Obama Administration Issues Final Rules on Limited Wraparound Coverage Under ACA


The Obama administration issued final regulations amending guidance on excepted benefits under the Affordable Care Act to include limited wraparound coverage provided certain requirements are met.

The final rules (T.D. 9714, RIN 1210-AB70, RIN 0938-AS52), issued March 16 by the departments of the Treasury, Labor, and Health and Human Services, said that limited wraparound coverage must provide meaningful benefits beyond cost sharing, which may include reimbursing for the entire cost of primary care, cost of prescription drugs “not on the formulary of the plan,” 10 visits to a physician a year and access to on-site clinics at no additional cost.

The final rules also set out two pilot programs for providing limited wraparound coverage, one allowing for wraparound benefits under the health insurance marketplace's Multi-State Plan program and the other permitting wraparound coverage for part-time workers enrolled in an individual policy or in basic health plan coverage for “low-income individuals.”

On Dec. 19, Treasury, the DOL and the HHS issued proposed rules (REG-132751-14, RIN 1545-BM44) that would allow employers to offer employees limited wraparound health-care coverage in a pilot program as excepted benefits.

Excepted benefits are generally exempt from market changes that the ACA and the Health Insurance Portability and Accountability Act added to the Employee Retirement Income Security Act, the Public Health Service Act and the tax code. These include such provisions as limits on pre-existing condition exclusions, prohibitions on health-status-based discrimination, guarantees on renewability of coverage and mental health coverage parity.

Limited in Amount

In addition to providing meaningful benefits beyond cost sharing, the limited wraparound coverage must be limited in amount, according to the guidance.

The final rules changed the requirements from the proposed rules, saying the coverage must be the greater of the maximum permitted annual salary reduction toward a health flexible spending account or “a percentage of the cost of coverage under the primary plan,” which was set at 15 percent in prior guidance.

The maximum permitted salary reduction for a health FSA was $2,500 in 2014 and will be “indexed in the manner prescribed under section 125(i)(2) of the Code,” which amounts to $2,550 for 2015, the final rules said.

The final rules adopted the three requirements set out in the proposed rules on the nondiscrimination requirement the limited wraparound coverage must meet, which included not imposing a pre-existing condition exclusion and not discriminating against individuals for eligibility, benefits or premiums. In addition, the limited wraparound coverage and the primary group health coverage can't discriminate in favor of highly compensated individuals and can't fail to be excludable from income with respect to any individual because of the application of tax code Section 105(h), the guidance said.

Excerpted from a story that ran in Pension & Benefits Daily (03/16/2015).

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