Many of the market reform provisions of the Affordable Care Act will not apply to programs that are categorized as HIPAA "excepted benefits." The following programs may qualify as excepted benefits:
- Coverage only for accident (including accidental death and dismemberment coverage)
- Disability income coverage
- Liability insurance, including general liability insurance and automotive liability insurance
- Coverage issued as a supplement to liability insurance
- Workers' compensation or similar coverage
- Automobile medical payment insurance
- Credit-only insurance (for example, mortgage insurance)
- Coverage for on-site medical clinics
- Limited scope dental benefits, limited scope vision benefits, and long-term care benefits, if they are provided under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of a group health plan (i.e. participants must have the right to elect not to receive coverage for the benefits, and if a participant elects to receive coverage for the benefits, the participant must pay an additional premium or contribution for the coverage)
- NOTE IRS, DOL, and HHS proposed regulations issued in December 2013 clarified in response to ACA concerns, and to level the playing field between insured and self-insured coverage, to 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 benefits that are not an integral part of a group health plan. This means more dental and vision plans may qualify for the limited scope exception. The Departments invite comments on this approach.
- These proposed regulations also excluded certain wraparound coverage in 2015 provided five requirements are met. The wraparound coverage would only be considered to be an excepted benefit if it is used to provide additional coverage to individuals and families enrolled in non-grandfathered individual health insurance coverage and for whom minimum value coverage under the employer's group health plan is offered but is unaffordable.
- These proposed regulations also set forth criteria for an EAP to qualify as excepted benefits beginning in 2015. Under these proposed regulations, benefits provided under EAPs are excepted if four criteria are met.
- Benefits provided under a health flexible spending arrangement, if participants in that arrangement have access to other group health coverage (not limited to excepted benefits) through their employment, and the flexible spending arrangement is structured so that the maximum benefit payable to any participant for a year cannot exceed two times the participant's salary reduction election for the year (or, if greater, cannot exceed $500 plus the amount of the participant's salary reduction election)
- Coverage for only a specified condition or illness (for example, cancer-only policies),
- Coverage under a hospital indemnity or other fixed indemnity insurance (insurance that pays a fixed dollar amount per day, or other period, of hospitalization or illness regardless of the amount of expenses incurred), but only if: (1) the benefits are provided under a separate policy, certificate or contract of insurance; (2) there is no coordination between the provision of benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and (3) the benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor. FAQs on 1/24/13 provide that in order for the "fixed indemnity" to apply, the payments cannot be made on a per-service/item basis as opposed to a per-period basis because then it is acting like insurance instead of an income replacement policy. Additional FAQs on 1/9/14 also add more guidance on this. Specifically, HHS intends to propose amendments to 45 CFR 148.220(b)(3) that would allow fixed indemnity coverage sold in the individual health insurance market to be considered to be an excepted benefit if it meets the following conditions:
- It is sold only to individuals who have other health coverage that is minimum essential coverage within the meaning of section 5000A(f) of the Code;
- There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
- The benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and
- A notice is displayed prominently in the plan materials informing policyholders that the coverage does not meet the definition of minimum essential coverage and will not satisfy the individual responsibility requirements of section 5000A of the Code.
Until HHS finalizes this rulemaking related to these proposed amendments, HHS will treat fixed indemnity coverage in the individual market as excepted benefits for enforcement purposes if it meets the conditions above in States where HHS has direct enforcement authority. For States with primary enforcement authority, HHS encourages those States to also treat this coverage as an excepted benefit and will not consider that a State is not substantially enforcing the individual market requirements merely because it does so.
- The following types of supplemental benefits provided under a separate policy, certificate or contract or insurance:
- Medicare supplemental health insurance;
- TRICARE supplemental programs; and
- Similar supplemental health coverage specifically designed to fill gaps in primary health insurance coverage, such as deductibles or coinsurance (this does not include coverage that becomes secondary or supplemental under a coordination of benefits provision).
ERISA Section 732(a) also seems to exclude a plan with "less than two participants who are current employees" on the first day of the plan year. Many interpret this to exclude stand-alone retiree-only health plans from HIPAA's coverage mandates. The preamble to the interim final regulations for grandfathered health plans and the first set of the Department of Labor's FAQs on health care reform, confirmed that PPACA's market reforms do not apply to retiree-only group health plans that cover fewer than two participants who are current employees.
Unfortunately, many benefits plans may fall into a gray area because they are not covered under this list and are not generally thought of as a major medical plan subject to the market reform rules. Some examples of this may include executive physicals, some wellness programs, or benefits that do not entirely line up with the exceptions above. Department guidance does indicate that with respect to requirements on which formal guidance has not yet been issued, the departments will accept good faith compliance with reasonable interpretations of the applicable statutory language.
If you have questions on which plans are covered by the market reform rules, please contact Kinney & Larson.