Excepted Benefits Regulations Finalized
On Oct. 1, 2014, the IRS, EBSA and HHS released final regulations related to excepted benefits. As background, plans or programs that qualify as excepted benefits are generally exempt from PPACA’s mandates such as preventive care services and the prohibition on annual dollar limits. There are four types of excepted benefits:
Coverage that is not health insurance (e.g. workers compensation, automobile and liability insurance)
Limited excepted benefits (e.g. limited scope vision or dental and long-term care insurance)
Non-coordinated excepted benefits (e.g. specified disease or illness coverage and fixed indemnity)
Supplemental excepted benefits (e.g. coverage that is supplemental to Medicare, TRICARE or group health insurance)
In December 2013 the agencies released proposed regulations which specifically addressed limited excepted benefits. The agencies finalized those regulations with a few amendments. According to the final regulations, in order to be an excepted benefit, a long-term care plan and limited scope dental or vision plans must be provided under a separate policy, certificate or contract of insurance, or not be an integral part of a group health plan. To be considered a non-integral part of a group health plan, participants must have the right to waive coverage for the benefits, or claims for the benefits must be administered under a separate contract from claims administration for any other benefits under the plan. Previously a limited benefit plan qualified as an excepted benefit only if participants had the right to waive coverage and, if coverage was elected, the participant was charged a premium or contribution amount for coverage. Both the proposed and final regulations removed the requirement that participants be charged a premium for coverage. This means an employer’s self-insured stand-alone dental plan qualifies as an excepted benefit even if premiums are paid solely by the employer. Stand-alone dental or vision HRAs are also permissible.
In relation to an EAP, the program must meet four criteria in order to qualify as an excepted benefit. First, the program must not provide significant medical care. While many hoped the regulations would provide specific parameters for determining whether a plan provided significant care (such as a certain number of outpatient visits), the regulations only provide that the amount, scope and duration of covered services are taken into account in determining whether significant medical care or treatment is provided. As an example, the agencies state that a plan that provides only limited short-term outpatient counseling (without covering inpatient, residential or intensive outpatient care) without requiring prior authorization does not provide significant medical care.
Secondly, participation in an EAP cannot be contingent upon participation in a group health plan. Further, participants cannot be required to exhaust EAP benefits before being eligible for benefits under a group health plan. Finally, the EAP must have no cost sharing for participants. The final regulations removed a requirement which was included in the proposed regulations that EAP benefits could not be financed by another group health plan.
The 2013 proposed regulations also addressed wraparound coverage for individual policies. The agencies indicated that they will issue future guidance on this issue.
The final regulations apply to plan years starting on or after Jan. 1, 2015. Until then, plans may comply with the requirements of either the proposed or final regulations.