The Government Agencies Overseeing Enforcement of the ACA Have Provided Relief for Employers Offering Certain Plans

HIGHLIGHTS:

  • IRS, DOL and HHS finalize guidance on "excepted benefits" requirements for dental, vision, long-term care and employee assistance programs.
  • Employers need to review their plans to either confirm the benefits are excepted, or that their programs comply with the requirements of the ACA.

The Patient Protection and Affordable Care Act (ACA) imposes numerous requirements on health plans, including group plans maintained by employer sponsors. An enhanced claims process, coverage for dependent children until age 26 and a prohibition on annual and lifetime dollar limits are just a few. Because dental, vision, and long-term care benefits and employee assistance programs are typically limited in nature, without an exception to the ACA requirements, these programs could violate ACA and trigger significant penalties for their sponsors. The only logical choice would be for employers to terminate these programs leaving employees without these benefits. Fortunately, the government agencies overseeing the enforcement of the ACA have provided relief for employers offering these plans. The final regulations are applicable to group health plans and issuers for plan years beginning on or after Jan. 1, 2015.   

Long-Term Care Benefits and Limited Scope Dental and Vision Benefits

Long-term care and limited scope dental and vision benefits are excepted if:

  • they are provided under a separate policy, certificate, or contract of insurance, or
  • they are not an integral part of a group health plan (i.e., major medical coverage)

Benefits are not an integral part of a group health plan (whether the benefits are provided through the same plan, a separate plan, or as the only plan offered to participants) if:

  • participants may decline coverage whether or not a participant contribution is required for the coverage; or
  • benefit claims are administered under a separate contract unrelated to claims administration for any other benefits under the group health plan

Notably, the final regulations eliminate the need for employees to pay an additional premium for this coverage and a self-insured plan can be "excepted" by not being an integral part of a major medical plan.

Employee Assistance Programs

Employee assistance plan (EAP) benefits are excepted if they satisfy all of the following:

  1. The plan does not provide significant benefits in the nature of medical care.
  2. The EAP benefits are not coordinated with benefits under another group health plan, as follows:
    • participants cannot be required to exhaust EAP benefits before becoming eligible for benefits under the other group health plan; and
    • eligibility for the EAP benefits cannot be dependent on participation in another group health plan
  3. EAP cannot require employee premiums or contributions.
  4. EAP does not have a cost-sharing component.

In the end, employers and issuers are free to continue offering EAPs with major medical plans provided the EAP is ancillary to a major medical plan, it does not cost the employees anything and use of the EAP is not a "gatekeeper" to accessing the major medical benefits.

Non-Coordinated Excepted Benefits

Finally, the preamble to the final regulations provides a helpful reminder about another category of excepted benefit referred to as "non-coordinated excepted benefits."

Non-coordinated benefits must meet all of the following conditions:

  1. The benefits are provided under a separate policy, certificate, or contract of insurance.
  2. There is no coordination between the provision of the benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor.
  3. The benefits are paid with respect to any event without regard to whether benefits are provided under any group health plan maintained by the same plan sponsor.

This third category of excepted benefits includes coverage for a specified disease or illness (such as cancer-only policies), and hospital indemnity or other fixed indemnity insurance (e.g., fixed-period payment like per diem and not based on a percentage of treatment costs incurred or service provided).

Action Items to Be Compliant with the ACA

Plan sponsors and issuers should take the following steps in order to be compliant with the ACA:

  1. Review vision, dental, long-term care and employee assistance plans to ensure that their programs meet the conditions to be "excepted benefits."
  2. Review other benefits that may seem ancillary, but which could offer group health plan benefits.
  3. If any of those benefits do not meet the conditions for the excepted benefits category, employers should consider revising their programs.