Employee assistance programs and certain “limited wraparound coverage” would be added to the set of “limited excepted benefits” exempt from most of the requirements of the Affordable Care Act, under proposed rules in the Dec. 24 Federal Register (78 Fed. Reg. 77632). The proposal also would make it easier for dental and vision benefits to qualify as “excepted.”
The U.S. Departments of Labor, Health and Human Services and the Treasury proposed guidance and sought comments in three areas, about which questions arose in the context of health care reform. Comments must be submitted by Feb. 24.
HIPAA rules already excepted certain benefits from its coverage-related requirements. Under 2004 guidance, dental and vision benefit plans are considered excepted benefits if the benefits offered are limited in scope and are either issued under a separate policy, or not otherwise considered integral to the health plan.
Excepted benefits have taken on new meaning because they are exempt from newer insurance market requirements under health care reform. The proposed rule expands those exemptions and applies them to (1) limited scope dental and vision benefits, (2) employee assistance plans and (3) “limited wraparound” plans.
Employee Assistance Programs
The status of EAPs has long been ambiguous, and the potential effects of health care reform have given the question a new urgency.
“Since enactment of the Affordable Care Act, various stakeholders have asked the Departments to treat EAPs as excepted benefits for reasons analogous” to those that apply to dental and vision benefits, according to the preamble to the proposed rules. “Specifically, some employers represented that compliance with the prohibition on annual limits could be problematic as such benefits are typically very limited, and that EAPs generally are intended to provide benefits in addition to those provided under other group health plans.”
Therefore, the proposed rules would treat an EAP as excepted if:
- it does not “provide significant benefits in the nature of medical care”;
- its benefits cannot be coordinated with another group health plan;
- no employee premiums or contributions are required to participate; and
- no cost-sharing is involved.
Limited Wraparound Coverage
The addition of certain limited wraparound coverage to the list of excepted benefits was to address a predicament employees may face if their employer offers “minimum essential coverage” but they still have to seek coverage on the exchanges because the employer’s coverage is “unaffordable” (as defined by the ACA).
Large employers’ group health plans often cover more items and services than are now defined as “essential health benefits” under the ACA. “Some group health plan sponsors have asked whether wraparound coverage could be provided for employees for whom the employer premium is unaffordable and who obtain coverage through an Exchange,” according to the preamble, so these employees still could have coverage comparable to the group health plan’s.
Therefore, the proposed rules would treat as excepted benefits coverage that:
- wraps around individual health insurance that is not grandfathered under the health care reform law and does not consist solely of excepted benefits;
- is specifically designed to provide benefits beyond those offered by this individual coverage;
- is not otherwise “an integral part” of the group health plan;
- costs no more than 15 percent (including employer contributions) of what the primary plan costs; and
- does not discriminate by health status or income.
Dental and Vision Benefits
To qualify as excepted benefits under the existing rules, dental and vision benefits must either be offered under a separate insurance policy, or charge an additional premium or contribution from participants who elect them.
ACA requirements such as the 90-day maximum waiting period and the phaseout of annual limits have made it harder to keep offering dental or vision benefits, so more plan sponsors are interested in getting them classified as “excepted,” and are questioning some of the current prerequisites for doing so, especially the additional employee contribution.
Some employers argued that if dental or vision benefits “are provided on a self-insured basis and without a contribution from employees, employers should not be required to charge a nominal contribution” that might be less than the cost of collecting it, according to the preamble. “Moreover, they pointed out that employers providing dental and vision benefits through a separate insurance policy are not required to charge a participant any premium in order for the dental or vision benefits to be considered excepted benefits.”
The agencies agreed “to level the playing field between insured and self-insured coverage” by eliminating the requirement that participants pay extra for dental or vision benefits in order for them to qualify as “not an integral part of a plan.”
For more information, go to The New Health Care Reform Law: What Employers Need to Know.