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February 20, 2014

Proposed Rule Would Modify when Dental and Vision Benefits Are Subject to the Affordable Care Act

Under existing law, dental and vision benefits are only “limited-scope” benefits, and, therefore, are not subject to the group mandates of the Affordable Care Act1, if they are either:

  • Separately insured, or
  • If self-insured, require a separate election and an additional premium if elected (nominal premiums are permissible).

Late last year, the Departments of Treasury, Labor, and Health and Human Services, which are responsible for implementing the Affordable Care Act1(collectively, the “Departments”), published a proposed rule2 that would remove the requirement that dental/vision coverage be separately paid for in order to be a “limited-scope” benefit. However, the proposed rule would not remove the requirement that, if self-insured, a separate election is required.

Comments on the proposed rule are due on or before February 24, 2014.

Implications

Employers with insured dental or vision plans do not have to comply with Affordable Care Act mandates for these benefits, such as the annual dollar limit rules. Under the proposed rule, self-insured dental or vision plans may now also avoid Affordable Care Act mandates by providing a separate election.

Plan sponsors no longer need to charge a separate premium in addition to the separate election to avoid the Affordable Care Act mandates. The separate election could potentially be an annual election, a one-time election that carries forward from year to year, or even an opt-out where the default election is having coverage. The proposed rule does not address the type of election required.

Expected Timing for the Final Rule

The final rule is expected to be effective in 2015. Until then, through at least 2014, the Departments will consider dental and vision benefits that meet the conditions of the proposed rule to qualify as excepted benefits.

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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 proposed 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. The Affordable Care Act requires non-grandfathered group health plans to provide in-network coverage for an extensive list of preventive services without imposing any cost-sharing requirements. The lists are developed by the United States Preventive Services Task Force (USPSTF) and other groups. List of required preventive services are available on the healthcare.gov website. (Return to the Capital Checkup.)

2 The proposed rule was published in the December 24, 2013 Federal Register. (Return to the Capital Checkup.)