Agencies Propose Amendments to Excepted Benefits

Various federal agencies, including the DOL’s Employee Benefits Security Administration (EBSA), have issued a proposal to amend regulations governing excepted benefits to permit health plan sponsors to provide coverage for limited scope vision, dental, wraparound, and employee assistance programs (EAPs) consistent with the qualifications for excepted benefits.  Generally, HIPAA excepted benefits are exempt from certain statutory requirements, including those insurance market reforms recently enacted by the Affordable Care Act (ACA).  According to the proposal, these amendments “would help employees by continuing to maintain their access to health coverage that new requirements could constrain.”  

The proposed rule’s overview explains that following the ACA’s enactment, employers asked the agencies charged with enforcing the excepted benefit regulations to remove conditions for limited-scope vision and dental benefits to be treated as excepted benefits. They argued that employers providing such benefits on a self-insured basis and without any employee contributions should not have to start requiring employees to contribute a nominal fee for the benefits in order to qualify as excepted.  Additionally, employers that provide such benefits through a separate benefits policy are not currently required to charge a premium in order for the benefits to be considered excepted.  Therefore, to address these concerns and “to level the playing field between insured and self-insured coverage,” the agencies are proposing to “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).”

In addition, the proposed rule would amend regulations addressing certain wraparound coverage provided under a group health plan to participants “who could receive such benefits through their group health plan if they could afford the premiums, but who do not enroll in the employer-sponsored plan because the premium is unaffordable under the law.”  The proposal would render certain wraparound coverage exempt from HIPAA and ACA market reform requirements. The proposal sets forth a number of conditions that must be met before wraparound coverage qualifies as excepted benefits.

Finally, the proposal includes criteria for EAPs to be deemed excepted benefits.  According to the EBSA, employers voiced concern that compliance with the ACA’s prohibition on annual limits could be difficult “as such benefits are typically very limited, and that EAPs generally are intended to provide benefits in addition to those provided under other group health plans sponsored by employers.”  To this end, the proposed rule sets forth conditions for EAPs to qualify as excepted benefits beginning in 2015.

Among other requests for input, the agencies are asking interested parties the following: How many employers offer coverage that provides minimum value and is affordable for a majority of the employees who are eligible for coverage? What is the total number of individuals who are eligible for primary plan coverage that provides minimum value and is affordable for a majority of eligible employees, but would not find it affordable? To what extent would this proposed rule cause employers to drop health insurance coverage or avoid newly offering it, and what is the dollar value associated with such dropped coverage? To what extent would wrap-around coverage be offered more widely as a result of this rule, and what is the average dollar value associated with such coverage? To what extent would premiums for relatively generous health coverage change in the presence and in the absence of this rule?

Comments on this proposal must be submitted within 60 days of the proposed rule’s publication in the Federal Register, which is scheduled for December 24, 2013. Comments must be identified by the phrase “Excepted Benefits,” and may be submitted through the federal eRulemaking portal, or by mail or hand-delivery to:  Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, Room N-5653, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210, Attention: Excepted Benefits.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.