In late December, the IRS, Department of Labor and Department of Health and Human Services jointly released proposed regulations providing requirements in order for certain arrangements to be considered excepted benefits under HIPAA and the Affordable Care Act (ACA). This guidance generally would be effective beginning in 2015 and would except certain benefits from HIPAA’s portability and nondiscrimination provisions, as well as the ACA’s requirements with respect to group health plans.
Under HIPAA, dental or vision benefits are excepted if they are limited in scope and either provided under a separate policy or contract or otherwise not an integral part of a group health plan, meaning that participants must have the right to elect not to receive coverage and must pay an additional premium or contribution for coverage. In response to employer requests with respect to contribution requirements and to prevent limited scope vision or dental benefits from disqualifying employees for the premium tax credit, the proposed regulations eliminate the requirement for participants to pay additional premiums or other contributions.
Earlier guidance, which is applicable through 2014, provides that employee assistance plans (EAPs) are exempt as long as they do not provide significant benefits in the nature of medical care or treatment, based on a reasonable, good faith interpretation. In order for an EAP to continue as an excepted benefit, the proposed regulations require that it provide no significant benefits in the nature of medical care and request comments on the definition of “significant” for this purpose. In addition, benefits under an EAP cannot be coordinated with benefits under another group health plan, and may not depend on participation in another group health plan. Participants may not be required to pay any premiums for coverage under an EAP, and cost sharing under the EAP is prohibited.
The proposed regulations also would allow limited wraparound coverage beginning in 2015 in response to group health plan sponsors who asked whether such coverage could be provided to employees for whom the premium for regular employer-provided coverage is unaffordable and who therefore obtain individual coverage through an exchange. The proposed regulations would allow employers to provide such employees with overall coverage that is comparable to group health plan coverage when taking into account both the individual coverage obtained through an exchange and the wraparound coverage. The rules are, however, designed so that the wraparound coverage does not replace group coverage where an employer drops such coverage or does not offer minimum value coverage, and they also prevent employers from providing fewer primary benefits to low income workers.
Plan sponsors and their advisors should keep these rules in mind when determining how to provide dental and vision benefits and EAPs after 2014. Some employers may want to explore their options with respect to wraparound coverage beginning in 2015.