Agencies Issue Amendments to Regulations on Excepted Benefits, i.e., Benefits Exempt from ACA Requirements
The Internal Revenue Service (IRS), Department of Labor (DOL), and Health and Human Services (HHS) published amendments to the regulations on October 1, 2014, regarding excepted benefits. This alert briefly describes the scope of the amendments and provides a link to the amendments to the regulations for more details. The amendments were originally published as a proposed rule in December 2013.1
Action Needed: Plan sponsors need to review the regulations and decide whether they want to make any changes to their group health plans. The amendments are effective for plan years commencing on or after January 1, 2015.
Background: Excepted benefits are generally exempt from the Affordable Care Act (ACA). This means that it is acceptable to place limitations such as lifetime or annual maximums on these benefits and to not provide coverage to certain dependents for these benefits.
There are four categories of excepted benefits. The categories are:
- Benefits that are not considered health benefits (e.g., automobile insurance)
- Limited excepted benefits (e.g., some dental and vision coverage, long-term care)
- Non-coordinated excepted benefits (e.g., cancer coverage)
- Supplemental excepted benefits (e.g., Medicare Supplemental plans)
For category 2, Limited excepted benefits, the amendments modify the dental and vision rules and add one benefit to the list of limited excepted benefits: Employee Assistance Programs (EAPs). The final rule does not add wrap around coverage (i.e., coverage that supplements an employee's Marketplace Exchange policy), which will be addressed at a later time.
Dental and Vision Benefits: Under the amended regulations, dental and visions benefits are considered limited excepted benefits if:
- They are provided under a separate policy, certificate, or contract of insurance, or
- They are otherwise not an integral part of a group health plan. In order to not be an integral part of a group health plan, either of the following two requirements must be satisfied:
- Participants have the right to elect not to receive coverage for the benefits; or
- Claims for the benefits are administered under a contract separate from claims administration from any other benefits under the plan.
The amended regulations remove the requirement that participants pay an additional premium/contribution for dental or vision benefits. If the dental or vision benefits meet the conditions of either the proposed regulations or the final regulations, they will be considered excepted benefits beginning on January 1, 2014.
Employee Assistance Plans (EAPs): For 2014, EAPs would be considered limited excepted benefits if the program does not provide significant benefits in the nature of medical care or treatment.
However, beginning on January 1, 2015, the following additional requirements must be met for an EAP to continue to be an excepted benefit:
- The EAP program does not provide for significant benefits in the nature of medical care or treatment. The amount, scope, and duration of benefits are taken into account for this purpose.
- The benefits cannot be coordinated with the benefits under another group health plan, as follows:
- Participants in the other group health plan are not required to use and exhaust benefits under the EAP (making the EAP a "gatekeeper") prior to the participant having access to benefits in the other group health plans such as behavioral health, and
- Participant eligibility for EAP benefits must not be dependent on participation in another group health plan.
- No employee premiums/contributions may be required.
- There is no cost sharing on the EAP benefit.
Cheiron Observations: The amended regulations remove the prohibition on the EAP being financed by the group health plan. As a reminder, non-essential health benefits, while they are not excepted benefits, are not subject to the ACA restrictions on placing annual or lifetime limits on benefits. Finally, there could be other Federal or State laws that could place a restriction on annual or lifetime limits.
The amendments to the regulations are available at http://www.gpo.gov/fdsys/pkg/FR-2013-12-24/pdf/2013-30553.pdf.
Cheiron health consultants can assist plan sponsors with the review and consideration of the impact of the amendments to the regulations.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Therefore, we do not provide legal services or tax advice.