The Affordable Care Act (ACA) specifically sets aside certain benefits as “excepted” from the law’s key requirements. These excepted benefits include the ban on annual benefit limits and waiting periods exceeding 90 days, rules governing distribution of Summary of Benefit and Coverage statements and cost-sharing limits. Now, new rules clarify and refine the definition of those benefits, as well as establishing ground rules for a new category known as “wraparound benefits.”
Under the proposed regulations — issued jointly by the Departments of Labor, Treasury and Health and Human Services — some provisions take effect this year, and others in 2015. Though they are in the “proposed” phase, you can rely on them before they are finalized. Typically, few major changes occur between the proposed and final stage, except when regulations are highly controversial.
For the majority of employers, the most significant elements of the rules deal with dental and vision benefits. This is particularly true if those benefits are to be made available via a health care reimbursement account. Previously, “limited” dental and vision benefits would only qualify for excepted status if a premium was paid by employees for a self-funded vision or dental plan. That would have made it impossible for employers with health care reimbursement accounts (HRAs) to offer those benefits, since these HRAs must be funded exclusively by the employer.
“Limited” dental and vision plans provide substantially all their benefits towards the treatment of the mouth and eyes, respectively, and are a benefit distinct from the main health plan. One stipulation under the new regulations is that employees must have the right to choose not to have those benefits.
The new rules are in effect at least for 2014 and probably beyond, once the final regulations are published.
The regulations also added a new category of excepted benefit: Employee assistance plans (EAPs) typically provide resources to help employees with emotional and substance abuse problems, as well as dire personal financial circumstances.
To have excepted status, EAPs must not “provide significant benefits in the nature of medical care,” according to the proposed regulations. Whether they do or not is subject to the employer’s “good faith” determination, because “significant” is too general to define.
In addition, EAP benefits cannot be coordinated with their other benefits. For example, employees cannot be required to exhaust their benefits through EAPs before seeking benefits in their health care plan. Similarly, employees cannot be required to participate in a group health plan to be eligible for health benefits.
Also, to maintain excepted status, EAP benefits must be made available without charge, including co-payments.
The proposed regulations also created an entirely new excepted benefit category: “limited wraparound coverage.” This category becomes effective in 2015. In a nutshell, such coverage helps employees who are enrolled in “non-grandfathered” (that is, pre-ACA) plans, which meet ACA’s minimum standards, yet is unaffordable to the employees. Minimum plan standards include covering at least 60 percent of health benefits provided through the plan, and being affordable to the majority of employees.
Affordability is defined as single coverage under an employer plan that will cost the employee not more than of 9.5 percent of household income. Needless to say, if single coverage is unaffordable, family coverage would be way above that affordability threshold.
What does wraparound coverage pay for? It pays for health benefits which are not “essential health benefits” as defined by ACA, care provided out of the main health plan’s provider network, and co-pays and coinsurance under the employee’s individual policy.
Strict nondiscrimination rules apply to wraparound coverage:
- Health must not be used as a consideration in determining employee eligibility for the coverage,
- No preexisting condition exclusions are permitted, and
- The main health plan which wraparound coverage supplements also cannot discriminate as described under ACA section 105(h).
It will take some careful analysis to determine whether it will make sense for you to offer a wraparound plan next year. The good news is you have ample time to make that decision. Meanwhile, you can immediately find out whether your company’s EAP plan, if you have one, as well as any dental or vision plans offered, qualify as “excepted.” You can also learn whether you can benefit from coming out from under the ACA rules which previously applied to those plans.