Amendments to Excepted Benefits, 77632-77642 [2013-30553]
Download as PDF
<![CDATA[
77632
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
sroberts on DSK5SPTVN1PROD with PROPOSALS
sites in Manchester and Nashua if
elevated CO levels are recorded in
Londonderry.
VII. Statutory and Executive Order
Reviews
Under the Clean Air Act, the
Administrator is required to approve a
SIP submission that complies with the
provisions of the Act and applicable
Federal regulations. 42 U.S.C. 7410(k);
40 CFR 52.02(a). Thus, in reviewing SIP
submissions, EPA’s role is to approve
state choices, provided that they meet
the criteria of the Clean Air Act.
Accordingly, this proposed action
merely approves state law as meeting
Federal requirements and does not
impose additional requirements beyond
those imposed by state law. For that
reason, this proposed action:
• Is not a ‘‘significant regulatory
action’’ subject to review by the Office
of Management and Budget under
Executive Order 12866 (58 FR 51735,
October 4, 1993);
• does not impose an information
collection burden under the provisions
of the Paperwork Reduction Act (44
U.S.C. 3501 et seq.);
• is certified as not having a
significant economic impact on a
substantial number of small entities
under the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.);
• does not contain any unfunded
mandate or significantly or uniquely
affect small governments, as described
in the Unfunded Mandates Reform Act
of 1995 (Pub. L. 104–4);
• does not have Federalism
implications as specified in Executive
Order 13132 (64 FR 43255, August 10,
1999);
• is not an economically significant
regulatory action based on health or
safety risks subject to Executive Order
13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action
subject to Executive Order 13211 (66 FR
28355, May 22, 2001);
• is not subject to requirements of
Section 12(d) of the National
Technology Transfer and Advancement
Act of 1995 (15 U.S.C. 272 note) because
application of those requirements would
be inconsistent with the Clean Air Act;
and
• does not provide EPA with the
discretionary authority to address, as
appropriate, disproportionate human
health or environmental effects, using
practicable and legally permissible
methods, under Executive Order 12898
(59 FR 7629, February 16, 1994).
In addition, this rule does not have
tribal implications as specified by
Executive Order 13175 (65 FR 67249,
November 9, 2000), because the SIP is
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
not approved to apply in Indian country
located in the state, and EPA notes that
it will not impose substantial direct
costs on tribal governments or preempt
tribal law.
List of Subjects in 40 CFR Part 52
Environmental protection, Air
pollution control, Carbon monoxide,
Incorporation by reference,
Intergovernmental relations, Lead,
Nitrogen dioxide, Ozone, Particulate
matter, Reporting and recordkeeping
requirements, Sulfur oxides, Volatile
organic compounds.
Authority: 42 U.S.C. 7401 et seq.
Dated: December 10, 2013.
Michael P. Kenyon,
Acting Regional Administrator, EPA New
England.
[FR Doc. 2013–30576 Filed 12–23–13; 8:45 am]
BILLING CODE 6560–50–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[REG–143172–13]
RIN 1545–BL90
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB60
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
[CMS–9946–P]
45 CFR Part 146
RIN 0938–AS16
Amendments to Excepted Benefits
Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Proposed rules.
AGENCY:
This document contains
proposed rules that would amend the
regulations regarding excepted benefits
under the Employee Retirement Income
Security Act of 1974, the Internal
Revenue Code, and the Public Health
Service Act. Excepted benefits are
generally exempt from the health reform
SUMMARY:
PO 00000
Frm 00029
Fmt 4702
Sfmt 4702
requirements that were added to those
laws by the Health Insurance Portability
and Accountability Act and the Patient
Protection and Affordable Care Act.
DATES: Comments are due on or before
February 24, 2014.
ADDRESSES: Written comments may be
submitted to the Department of Labor as
specified below. Any comment that is
submitted will be shared with the other
Departments and will also be made
available to the public. Warning: Do not
include any personally identifiable
information (such as name, address, or
other contact information) or
confidential business information that
you do not want publicly disclosed. All
comments may be posted on the Internet
and can be retrieved by most Internet
search engines. No deletions,
modifications, or redactions will be
made to the comments received, as they
are public records. Comments may be
submitted anonymously.
