H&W: What Exclusions Are Common Under Self-Insured Health Plans?

Question of the Week From Thomson Reuters

QUESTION: We are considering some design changes to our company’s self-insured major medical plan. Can we amend the plan’s list of items and services that are excluded from coverage? What items and services are typically excluded under self-insured major medical plans?

ANSWER: Your company, as the plan sponsor, may amend the plan to revise the list of excluded items and services, subject to certain requirements under health care reform and other federal laws. As a self-insured health plan subject to ERISA, your plan is not subject to the various state laws that mandate coverage of certain benefits. (But self-insured governmental plans and church plans not subject to ERISA—and insured health plans— generally are required to comply with state-law benefit mandates in addition to federal mandates.)

Within the boundaries of federal law (noted below), your company has discretion to establish exclusions under the plan. For example, self-insured major medical plans frequently exclude items and services in the following categories:

• experimental or investigational treatments and procedures;
• cosmetic treatments and surgery;
• custodial care;
• certain types of “alternative” treatments, such as acupuncture, biofeedback, hypnotism, or massage therapy;
• occupational illness or injury;
• illness or injury caused by an illegal act of the covered person; and
• illness or injury caused by engaging in a hazardous activity (such as mountain climbing or skydiving).

Certain exclusions contain words or phrases (such as “experimental or investigational”) that need to be defined or explained in the plan document and SPD. (These provisions should be drafted with as much specificity as possible, as they are often challenged by participants.) And the plan’s discussion of exclusions may need to be coordinated with other plan provisions that contain affirmative requirements (such as medical necessity and preauthorization). Also remember that you will need to take appropriate action to formally amend the plan document and update the plan’s SPD and SBC to reflect any changes. All exclusions and limitations must be clearly and carefully described in these documents. If you use a TPA for plan administration, you should work with the TPA to confirm that the exclusions will be administered as intended and consistently with the plan document. And if you maintain stop-loss insurance, you should work with the stop-loss insurer to confirm that the plan’s coverage aligns with your stop-loss policy.

As stated above, your company’s self-insured major medical plan may not exclude benefits mandated by federal law. These include benefits such as those required under the Women’s Health and Cancer Rights Act (WHCRA), the Newborns’ and Mothers’ Health Protection Act (NMHPA), health care reform’s preventive health services and clinical trials mandates, and—if the plan provides mental health or substance use disorder benefits—the Mental Health Parity and Addiction Equity Act (MHPAEA). Health care reform prohibits preexisting condition exclusions for plan years beginning on or after January 1, 2014 (a prohibition which took effect earlier for individuals under age 19). And the plan’s exclusions must not violate nondiscrimination rules imposed by HIPAA portability, GINA, and federal employment discrimination laws. (For example, benefit limitations and exclusions cannot be directed at individual participants based on a health factor.) Since the operation of these laws in the benefit plan context can be complex, you should consult with experienced benefits counsel if you are considering any disease-specific or treatment-specific limitations or exclusions.

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