Federal regulators have released some long-overdue guidance on benefits that many HR professionals and their brokers/consultants have long categorized by the catch-phrase “excepted benefits”. With the release of these final regulations (from the IRS, DOL and HHS) there are some minor changes to those self-insured dental, vision, LTC (Long-Term-Care) and EAP (Employee Assistance Plan) plans as to when they will be treated as “excepted benefits”.
What is an excepted benefit?
Excepted benefits are exempt from certain group plan mandates under:
- HIPAA’s portability rules (like the HIPAA Special Enrollment periods);
- PPACA reforms (requirements under the Affordable Care Act, such as requiring coverage for dependents to age 26 without regard to student or marital status, full coverage for preventive services, annual dollar limitations, etc.);
- Federal Mental Health Parity requirements (particularly with regard to EAP coverages);
Excepted benefits do not:
- Relieve employers of their shared-responsibility penalties
- Satisfy the individual mandate coverage requirements
- Disqualify someone from received exchange-premium-subsidies
Here are the most important changes that are worth noting and reviewing.
1 Bundling coverage and Free Coverage – clarifications.
Under the prior regulations (from 2004) we knew that self-insured dental, vision and LTC coverage was an excepted benefit if plan participants could waive the coverage and they must have been charged something for the coverage. Under the final regulations there is no longer a requirement that there be a charge for the coverage. However, participants must still be able to (a) waive the coverage or (b) claims must be administered under a contract separate from claims administration of any other benefits offered by the plan.
- The final regs do not change the rules for insured coverages here—they will continue to be an excepted benefit if they are offered under a separate policy of insurance, without regard to participant contributions.
- Employers/Plan Sponsors that don’t offer any medical coverage can still treat their dental coverage as an excepted benefit.
- HCFSAs and HRAs (Health Care FSAs and Health Reimbursement Arrangements) are still exempt if they only reimburse dental or visions expenses and meet the regs’ requirements.
2 EAPs – How can they be excepted benefits?
EAPS can be excepted benefits if they meet the following four (4) conditions:
- EAP benefits are not coordinated with benefits under another group health plan;
- the EAP does not provide significant benefits in the nature of medical care (“significant” will mean and take into account the amount, scope and duration of any covered services into account; so, E.g., the likelihood that a three (3) consultations plan will be deemed “significant” is small, but the Departments (IRS/DOL/HHS) still have time to issue guidance in this regard);
- there are no employee contributions (required in order to enroll or benefit from the EAP); and
- the EAP contains no cost-sharing provisions.
In order to meet the first condition above (a) participants must not be required to exhaust EAP benefits before being eligible for benefits under the other plan and EAP eligibility cannot depend on participation in another plan.
- These regulations reject the suggestions to treat wellness programs as excepted benefits by including them in an EAP.
- The proposed regulations contained a provision that the EAP could not be financed by another group health plan, and, the final regulations do not contain that provision].
When can I rely upon these regulations?
These regulations apply for plan years beginning on or after 01/01/2015. Until then, the Departments will treat dental, visions, EAP and LTC benefits as “excepted” if they meet the conditions of the proposed or final regulations.