H&W: Final Regulations: Excepted Benefits and EAPs

The Departments of Treasury, Labor and HHS (the Departments) have issued final regulation regarding the treatment of limited scope dental and vision plans and EAPs as excepted benefits.

These regulations are effective for plan years beginning on or after January 1, 2015.

Background

Why is the designation as an excepted benefit important? Because excepted benefits are not considered group health plans under the ACA, nor are they subject to the non-discrimination requirements under HIPAA. Please note that these plans remain subject to HIPAA’s administrative simplification requirements including privacy, security and transactions rules.

Prior to 2013, the Departments had issued regulations on the treatment of dental and vision plans as excepted benefits.  In 2013, the Department proposed to revise those regulations and add additional regulations governing the treatment of EAPs.

On September 26, 2014, the Department released final rules on these topics.

Limited Scope Dental and Visions Plans

Vision and dental benefits are excepted if they are limited in scope (described as benefits, substantially all of which are for treatment of the eyes or mouth, respectively) and are either:

• provided under a separate policy, certificate, or contract of insurance; or
• are otherwise not an integral part of a group health plan.

Prior to 2013, the regulations provided that benefits are not an integral part of a plan if:

• participants have the right to elect not to receive coverage for the benefits;
• participants elect to receive coverage for such benefits, they pay an additional premium or contribution for the coverage.

The final regulations adopted the proposed regulations that eliminate the premium/contribution requirement under #2 above.

The final regulations also 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 plan coverage in order to satisfy the requirement that the benefits not be integral to the plan.   The final regulations provide that this criterion is met if participants may decline coverage or the claims for the benefits are administered under a contract separate from claims administration for any other benefits under the plan.

Employee Assistance Plans

Prior to 2013, EAPs were not generally considered excepted benefits.  The 2013 proposed regulations announced the intent of the Department to issue regulations defining when an EAP could be an excepted benefit.  The final rule adopted the proposal rule with some minor exceptions and some additional clarifications.

In order for an EAP to qualify as an excepted benefit it must meet four requirements.

First, it must not provide “significant benefits in the nature of medical care.”  This criterion remains somewhat subjective.  While the amount, scope and duration of the services are relevant, the Departments declined to provide any numerical safe harbors.  They did offer a couple of examples.

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.   In contrast, 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 cannot be “coordinated with benefits under another group health plan”. This means that:

• 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
• participant eligibility for benefits under the EAP must not be dependent on participation in another group health plan.

Third, no employee premiums or contributions may be required as a condition of participation in the EAP.

Fourth, the EAP may not impose any cost-sharing requirements.

Although the final regulations apply for plan years beginning on or after January 1, 2015, the agencies will treat benefits that meet the conditions of either the final or proposed regulations as excepted benefits until that time.