Friday, January 10, 2014

Compliance Bulletin: Proposed Expansion of Excepted Benefits

On Friday, December 20, 2013, the Departments of Labor, Health and Human Services, and the Treasury issued proposed regulations that, if finalized, would expand the definition of excepted benefits by:
  • Adding group wrap-around coverage that satisfies specific requirements to the definition of excepted benefits;
  • Expanding the scope of an existing (dental and vision) category of excepted benefits; and
  • Recognizing certain types of employee assistance programs (EAP) as excepted benefits.
The significance, under the Affordable Care Act (ACA), of qualifying as an excepted benefit is:
  • Excepted benefits are not subject to the ACA market reforms and therefore can be offered without violating the ACA's prohibition on annual limits and preventive care coverage requirement; and
  • Excepted benefits do not constitute "minimum essential coverage" and therefore: 
    • Cannot satisfy an applicable large employer's responsibilities under the ACA employer mandate; and
    • Similarly cannot disqualify an employee who enrolls in coverage through an Exchange from qualifying for a premium tax credit or cost-sharing reduction. 
The following chart provides a high-level overview of the proposed regulations. More details are available in this BB&T compliance update prepared by Zywave:

Proposed Expansion of Excepted Benefits

Type of BenefitProposed RegulationEffective
Dental and Vision
Separately elected dental and vision benefits no longer require extra premium payment to qualify as an excepted benefit.
Now until final regulations are issued
Group Wrap-Around CoverageNew category of excepted benefits - "wrap-around" group coverage that supplements individual non-grandfathered coverage - and is available to employees who are eligible for, but cannot afford, the employer-sponsored "primary" coverage. To qualify, must either provide benefits in addition to essential health benefits or reimburse cost of providers that are out of network under individual policy, or both. Other requirements apply, including cost limitations and nondiscrimination rules. 
Plan years starting in 2015
Employee Assistance Program
Existing rule for EAP to qualify as excepted benefit prohibits EAP from providing significant benefits in the nature of medical care. Proposed regulation requires the following beginning in 2015:

  • Participants in the separate group health plan must not be required to exhaust benefits under the EAP before becoming eligible for benefits under the other group health plan;
  • Eligibility for benefits under the EAP must not be dependent on participation in another group health plan;
  • Benefits under the EAP must not be financed by another group health plan;
  • No employee premiums or contributions may be required to participate in the EAP; and
  • No cost sharing under the EAP.
Plan years starting in 2015

BB&T Insurance Services, Inc., McGriff, Seibels & Williams, Inc., BB&T Insurance Services of California, Inc., and Precept Insurance Solutions, LLC