IRS, DOL, HHS Propose to Expand Types of Excepted Benefits Under ACA

The Departments of Treasury, Labor, and Health and Human Services issued proposed rules (REG-143172-13; RIN 1210-AB60; CMS-9946-P) that would amend the regulations on excepted benefits regarding vision and dental benefits, as well as employee assistance programs.         

The proposed rules, issued Dec. 20, say that excepted benefits are generally exempt from the changes made to the Employee Retirement Income Security Act, the tax code, and the Public Health Service Act by the Health Insurance Portability and Accountability Act and the Patient Protection and Affordable Care Act.         

Under HIPAA, “vision and dental benefits are excepted if they are limited in scope,” the proposed rules said. Excepted benefits are divided into four categories and the proposed rules would amend the category known as limited excepted benefits, the agencies said.          

After the enactment of the ACA, the departments received comments asking for the regulations on excepted benefits to be amended to remove conditions for limited-scope vision and dental benefits as excepted benefits, the agencies said.         

“In response to these concerns, and to level the playing field between insured and self- insured coverage, these proposed regulations would eliminate the requirement under the HIPAA regulations that participants pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as benefits that are not an integral part of a plan (and therefore as excepted benefits),” the agencies said.         

Employee Assistance Programs          

The proposed rules also set out criteria for employee assistance programs to qualify as excepted benefits beginning in 2015, the agencies said.         

The new guidance follows Notice 2013-54 issued by the agencies in September which stated the intent to amend the excepted benefits rules with regard to EAPs and provided transitional relief for employers offering EAPs.         

Through 2014, EAPs would constitute excepted benefits as long as they didn't provide “significant benefits in the nature of medical cost or care,” the notice said.        

Under the proposed rules, EAPs would qualify as excepted benefits if the following four conditions are met:

• the EAP doesn't provide “significant benefits in the nature of medical care,”

• the benefits can't be coordinated with benefits under another group health plan,  

• premiums or contributions to the EAP can't be required and

• there is no cost sharing under the EAP.         

Limited Wraparound Coverage         

The proposed regulations also would treat as excepted benefits “certain wraparound coverage” offered to employees who purchased coverage on the individual market place, because the premiums of the coverage offered by their employers were considered unaffordable under the ACA, the agencies said.         

“Experts suggest that most workers who are offered minimum value employer-sponsored coverage will not meet the criteria for the premiums to be considered to be ‘unaffordable' and thus not qualify for the premium tax credit for enrolling in coverage through an Exchange. Nevertheless, in some cases, employer plans may be unaffordable for some employees,” the proposed rules said.         

Coverage purchased on the exchange may consist of benefits that aren't as “generous” as the coverage offered by their employer and the coverage network may not be as broad, the agencies said.         

“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,” the rules said. This would allow employers to provide coverage to some employees that would be on par with the overall group health plan coverage they offer if the wraparound coverage and the coverage purchased on the exchange were taken into account together, the rules said.    

Under the proposed rules, wraparound coverage would only qualify as excepted benefits if the five conditions are met, the agencies said. In order to be considered an excepted benefit, the wraparound coverage must:

• “only wrap around certain coverage provided through the individual market,”
• be purposefully designed to give benefits beyond what is provided through the exchange,
• “be otherwise not an integral part of the group health plan,”
• be limited in amount and
• not discriminate against anyone based on any one health factor, the guidance said.

The proposed rules noted “that provision of excepted benefits will not satisfy an applicable large employer's responsibilities under section 4980H.”

 Excerpted from a story that ran in Pension & Benefits Daily (12/16/2013).