Departments Finalize Excepted Benefits Rules For Dental And Vision Coverage, EAPs

The Departments of Labor, Health and Human Services (HHS) and the Treasury (Departments) have jointly issued final regulations that address the treatment of dental and vision benefits and employee assistance programs (EAP) as limited excepted benefits, which are generally exempt from the Patient Protection and Affordable Care Act’s (ACA) market reform requirements. The rules apply to group health plans and group health insurance issuers for plan years starting in 2015. The rules finalize some, but not all, of the proposed rules issued on December 24, 2013, with minor modifications. The Departments indicate that additional guidance on limited wraparound coverage is forthcoming. The final regulations were published in the October 1 Federal Register.

Dental and vision benefits. Consistent with the proposed regulations, the final regulations eliminate the requirement under the HIPAA regulations that participants pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as excepted benefits. As explained in the preamble to the proposed regulations, without this change, an employer that establishes or maintains a self-insured plan could be required to charge a nominal contribution from participants simply for limited-scope vision and dental benefits to qualify as excepted benefits and, in some cases, the cost of collecting the nominal contribution would be greater than the contribution itself.

In addition, if an employer offers primary group health coverage that is unaffordable to individuals, but limited-scope vision or dental coverage, without this modification, accepting the vision or dental coverage could make such individuals ineligible to receive a premium tax credit under Code Sec. 36B if they enroll in coverage under a qualified health plan (QHP) through the Exchange.

Note that the final regulations do not undermine the inclusion of pediatric vision or dental coverage as essential health benefits. The requirement that issuers in the small group market offer coverage of essential health benefits is not changed, and that rule does not apply to large or self-insured plans. Moreover, PHSA Sec. 2711 (as incorporated into ERISA by section 715 and the Code by section 9815) allows self-insured plans to choose any definition of essential health benefits that is authorized by the Secretary of HHS for purposes of the prohibition on lifetime or annual dollar limits on essential health benefits.

In addition, the final regulations clarify that limited-scope vision or dental benefits do not have to be offered in connection with a separate offer of major medical or “primary” group health coverage under the plan in order to meet the statutory criterion that such benefits are “otherwise not an integral part of the plan.” To meet this criterion, limited-scope vision or dental benefits can be provided without connection to a primary plan, or the limited-scope vision or dental benefits can be offered separately from the major medical or “primary” coverage under the plan. Benefits are not an integral part of a group health plan (whether the benefits are provided through the same plan, a separate plan, or as the only plan offered to participants) if either of the following are met:

1. Participants may decline coverage. For example, a participant may decline coverage if the participant can opt out of the coverage upon request, whether or not there is a participant contribution required for the coverage.
2. Claims for the benefits are administered under a contract separate from claims administration for any other benefits under the plan.

EAPs. As with the proposed regulations, the final regulations provide that, for an EAP to constitute excepted benefits, the EAP must satisfy four requirements. First, the EAP does not provide significant benefits in the nature of medical care. For this purpose, the amount, scope, and duration of covered services are taken into account. For example, an EAP that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential or intensive outpatient care) without requiring prior authorization or review for medical necessity does not provide significant benefits in the nature of medical care. At the same time, a program that provides disease management services (such as laboratory testing, counseling, and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant benefits in the nature of medical care.

Second, an EAP’s benefits cannot be coordinated with the benefits under another group health plan. This requirement has two elements: (1) participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a “gatekeeper”) before an individual is eligible for benefits under the other group health plan; and (2) participant eligibility for benefits under the EAP must not be dependent on participation in another group health plan. In response to comments, the final regulations do not include the requirement set forth in the proposed regulations that EAP benefits cannot be financed by another group health plan in order to qualify as excepted benefits.

Third, no employee premiums or contributions may be required as a condition of participation in the EAP. Fourth, the final regulations provide that an EAP that constitutes excepted benefits may not impose any cost-sharing requirements.

Applicability date. Until the applicability date of the final regulations (plan years beginning on or after January 1, 2015), the Departments will consider dental and vision benefits and EAP benefits meeting the conditions of the proposed regulations or these final regulations to qualify as excepted benefits.

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