October 23, 2014
The Departments of Treasury, Labor and Health and Human Services, which are responsible for implementing the Affordable Care Act1 (collectively, the Departments), published a final rule addressing when dental and vision benefits and employee assistance programs (EAPs) are not subject to the group health plan mandates of the Affordable Care Act.2 The final rule follows the proposed rule published in December 2013 in most respects.3 Plan sponsors have been able to rely on the approach announced in the proposed rule for the 2014 plan year. The final rule takes effect with the plan year beginning on or after January 1, 2015.
Under the final rule, dental and vision benefits are considered “limited-scope” benefits4 and are exempt from many provisions of federal law if they are either:
Under the criteria for self-insured dental or vision benefits, a plan sponsor could allow either a separate election or an opt-out, and the benefits would be considered “limited-scope” benefits. In addition, if the contract for dental or vision benefit administration is separate from any other benefits, the dental/vision benefits would be considered “limited scope” even if there is no separate election or opt-out. This provides maximum flexibility to plan sponsors.
Plan sponsors may wish to ensure that dental and vision benefits are considered “limited scope” for several reasons. These include exempting the benefits from the annual and lifetime limit rules of the Affordable Care Act and potentially carving the benefits out of the cost of the plan for the purpose of calculating the 40 percent excise tax on high-cost plans (effective in 2018).5
To qualify as a new type of limited-scope benefit and also be exempt from many provisions of federal law, an EAP must meet all of the following requirements:
The Departments provide two examples of EAPs in the preamble to the final rule, one of which would qualify as a limited excepted benefit and one of which would not. An EAP that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient care or more intensive outpatient care) without requiring prior authorization or review for medical necessity qualifies as a limited benefit. However, a program that provides disease management services (e.g., laboratory testing, counseling and prescription drugs) for individuals with chronic conditions (e.g., diabetes) would not qualify.
Benefits that meet these tests are not subject to group health plan mandates under the Affordable Care Act, including the ban on annual or lifetime dollar limits. Nor would the pediatric dental or vision benefits offered under these limited-scope arrangements have to count toward the out-of-pocket limit applicable to non-grandfathered plans ($6,600 single/$13,200 family in 2015).6 In addition, to the extent these benefits are not already exempt, they will also be exempt from certain fees, such as the comparative effectiveness research fees7 and the transitional reinsurance fees.8 Treating these benefits as excepted benefits may also assist the plan to avoid the excise tax on high-cost health plans.
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As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.
1 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)
2 The final rule was published in the October 1, 2014 Federal Register. The final rule does not address the concept of limited wraparound benefits included in the proposed rule. For information on that proposal, see Sibson’s February 20, 2014 Capital Checkup, “Proposed Rule Would Create a New Category of Benefits Not Subject to the Affordable Care Act’s Group Health Plan Mandates: Limited Wraparound Coverage.” (Return to the Capital Checkup.)
3 For more information about the proposed rule, see Sibson’s February 20, 2014 Capital Checkup, “Proposed Rule Would Modify when Dental and Vision Benefits Are Subject to the Affordable Care Act.” (Return to the Capital Checkup.)
4 The term “limited-scope benefits” applies to dental, vision and long-term care benefits. These benefits are part of a subcategory of “excepted benefits” under the Health Insurance Portability and Accountability Act (HIPAA) called “limited excepted benefits.” The final rule amends the existing HIPAA regulations to add a new type of limited excepted benefit: certain EAPs. (Return to the Capital Checkup.)
5 For more information about the excise tax, see Sibson’s October 2014 Health Care Reform Insights, “Affordable Care Act’s Excise Tax on High-Cost Health Plans.” (Return to the Capital Checkup.)
6 Non-grandfathered plans also have to offer certain required preventive services without cost sharing. Basic vision screenings for children and certain dental benefits (e.g., fluoride in certain situations) must be provided to children, but these benefits can all be provided under the medical plan as part of a routine primary care visit. (Return to the Capital Checkup.)
7 The regulations implementing the comparative effectiveness research fees explicitly exempt benefits that qualify as excepted benefits under HIPAA, as well as EAPs that do not provide significant benefits in the nature of medical care or treatment. As a result, dental and vision benefits that failed to meet the preexisting HIPAA definition have been subject to the fees. For additional information about these fees, see Sibson’s December 13, 2012 Capital Checkup, “Final Rule on Paying the Affordable Care Act’s Comparative Effectiveness Research Fees.” (Return to the Capital Checkup.)
8 The regulations implementing the transitional reinsurance fee explicitly exempt benefits that qualify as excepted benefits under HIPAA, as well as EAPs that do not provide major medical coverage. As the fee generally only applies to major medical coverage, dental and vision benefits not meeting the preexisting HIPAA definition would effectively be exempt in any case. Nonetheless, the final rule on excepted benefits makes this even clearer. (Return to the Capital Checkup.)