Comments, identified by ‘‘Excepted
Benefits,’’ may be submitted by one of
the following methods:
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Mail or Hand Delivery: Office of
Health Plan Standards and Compliance
Assistance, Employee Benefits Security
Administration, Room N–5653, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210,
Attention: Excepted Benefits.
Comments received will be posted
without change to www.regulations.gov
and available for public inspection at
the Public Disclosure Room, N–1513,
Employee Benefits Security
Administration, 200 Constitution
Avenue NW., Washington, DC 20210,
including any personal information
provided.
FOR FURTHER INFORMATION CONTACT:
Amy Turner or Beth Baum, Employee
Benefits Security Administration,
Department of Labor, at (202) 693–8335;
Karen Levin, Internal Revenue Service,
Department of the Treasury, at (202)
317–5500; Jacob Ackerman, Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services, at (410) 786–1565.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws, may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (https://www.dol.gov/ebsa). In
addition, information from HHS on
private health insurance for consumers
can be found on the Centers for
Medicare & Medicaid Services (CMS)
E:\FR\FM\24DEP1.SGM
24DEP1
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
connection with group health plans.
The PHS Act sections incorporated by
these references are sections 2701
through 2728.
I. Background
The Health Insurance Portability and
Accountability Act of 1996 (HIPAA),
Public Law 104–191, 110 Stat. 1936
added title XXVII of the Public Health
Service Act (PHS Act), part 7 of the
Employee Retirement Income Security
Act of 1974 (ERISA), and chapter 100 of
the Internal Revenue Code (the Code),
providing portability and
nondiscrimination provisions with
respect to health coverage. These
provisions of the PHS Act, ERISA, and
the Code were later augmented by other
consumer protection laws, including the
Mental Health Parity Act of 1996,1 the
Mental Health Parity and Addiction
Equity Act of 2008,2 the Newborns’ and
Mothers’ Health Protection Act,3 the
Women’s Health and Cancer Rights
Act,4 the Genetic Information
Nondiscrimination Act of 2008,5 the
Children’s Health Insurance Program
Reauthorization Act of 2009,6 Michelle’s
Law,7 and the Affordable Care Act.8
The Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the PHS Act
relating to group health plans and
health insurance issuers in the group
and individual markets. The term
‘‘group health plan’’ includes both
insured and self-insured group health
plans.9 Section 715(a)(1) of ERISA and
section 9815(a)(1) of the Code, as added
by the Affordable Care Act, incorporate
the provisions of part A of title XXVII
of the PHS Act into ERISA and the Code
to make them applicable to group health
plans and health insurance issuers
providing health insurance coverage in
sroberts on DSK5SPTVN1PROD with PROPOSALS
Web site (www.cms.gov/cciio) and
information on health reform can be
found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
II. Overview of the Proposed
Regulations
Sections 2722 and 2763 of the PHS
Act, section 732 of ERISA, and section
9831 of the Code provide that the
requirements of title XXVII of the PHS
Act, part 7 of ERISA, and chapter 100
of the Code, respectively, generally do
not apply to excepted benefits. Excepted
benefits are described in section 2791 of
the PHS Act, section 733 of ERISA, and
section 9832 of the Code.
The parallel statutory provisions
establish four categories of excepted
benefits. The first category includes
benefits that are generally not health
coverage 10 (such as automobile
insurance, liability insurance, workers
compensation, and accidental death and
dismemberment coverage). The benefits
in this category are excepted in all
circumstances. In contrast, the benefits
in the second, third, and fourth
categories are types of health coverage
but are excepted only if certain
conditions are met.
The second category of excepted
benefits is limited excepted benefits,
which may include limited scope vision
or dental benefits, and benefits for longterm care, nursing home care, home
health care, or community based care.
Section 2791(c)(2)(C) of the PHS Act,
section 733(c)(2)(C) of ERISA, and
section 9832(c)(2)(C) of the Code
authorize the Secretaries of HHS, Labor,
and the Treasury (collectively, the
Secretaries) to issue regulations
establishing other, similar limited
benefits as excepted benefits. The
Secretaries exercised this authority
previously with respect to certain health
flexible spending arrangements (health
FSAs).11 To be excepted under this
second category, the statute provides
that limited benefits must either: (1) be
provided under a separate policy,
certificate, or contract of insurance; or
(2) otherwise not be an integral part of
a group health plan, whether insured or
self-insured.
