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By Kristen Ricaurte Knebel
March 16 — 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.
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.
Regarding plan eligibility requirements, individuals eligible for the limited wraparound coverage wouldn't be able to be enrolled in excepted benefit coverage that is a health flexible spending account. In addition, plans must comply with one of two sets of standards relating to eligibility and benefits, one of which is for eligible individual health insurance for individuals who aren't full-time employees, and the other applies to coverage that wraps around certain Multi-State Plan coverage, the rules said.
Some commenters wanted the ability to offer limited wraparound coverage to full-time employees, but the departments balked at that suggestion, saying “this is not intended to incentivize or permit employers to fail to offer minimum essential coverage to full-time employees, a population to whom employers have typically offered coverage.”
Finally, for limited wraparound coverage to qualify as an excepted benefit, a self-insured group health plan, or health insurance issuer offering or proposing to offer Multi-State Plan wraparound coverage, would be required to report to the Office of Personnel Management to get clearance to offer this benefit. After receiving the required information, the agency will determine whether the plan or issuer qualifies to offer such coverage and complies with the final rules.
Sponsors of group health plans are required to report to the HHS so the agency can assess the effectiveness of the pilot program.
The final rules change the effective date of the pilot program for offering limited wraparound coverage after the agencies received comments that said the timing was too tight to offer such benefits for the 2015 plan year.
“These final rules specify that wraparound coverage could be offered as excepted benefits if the coverage is first offered no earlier than January 1, 2016 and no later than December 31, 2018,” the agencies said in the guidance.
The end date for the pilot program remains the later of the date that is three years after the date wraparound coverage is first offered, or the date on which the last collective bargaining agreement relating to the plan terminates after the date wraparound coverage is first offered.
The final rules are effective May 18. They are scheduled to appear in the Federal Register on March 18.
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Text of T.D. 9714 is in the Text section.
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