Student health plans that might violate ACA given time to comply

The Departments of the Treasury, Labor, and Health and Human Services (Departments) have issued guidance on the application of certain provisions of the Patient Protection and Affordable Care Act (ACA) to premium reduction arrangements offered in connection with student health plans. The guidance also provides a transition period for these arrangements.

Integration of reimbursement plans. Under EBSA Technical Release 2013-03 (the 2013 guidance), an employer payment plan (EPP) is a group health plan under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual market health insurance policy or directly pays a premium for an individual market health insurance policy covering the employee. EPPs and health reimbursement arrangements (HRAs) typically consist of a promise by an employer to reimburse medical expenses up to a certain amount.

The 2013 guidance clarified that EPPs and HRAs will fail to comply with the prohibition on annual dollar limits under Public Health Service Act (PHSA) Sec. 2711 and the requirement to provide certain preventive services without cost sharing under PHSA Sec. 2713 because these arrangements, by their very definition, include dollar limits on the amount of reimbursements or payments. Such arrangements will not violate the market reform provisions when integrated with a group health plan that otherwise complies with those provisions, however. But these arrangements cannot be integrated with individual market policies to satisfy the market reforms.

Student health coverage. On March 21, 2012, HHS published a final rule (the student health insurance plan (SHIP rule)) establishing requirements for student health insurance coverage under the PHSA and the ACA. The SHIP rule defines “student health insurance coverage” as a type of individual market health insurance coverage that is offered to students and their dependents under a written agreement between an institution of higher education and an issuer.

Many colleges and universities provide students (typically graduate students) with student health coverage at greatly reduced or no cost as part of their student package, which often includes tuition assistance and a stipend for living expenses. The student health coverage can be provided either through individual health insurance or through coverage that is self-insured by the college or university. For these students, the bill they receive from the school for the health coverage premium may take into account a premium reduction arrangement.

Because some of these students also perform services for the school (such as teaching or research), the question has been raised whether such premium reduction arrangements might be employer-sponsored group health plans, and, as a result, might be viewed as EPPs that violate the ACA’s market reform provisions. Whether a particular arrangement constitutes a group health plan will depend on all of the facts and circumstances.

Nature of arrangement. In many cases in which a college or university offers a premium reduction arrangement to its students, the payment arrangement will not constitute an EPP under the 2013 guidance. In other cases, however, such arrangements might meet the definition of an EPP.

Some schools that have been offering such premium reduction arrangements might not have recognized at the time of the 2013 guidance that, in certain circumstances, the arrangements might constitute EPPs within the meaning of the 2013 guidance and, therefore violate PHSA Secs. 2711 and 2713 because they are not integrated with group health plan coverage and (as provided in the 2013 guidance and other guidance) cannot integrate with individual insurance coverage. As a result, schools may need additional time to adopt a suitable alternative or make other arrangements to come into compliance.

Transition relief. The Departments will not assert that a premium reduction arrangement fails to satisfy PHSA Sec. 2711 or 2713 if the arrangement is offered in connection with other student health coverage (insured or self-insured) for a plan year or policy year beginning before January 1, 2017. This includes plan years or policy years that are roughly coterminous with academic years beginning in the summer or fall of 2016 and ending in 2017.

SOURCE: EBSA Technical Release 2016-01, February 5, 2016.

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