ACA, HIPAA Excepted Benefits Final Rules Released

Author: Gloria Ju

October 1, 2014

The Departments of the Treasury, Labor and Health and Human Services published final rules regarding excepted benefits under the Employee Retirement Income Security Act (ERISA), Internal Revenue Code (IRC) and Public Health Service Act (PHSA) today. The rules specifically cover vision and dental benefits and employee assistance program (EAP) benefits.

The final rules apply to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2015. The agencies intend to publish regulations in the future addressing limited wraparound coverage.

Excepted benefits are generally exempt from the health reform requirements added to ERISA, the IRC and the PHSA by the Health Insurance Portability and Accountability Act (HIPAA) and Affordable Care Act (ACA). In addition, eligibility for excepted benefits does not preclude an individual from eligibility for a premium tax credit if he or she chooses to enroll in coverage under a qualified health plan through an exchange (or marketplace) established under the ACA.

There are four categories of excepted benefits:

  • Benefits that are generally not health coverage. Benefits such as auto insurance, liability insurance, workers' compensation and accidental death and dismemberment coverage are excepted in all circumstances.
  • Limited excepted benefits. Benefits such as limited-scope vision or dental benefits and benefits for long-term care, nursing home care, home health care or community-based care are excepted if they are:
  • Provided under a separate policy, certificate or contract of insurance; or
  • Otherwise not an integral part of a group health plan, whether insured or self-insured.
  • Noncoordinated excepted benefits. Benefits such as coverage for only a specified disease or illness and hospital indemnity or other fixed indemnity insurance are excepted if all of the following conditions are met:
  • The benefits are provided under a separate policy, certificate or contract of insurance;
  • There is no coordination between the provision of such benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor; and
  • 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.
  • Supplemental excepted benefits. In order to be excepted, benefits must be:
  • Coverage that is supplemental to Medicare, the Civilian Health and Medical Program of the Department of Veterans Affairs, Tricare or to coverage provided under a group health plan; and
  • Provided under a separate policy, certificate or contract of insurance.

    • Vision and Dental Benefits

    The final rules eliminate the requirement under HIPAA regulations that participants pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as limited excepted benefits. Otherwise, an employer that establishes or maintains a self-insured plan could be required to charge a nominal contribution from participants simply for such benefits to qualify as excepted benefits. In some cases, the cost of collecting the nominal contribution could be greater than the contribution itself.

    In addition, the rules make clear that employees will not be disqualified from tax credit eligibility under a plan that is otherwise not affordable under the ACA but could be affordable with respect to limited-scope vision and dental benefits. This is consistent with the proposed rules issued in 2013.

    In the agencies' view, the final rules do not undermine the inclusion of pediatric vision or dental coverage as essential health benefits. The requirement that issuers in the small group market offer coverage of essential health benefits is not changed, and that rule does not apply to large or self-insured plans.

    The final rules clarify that limited-scope vision or dental benefits do not have to be offered in connection with a separate offer of major medical or primary group health coverage under the plan in order to meet the statutory requirement that such benefits are otherwise not an integral part of the plan. To meet this criterion, limited-scope vision or dental benefits may be provided without connection to a primary plan, or the benefits may be offered separately from the major medical or primary coverage under the plan. The final rules provide that this criterion is satisfied if:

    • Participants may decline coverage; or
    • The claims for the benefits are administered under a contract separate from claims administration for any other benefits under the plan.

    While coverage of long-term care benefits is not the focus of the final rules, these provisions apply to such coverage.

    EAP Benefits

    The final rules on EAPs conform closely to the proposed rules, with one exception related to the coordination of benefits. To constitute excepted benefits, an EAP must satisfy four requirements:

    • The EAP does not provide significant benefits in the nature of medical care. For this purpose, the amount, scope and duration of covered services are taken into account. For example, an EAP that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential or intensive outpatient care) without requiring prior authorization or review for medical necessity does not provide significant benefits in the nature of medical care. At the same time, a program that provides disease management services (such as laboratory testing, counseling and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant benefits in the nature of medical care. The agencies may further clarify this requirement in the future.
    • Benefits cannot be coordinated with the benefits under another group health plan. Participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a "gatekeeper") before an individual is eligible for benefits under the other group health plan. Also, participant eligibility for benefits under the EAP must not be dependent on participation in another group health plan. Unlike the proposed rules, the final rules exclude the requirement that EAP benefits cannot be financed by another group health plan in order to qualify as excepted benefits.
    • No employee premiums or contributions may be required as a condition of EAP participation.
    • The EAP may not impose any cost-sharing requirements.