meet the following criteria:
- The EAP may not provide significant benefits in the nature of medical care,
- The EAP’s benefits may not be coordinated with the benefits under another group health plan,
- No employee premiums or contributions may be required as a condition to participate in the EAP, and
- There may be no cost-sharing under the EAP.
These criteria are intended to ensure that employers are able to continue offering EAPs as supplemental benefits to other coverage and ensure that EAP coverage does not unreasonably disqualify an otherwise eligible employee from being eligible for a premium tax credit for enrolling in coverage through a health care marketplace.
Limited Wraparound Coverage. The ACA requires non-grandfathered health plans in the individual and small group markets to cover essential health benefits. Often employer sponsored group health plans offer expanded provider networks and cover items and services beyond the essential health benefits required under the ACA. Understandably, the additional benefits and coverage typically come with a higher cost to employees. Because group coverage available through an employer may be unaffordable for some employees, those employees may choose to obtain less expensive (and more limited) coverage though a health care marketplace. These proposed regulations provide that, under limited circumstances, employers may offer wraparound coverage to certain lower income employees who obtain subsidized coverage through a health care marketplace. This approach, when taking into account the marketplace coverage and the wraparound coverage, would allow employers to provide such employees with overall coverage comparable to their group health plan coverage. Under these proposed regulations, limited wraparound coverage is an excepted benefit if these conditions are met:
- The coverage may only wrap around non-grandfathered individual health insurance that does not consist solely of excepted benefits,
- The limited wraparound coverage must provide benefits beyond those offered by the individual health insurance coverage. Specifically, it must provide either benefits that are in addition to essential health benefits or reimburse the cost of out-of-network health care providers, or both,
- The limited wraparound coverage may not be an integral part of a group health plan. That is, the plan sponsor offering the limited wraparound coverage must sponsor another group health plan meeting the minimum value. Only individuals eligible for coverage under the primary plan would be eligible for the limited wraparound coverage,
- The total cost of the limited wraparound coverage must not exceed 15 percent of the cost of coverage under the primary plan. For this purpose, the cost of coverage includes both the employer and employee contributions, and
- The limited wraparound plan may not discriminate on the basis of eligibility, benefits, or premiums based on a health factor of an individual. The limited wraparound coverage may not impose any preexisting condition exclusion. Also, the limited wraparound plan may not discriminate in favor of highly compensated individuals.
Dental and Vision Benefits. Under prior guidance, dental and vision benefits were considered excepted benefits if they were limited in scope and were either:
- Provided under a separate policy, certificate, or contract of insurance, or
- Otherwise not an integral part of a group health plan. The prior guidance provided that benefits were not an integral part of a plan if participants had the right to elect not to receive coverage and, if they did elect coverage, they were required to pay an additional premium or contribution for it.
Under these proposed regulations, the requirement for participants to pay an additional premium or contribution for limited-scope dental or vision benefits is eliminated.
These proposed regulations will be effective for plan years beginning in 2015. Employers should review their dental, vision, and EAP plans to determine if any changes are needed to meet the expended definition of excepted benefit.