The third category of excepted
benefits, referred to as ‘‘noncoordinated
excepted benefits,’’ includes both
coverage for only a specified disease or
illness (such as cancer-only policies),
and hospital indemnity or other fixed
indemnity insurance. These benefits are
excepted only if all of the following
1 Public Law 104–204, 110 Stat. 2944 (September
26, 1996).
2 Public Law 110–343, 122 Stat. 3881 (October 3,
2008).
3 Public Law 104–204, 110 Stat. 2935 (September
26, 1996).
4 Public Law 105–277, 112 Stat. 2681–436
(October 21, 1998).
5 Public Law 110–233, 122 Stat. 881 (May 21,
2008).
6 Public Law 111–3, 123 Stat. 65 (February 4,
2009).
7 Public Law 110–381, 122 Stat. 4081 (October 9,
2008).
8 The Patient Protection and Affordable Care Act,
Public Law 111–148, was enacted on March 23,
2010, and the Health Care and Education
Reconciliation Act, Public Law 111–152, was
enacted on March 30, 2010. (They are collectively
known as the ‘‘Affordable Care Act’’.)
9 The term ‘‘group health plan’’ is used in title
XXVII of the PHS Act, part 7 of ERISA, and chapter
100 of the Code, and is distinct from the term
‘‘health plan,’’ as used in other provisions of title
I of the Affordable Care Act. The term ‘‘health plan’’
does not include self-insured group health plans.
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
10 See 62 FR 16894, 16903 (Apr. 8, 1997), which
states that these benefits are generally not health
insurance coverage).
11 26 CFR 54.9831–1(c)(3)(v); 29 CFR
2590.732(c)(3)(v); 45 CFR 146.145(c)(3)(v).
PO 00000
Frm 00030
Fmt 4702
Sfmt 4702
77633
conditions are met: (1) The benefits are
provided under a separate policy,
certificate, or contract of insurance; (2)
there is no coordination between the
provision of such benefits and any
exclusion of benefits under any group
health plan maintained by the same
plan sponsor; and (3) the benefits are
paid with respect to any event without
regard to whether benefits are provided
under any group health plan maintained
by the same plan sponsor.12
The fourth category of excepted
benefits is supplemental excepted
benefits. Such benefits must be: (1)
Coverage supplemental to Medicare,
coverage supplemental to the Civilian
Health and Medical Program of the
Department of Veterans Affairs
(CHAMPVA) or to Tricare, or similar
coverage that is supplemental to
coverage provided under a group health
plan; and (2) provided under a separate
policy, certificate, or contract of
insurance.13
These proposed regulations would
amend the second category of excepted
benefits, limited excepted benefits.
A. Dental and Vision Benefits
In 2004, the Departments of the
Treasury, Labor, and HHS published
final regulations with respect to
excepted benefits (the HIPAA
regulations).14 (Subsequent references to
the ‘‘Departments’’ include all three
Departments, unless the headings or
context indicate otherwise.) Under the
HIPAA regulations, 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: (1)
Provided under a separate policy,
certificate, or contract of insurance; or
(2) are otherwise not an integral part of
a group health plan. While only insured
coverage may qualify under the first
test, both insured and self-insured
coverage may qualify under the second
test. The HIPAA regulations provided
that benefits are not an integral part of
a plan if participants have the right to
12 26 CFR 54.9831–1(c)(4); 29 CFR 2590.732(c)(4);
45 CFR 146.145(c)(4). See also Q7 in FAQs about
Affordable Care Act Implementation Part XI,
available at https://www.dol.gov/ebsa/faqs/faqaca11.html.
13 26 CFR 54.9831–1(c)(5); 29 CFR 2590.732(c)(5);
45 CFR 146.145(c)(5). The Departments issued
additional guidance regarding supplemental health
insurance coverage as excepted benefits. See EBSA
Field Assistance Bulletin No. 2007–04 (available at
https://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS
Insurance Standards Bulletin 08–01 (available at
https://www.cms.gov/CCIIO/Resources/Files/
Downloads/hipaa_08_01_508.pdf); and IRS Notice
2008–23 (available at https://www.irs.gov/irb/200807_IRB/ar09.html).
