Departments Publish Proposed Rule on Excepted Benefits

Category: Private Education Matters
Date: Feb 6, 2015 05:29 PM

The Departments of the Treasury, Labor, and Health and Human Services proposed rules to amend regulations relating to excepted benefits.  Excepted benefits are generally exempt from the requirements of HIPAA and the ACA.  The proposed rules provide guidance regarding what will qualify as an excepted benefit.

Vision and Dental Benefits

The proposed regulations would eliminate the requirement that participants in self-insured plans pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as benefits that are not an integral part of the plan.  Under the proposed regulations, vision and dental benefits are excepted benefits if either they are provided under a separate policy, certificate, or contract of insurance or are not an integral part of a group health plan, meaning that employees may elect not to receive the coverage.

Employee Assistance Programs (EAPs)

The proposed regulations propose to set forth criteria under which EAPs will be considered to be an excepted benefit.  In order to satisfy the proposed requirements, an EAP must not provide a "significant" benefit in the nature of medical care.  The Departments are seeking comments regarding the definition of "significant."

Limited Wraparound Coverage

The proposed regulations allow for employers to offer "wraparound" coverage to employees who purchase health insurance on the individual market through an Exchange so long as the coverage is non-grandfathered.  The coverage would only qualify as an excepted benefit if it is used as additional coverage for individuals who receive coverage through an Exchange where the employer's health plan options are unaffordable under the ACA.  This wraparound coverage is not a substitute for large employers' shared responsibility requirements under Section 4980H.

In addition, the limited wraparound coverage must be limited in amount.  Specifically, coverage may not exceed the maximum annual contribution for health FSAs, which is $2,550 in 2015.  Also, individuals eligible for the limited wraparound coverage cannot be enrolled in excepted benefit coverage that is a health FSA.

The limited wraparound coverage must also meet three non-discrimination requirements.  First, the coverage must not impose any preexisting condition exclusion.  Second, it may not discriminate against individuals in eligibility, benefits, or premiums based on any health factor of an individual.  Third, it must not discriminate in favor of highly compensated individuals. 

Finally, in order to qualify as an excepted benefit, the health plan must properly report its compliance with the above requirements to the Office of Personnel management.

The proposed regulations are available at:

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