Regulators Issue Final Rules for Wraparound Health Coverage

The U.S. Departments of Labor, Health and Human Services, and Treasury have published final rules to amend the definition of excepted benefits to include certain limited coverage that wraps around individual health insurance.

Such coverage would have to be specifically designed to provide meaningful benefits such as coverage for expanded in-network medical clinics or providers, reimbursement for the full cost of primary care, or coverage of the cost of prescription drugs not on the formulary of the primary plan.

The final rules permit group health plan sponsors, in limited circumstances, to offer wraparound coverage to employees who are purchasing individual health insurance in the private market, including in the Health Insurance Marketplace. The rule sets forth two pilot programs for limited wraparound coverage. One pilot allows wraparound benefits only for multi-state plans in the Health Insurance Marketplace. The other allows wraparound benefits for part-time workers who enroll in an individual health insurance policy or in Basic Health Plan coverage for low-income individuals established under the Patient Protection and Affordable Care Act (ACA). These workers could, under existing excepted benefit rules, qualify for a flexible spending arrangement alternative to this wraparound coverage.

The final rules give employees who otherwise may not be able to get an employer-based benefits access to high-level benefits. The departments first requested comments on limited wraparound coverage on December 24, 2013. The departments received suggestions from a wide range of stakeholders, including business groups supportive of the idea. In light of the comments received on the 2013 proposed rules, the departments published an additional proposed rule on December 23, 2014, focusing specifically on limited wraparound coverage. The final rules take into account the feedback received on both proposed rules and give businesses—including small businesses—new flexibility to meet the unique needs of their employees.

The final rules will be published in the March 18 edition of the Federal Register. Text of the final rules is here.