The Departments of Labor, the Treasury, and Health and Human Services (the “Departments”) have recently published final regulations related to when limited scope dental and vision benefits and employee assistance programs (“EAPs”) qualify as “excepted benefits” not subject to certain requirements that otherwise apply to group health plans. These group health plan requirements were primarily established under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Patient Protection and Affordable Care Act (“PPACA”) and, along with certain other consumer health protection laws applicable to group health plans, (collectively, the “Acts”) are found in the Public Health Services Act (“PHSA”), the Employee Retirement Income Security Act (“ERISA”) and the Internal Revenue Code (“IRC”) (collectively, the “Statutes”). As such, the Departments must work together to draft regulatory guidance that impacts the operation of the group health plan requirements under the Acts.
Background
The Acts set forth significant guidance that impacts both the operation and coverage requirements for group health plans. If a plan is considered a group health plan under the Acts, then generally the requirements are mandated. These requirements include HIPAA’s portability provisions and PPACA’s coverage and benefit provisions.
In creating these health plan requirements, however, the Acts allow for certain plans which technically meet the broad definition of a group health plan to be exempt from complying with the mandated group health plan requirements of the Acts. As such, the applicable Statutes designated the following four categories of “excepted” benefits:
Benefits that are generally not considered health coverage (such as auto insurance, accidental death and dismemberment benefits or workers compensation coverage);
Limited excepted benefits which are excepted based on meeting certain requirements (such as limited scope vision or dental coverage, long term care benefits or nursing home care);
Non-coordinated excepted benefits (such as cancer coverage or fixed indemnity plans); and
Supplemental excepted benefits that are offered as a separate policy and supplemental to Medicare, Armed Forces coverage or (in very limited circumstances) group health coverage (such as a Medicare Supplemental Plan).
The recently published final regulations (which finalize proposed regulations from 2013 (the “2013 proposed regulations”)), provide guidance related to certain types of the limited excepted benefit coverage described in item 2 above. The final regulations specifically address how to establish limited scope dental and vision benefits and employee assistance program requirements that qualify as excepted from the group health plan mandates under the Acts.
The Final Regulations
Under the regulations originally promulgated under HIPAA, vision and dental benefits were considered excepted if they were limited in scope and were either (1) provided under a separate insurance policy or (2) otherwise not an integral part of a group health plan. Under these HIPAA rules, an employer self-insured dental or vision plan could only qualify as excepted under the second “not an integral part” prong, since by definition self-insured plans are not offered under an insurance policy. The original HIPAA regulations also required that to be considered not an integral part of a group health plan, the participants must have the right to elect to opt out of coverage for the dental or vision plan. Final the HIPAA regulations required that if an individual elected coverage under the dental or vision plan, an additional premium must be paid by the individual for that coverage. Employers had many complaints about this additional premium requirement including that it treated fully insured dental and vision plans and self-insured dental and vision plans differently and that in some cases it cost more to collect the additional premium than was being collected.
Under both the 2013 proposed regulations and the final regulations, for a dental or vision plan to be an excepted benefit plan, the requirement that participants must pay an additional premium amount has been removed. The Agencies justify this change on the basis of the employer complaints and the risk that these limited scope dental and vision plans might impact an individual’s eligibility for a subsidy if such a person enrolled in a medical plan through a Health Insurance Marketplace under PPACA.
As well, the Agencies clarified that the limited scope dental and vision do not have to be offered alongside a separate employer offer of medical coverage to meet the “not an integral part of a group health plan” requirement. The final regulations indicate that this requirement is met if the participant may decline the dental or vision coverage or if the claims are administered under a separate contract.
As an extra bonus, the Agencies, while not directly addressing long term care benefits in the regulations do state in the preamble to the final regulations that because such benefits are also subject to the “not an integral part of a group health plan” requirement to qualify as an excepted benefit, that the guidance in the final regulations also apply to long term care benefits.
Employee Assistance Programs
Employers who offer EAPs generally design them to provide a wide variety of benefits to address personal, social and financial situations that might otherwise adversely affect employees’ work and health. Such benefits may include referral services for counseling, and/or short term counseling for mental health issues, concierge services and financial or legal counseling. EAPS are often provided to all employees for no charge using third party vendors. If an EAP provides referral services only, with no group health plan component, then the applicable group health plan mandates will not apply to it. However, to the extent an EAP provides medical care, it would qualify as group health coverage subject to Acts mandated group health plan requirements unless it qualifies as excepted benefit under the regulations.
Under the 2013 Proposed Regulations an EAP was considered an excepted benefit if it met four criteria:
no significant benefits in the nature of medical care;
not coordinated with benefits under another group health plan so that;
no need to exhaust EAP before using the group health plan benefits
no need to elect group health plan for coverage under the EAP
benefits under the EAP must not be financed by another group healthplan
no employee premiums are required for the EAP; and
no cost sharing under the EAP.
The final regulations make one small change to these proposed regulation requirements. The final regulations remove the requirement under the second criteria above that the EAP not be financed by another group health plan. As well, the preamble to the final regulations does provide a bit of guidance around what may or may not qualify as significant benefits in the nature of medical care, a topic that has been the source of many questions.
Summary
The final regulations and the preamble thereto help bring some clarity to establishing limited scope dental and vision coverage and EAPs that qualify as excepted benefits. While there are still some areas that could benefit from additional guidance, the Agencies provide some much needed clarity in the issues that are addressed.