Adjustments to Excepted Benefits Rules Proposed

According to a statement from the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA), three agencies—the U.S. Treasury, the DOL and the Department of Health and Human Services—released the proposed rules, which would expand regulations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) for excepted benefits to include employee assistance programs (EAPs). In addition, the rules would provide added options for employees and employers in connection with the Patient Protection and Affordable Care Act (or ACA).

“This proposal would give employers and workers more options for their health-care coverage, while staying true to the consumer protections put in place by the ACA,” says Phyllis Borzi, Assistant Secretary of Labor for Employee Benefits Security. “This is another example of federal agencies listening to public concerns and responding with solutions.”

Under the HIPAA, excepted benefits are exempt from certain health reform requirements, including some requirements added by the ACA. Employers and employees have expressed concerns that past HIPAA definitions need to be updated to reflect new ACA standards.

The proposed rules would amend current regulations to treat certain EAPs as excepted benefits, effective immediately, according to the EBSA statement. EAPs address circumstances that might otherwise adversely affect employees’ work and health. Benefits may include short-term substance abuse or mental health counseling or referral services, as well as financial counseling and legal services.

Under the proposed rules, EAPs would be considered excepted benefits if the program is free to employees and does not provide significant benefits in the nature of medical care or treatment. As excepted benefits, EAPs would be exempt from private insurance market reforms, and EAP coverage would not make individuals ineligible for a premium tax credit for enrolling in qualified health plans through the health insurance exchanges.

Similarly, vision and dental benefits provided by employers on a self-insured basis would be able to qualify as excepted benefits (effective immediately), even if they do not require contributions from employees.

For plan years starting in 2015, the proposed rules also would treat as excepted benefits certain limited coverage provided by plan sponsors that “wraps around” an individual market policy. Such wrap-around coverage would be available to employees for whom the plan sponsor’s primary group health coverage is not affordable and who instead get coverage through a non-grandfathered individual market policy.

The wrap-around coverage would provide extra benefits or broader networks, and could potentially reduce cost sharing. The proposal would not allow the wrap-around coverage to substitute for employment-based coverage. The value of the wrap-around coverage could not exceed 15% of the value of the primary coverage offered by the plan sponsor, says the EBSA, which must be affordable for at least the majority of employees.

The proposed rules were published in the December 24 edition of the Federal Register. More information including a summary, a downloadable version of the full text, and instructions for how to comment on the proposed rules can be found here. Comments are due by no later than February 24, 2014.