14 69 FR 78720 (Dec. 30, 2004).
E:\FR\FM\24DEP1.SGM
24DEP1
77634
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
sroberts on DSK5SPTVN1PROD with PROPOSALS
elect not to receive coverage for the
benefits, and if participants elect to
receive coverage for such benefits, they
pay an additional premium or
contribution for it. By contrast, health
FSA benefits could qualify as excepted
benefits without any participant
contribution under the HIPAA
regulations.15
Following enactment of the
Affordable Care Act, various
stakeholders asked the Departments to
amend the regulations in order to
remove conditions for limited-scope
vision and dental benefits to be treated
as excepted benefits. Specifically, some
employers represented that, although
their vision and dental benefits
complied with the pre-Affordable Care
Act requirements in title XXVII of the
PHS Act, part 7 of ERISA, and chapter
100 of the Code (such as the
nondiscrimination and preexisting
condition exclusion provisions),
compliance with the Affordable Care
Act provisions (including the 90-day
waiting period limitation 16 and the
prohibition on annual limits) 17
presented additional challenges. These
employers argued that, where employers
are providing such benefits on a selfinsured basis and without a
contribution from employees, employers
should not be required to charge a
nominal contribution from participants
simply for the benefits to qualify as
excepted benefits. In some cases, the
cost of collecting the nominal
contribution would be greater than the
contribution itself. Moreover, they
pointed out that employers providing
dental and vision benefits through a
separate insurance policy are not
required to charge a participant any
premium in order for the dental or
vision benefits to be considered
excepted benefits. Similarly, consumer
groups argued that, if an employer offers
primary group health coverage that is
unaffordable to individuals, but limitedscope vision or dental coverage that is
affordable, such limited-scope vision or
dental coverage should qualify as
15 Under paragraph (c)(3)(v) of the HIPAA
regulations, benefits provided under a health FSA
are only excepted for a class of participants if other
group health coverage, not limited to excepted
benefits, is made available for the year to the class
of participants; and the arrangement is structured
so that the maximum benefit payable to any
participant in the class for a year does not exceed
an amount specified in the regulations.
16 See PHS Act section 2708. See also proposed
regulations, published on March 21, 2013, at 78 FR
17313, stating that ‘‘the Departments will consider
compliance with these proposed regulations as
compliance with PHS Act section 2708 at least
through the end of 2014.’’ (78 FR at 17317).
17 See PHS Act section 2711 and its implementing
regulations at 26 CFR 54.9815–2711T, 29 CFR
2590.715–2711, and 45 CFR 147.126.
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
excepted benefits so as not to make such
individuals ineligible for the premium
tax credit under section 36B of the Code
for enrolling in coverage through an
Affordable Insurance Exchange, or
‘‘Exchange’’ (also called a Health
Insurance Marketplace or Marketplace).
In response to these concerns, and to
level the playing field between insured
and self-insured coverage, these
proposed regulations would 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 plan (and therefore as
excepted benefits). The Departments
invite comments on this approach.
B. Limited Wraparound Coverage
The Affordable Care Act requires that
non-grandfathered health plans in the
individual and small group markets
cover essential health benefits (EHB),
which include items and services in ten
statutorily specified categories that are
equal in scope to a typical employer
plan.18 Because employer group
coverage varies from State to State, HHS
regulations at 45 CFR 156.100 provide
for States to adopt individual
benchmarks from among a range of
primarily small group plan offerings in
each State to serve as a reference plan,
reflecting both the scope of services and
limits offered by a typical employer
plan in that State.19
Prior to the Affordable Care Act, there
was no Federal requirement that health
coverage in the individual and small
group market include a standardized set
of benefits such as those included in
EHB. Self-insured group health plans
and health insurance coverage in the
large group market often cover items
and services in addition to the types of
services included in EHB. For example,
items and services that either cannot be
or are unlikely to be included in EHB
include routine adult vision and dental
care, long-term/custodial nursing home
care, non-medically necessary pediatric
orthodontia, and coverage that extends
beyond the benchmark plan’s coverage
of wellness programs, manipulative
treatment, infertility, home health care,
private duty nursing, hospice, or certain
non-traditional treatments. In addition,
18 For more information on grandfathered health
plans, see section 1251 of the Affordable Care Act
and its implementing regulations at 26 CFR
54.9815–1251T, 29 CFR 2590.715–1251, and 45
CFR 147.140. For more information on essential
health benefits, see 45 CFR 156.110, incorporated
into the regulations through 78 FR 12834, Patient
Protection and Affordable Care Act; Standards
Related to Essential Health Benefits, Actuarial
Value, and Accreditation; Final Rule, Feb. 25, 2013.
