On September 26, 2014, the U.S. Department of Health and Human Services (HHS), the Internal Revenue Service (IRS), and the Department of Labor (DOL) released final regulations that explain when dental and vision plans and employee assistance plans (EAPs) will be considered “excepted benefits.” Excepted benefits are health benefits that are limited enough in scope to be exempt from many of the requirements of the Patient Protection and Affordable Care Act (PPACA), such as annual dollar limits, reporting on W-2s and various fees.
Excepted benefits are not considered “minimum essential” coverage. This means that a large employer will not avoid the employer-shared responsibility (play or pay) penalty if it simply offers coverage that is considered an excepted benefit. It also means that an individual who is covered by an excepted benefit remains eligible for a premium tax credit, as long as the person meets the income and other requirements to receive the credit.
The regulatory agencies issued proposed regulations in December 2013 and the final regulations generally follow the proposed regulations, although in a few instances the final rule is less restrictive than the proposed rule. The proposed regulations also addressed a new type of benefit called a “limited wraparound” plan; the agencies will issue a final regulation on this benefit later.
Stand-Alone or Limited Scope Dental and Vision Benefits
Dental and vision benefit plans are considered excepted benefits if the benefits offered are limited to care of the mouth or eyes and the benefits either are provided under a separate policy or they are not an “integral” part of the medical plan. Under the final rules, benefits are not considered an integral part of a plan if participants have the right to opt out of coverage, or if claims are administered under a separate contract from other benefits administration. To qualify as a non-integrated benefit, employees do not have to pay a separate premium or contribution for the excepted coverage.
Particularly for self-funded plans, the new rules will make it much simpler for a stand-alone dental or vision plan to qualify as an excepted benefit. A benefit will be considered an “excepted benefit” if it meets any of these criteria:
• It is provided through a separate policy or contract.
• The employee may decline coverage for the stand-alone dental or vision coverage.
• Claims for the dental or vision benefits are administered under a contract separate from claims administration for any other benefits administration under the plan.
Employee Assistance Plans
Employee assistance plans (EAPs) are considered group health plans – and therefore must meet all of the PPACA requirements if they provide significant benefits for medical care. The final regulations state that in order for an EAP to be considered an excepted benefit, it must meet these four criteria:
- The EAP cannot provide significant benefits in the nature of medical care. The agencies have chosen not to specify a particular number of visits that would be considered “insignificant.” The regulation does say that, when determining if any offered medical services are significant, the amount, scope and duration of covered services are taken into account.
- The EAP benefits cannot be coordinated in any way with benefits under another group health plan. This means, for example, that participants could not be required to exhaust EAP benefits before being eligible for benefits under the group medical plan and that the EAP must be available whether or not the employee participates in the group medical plan. The EAP cannot be used as a gatekeeper before group medical benefits become available.
- The EAP cannot require premiums or contributions for participation.
- The EAP may not require any cost sharing (i.e., all benefits must be paid first-dollar).
The final regulations are effective as of the start of the 2015 plan year. The proposed regulations, which are very similar to the final regulations, remain in effect through 2014. Employers may safely follow the final regulations now, except that the ability to treat a limited scope dental or vision plan as an excepted benefit because claims are administered under a separate contract will not be effective until the 2015 plan year. The proposed regulations had suggested that fewer than 10 EAP visits would qualify as an excepted benefit; that threshold will not be in effect after the 2014 plan year.
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