19 45 CFR 156.100, 78 FR 12840.
PO 00000
Frm 00031
Fmt 4702
Sfmt 4702
some of these group health plans may
provide broader provider networks, in
terms of the number and types of
contracted providers, than those often
included in the individual and small
group market. Federal law is designed to
encourage employers to provide group
coverage for their employees.20
Experts suggest that most workers
who are offered minimum value
employer-sponsored coverage will not
meet the criteria for the premiums to be
considered to be ‘‘unaffordable’’ and
thus not qualify for the premium tax
credit for enrolling in coverage through
an Exchange.21 Nevertheless, in some
cases, employer plans may be
unaffordable for some employees. These
individuals might purchase coverage
through an Exchange with a premium
tax credit. While such individuals might
pay lower premiums for coverage
through an Exchange, they might also
have less generous coverage in terms of
benefits or a different provider network
than they would have had in their group
health plan. Some group health plan
sponsors have asked whether
wraparound coverage could be provided
for employees for whom the employer
premium is unaffordable and who
obtain coverage through an Exchange.
This approach would allow employers
20 Section 4980H of the Code generally provides
that an applicable large employer is subject to an
assessable payment if one or more full-time
employees is certified to the employer as having
received an applicable premium tax credit or costsharing reduction and either (1) the employer fails
to offer to its full-time employees (and their
dependents) the opportunity to enroll in minimum
essential coverage (MEC) under an eligible
employer sponsored plan, or (2) the employer offers
its full-time employees (and their dependents) the
opportunity to enroll in MEC under an eligible
employer-sponsored plan but the coverage fails to
meet requirements for affordability and minimum
value. Section 5000A of the Code provides that
MEC includes group health plans that are selfinsured or are offered in the large or small group
market within a State. Under section 5000A,
nonexempt individuals must either maintain MEC
for themselves and any nonexempt family members
or include an additional payment with their Federal
income tax return. Section 36B of the Code allows
a premium tax credit to certain taxpayers who
enroll (or whose family members enroll) in a
qualified health plan (QHP) through an Exchange.
The credit subsidizes a portion of the premiums for
the QHP. In general, the premium tax credit may
not subsidize coverage for an individual who is
eligible for other MEC. If the MEC is eligible
employer-sponsored coverage, however, an
individual is treated as eligible for that coverage
only if the coverage is affordable and provides
minimum value or if the individual enrolls in the
coverage.
21 See Congressional Budget Office, CBO and JCT
Estimates of the Effects of the Affordable Care Act
on the Number of People Obtaining EmployerBased Insurance, March 2012, at Table 2, available
at https://www.cbo.gov/sites/default/files/cbofiles/
attachments/03-15-ACA_and_Insurance_2.pdf. See
also Carter C. Price & Evan Saltzman, Delaying the
Employer Mandate, July 2013, available at https://
www.rand.org/pubs/research_reports/RR411.html.
E:\FR\FM\24DEP1.SGM
24DEP1
sroberts on DSK5SPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
to provide such employees with overall
coverage that is comparable to the group
health plan coverage, taking into
account both the wraparound coverage
and the Exchange coverage.
Accordingly, the Departments have
developed these proposed regulations to
treat certain wraparound coverage
provided under a group health plan as
excepted benefits when it is offered to
individuals who could receive such
benefits through their group health plan
if they could afford the premiums, but
who do not enroll in the employersponsored plan because the premium is
unaffordable under the law. As excepted
benefits, the coverage would generally
be exempt from the HIPAA and
Affordable Care Act market reform
requirements of ERISA, the PHS Act,
and the Code. Wraparound coverage
would only qualify as excepted benefits
under limited circumstances in order to
alleviate two concerns. First, the
wraparound coverage could not replace
group coverage for employers who drop
coverage or who otherwise do not offer
minimum value coverage. Instead, 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. Second, the
proposed rules aim to prevent plan
sponsors from structuring wraparound
coverage so that low-income workers
receive fewer primary benefits than
high-income workers. These proposed
regulations are intended to allow a plan
sponsor to maintain a comparable level
of benefits for all potential enrollees,
including not only high-income workers
in their group health plan but also lowincome workers that enroll in nongrandfathered individual market
coverage, promoting equity in coverage.
The proposed regulations, which the
Departments are proposing would be
effective for plan years starting in 2015,
describe the circumstances under which
employer-provided wraparound
coverage would constitute excepted
benefits (limited wraparound coverage)
and therefore would not disqualify an
employee from eligibility for the
premium tax credit and cost-sharing
reductions. The Departments note that
provision of excepted benefits will not
satisfy an applicable large employer’s
responsibilities under section 4980H of
the Code. Under these proposed
regulations, limited wraparound
coverage is an excepted benefit if five
conditions are met.
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
First, the coverage can wrap around
only certain coverage provided through
the individual market. Specifically, the
individual health insurance coverage
must be non-grandfathered and cannot
consist solely of excepted benefits. In
States that elect to establish a Basic
Health Program (BHP), certain lowincome individuals (for example, those
with household income between 133%
and 200% of the Federal poverty level)
who would otherwise qualify for a tax
credit to obtain a qualified health plan
through an Exchange will instead be
enrolled in coverage through the BHP.
Therefore, the Departments invite
comments on how an employer might
make wraparound coverage available to
BHP enrollees.
Second, the limited wraparound
coverage must be specifically designed
to provide benefits beyond those offered
by the individual health insurance
coverage. Specifically, the limited
wraparound coverage must provide
either benefits that are in addition to
EHBs, or reimburse the cost of health
care providers considered out-ofnetwork under the individual health
insurance coverage, or both. The
Departments invite comments on the
types of benefits and provider
arrangements that could be included in
this coverage as well as their similarities
to, or differences from, other types of
excepted benefits described in the
HIPAA regulations. The Departments
also invite comments on whether the
proposed standard should be modified
to require that these wraparound
coverage benefits be ‘‘substantial’’ or
‘‘material’’ and, if so, how those terms
should be defined.
The limited wraparound coverage
may, but is not required to, also provide
benefits to reimburse for participants’
otherwise applicable cost sharing under
the individual health insurance policy,
but that cannot be its primary purpose.
For the benefits to be considered
specifically designed to wrap around
the individual health insurance
coverage, it must provide additional
wraparound benefits as discussed in the
immediately preceding paragraph; the
coverage cannot provide benefits solely
pursuant to a coordination-of-benefits
provision that simply pays benefits
whenever the individual health
insurance policy does not cover all or
part of a medical expense.
The third condition requires the
limited wraparound coverage to be
otherwise not an integral part of a group
health plan. That is, under the proposed
regulations, the plan sponsor offering
the limited wraparound coverage must
sponsor another group health plan
meeting minimum value (as defined
PO 00000
Frm 00032
Fmt 4702
Sfmt 4702
77635
under section 36B(c)(2)(C)(ii) of the
Code) for the plan year, referred to as
the ‘‘primary plan.’’ This primary plan
must be affordable for a majority of the
employees eligible for the primary plan.
Only individuals eligible for this
primary plan may be eligible for the
limited wraparound coverage. The
Departments seek input on this
proposed standard, including whether
the majority level is an appropriate level
(or whether the primary plan should
provide coverage that is affordable for a
higher or lower percentage of
employees), recognizing the goal of
preventing plan sponsors from shifting
participants from the employersponsored primary plan to the
individual market with limited
wraparound coverage. Assuming use of
the 9.5% of income test set forth in
section 36B(c)(2)(C)(i) of the Code as the
basic definition of ‘‘affordable,’’ the
Departments also request comments on
how to implement that definition here—
for example, whether the Departments
should use a Form W–2 safe harbor
based on employee wages like the one
set forth in the proposed regulations
under Code section 4980H.
Under the fourth condition set forth
in the proposed regulations, the limited
wraparound coverage must be limited in
amount. Specifically, the total cost of
coverage under the limited wraparound
coverage must not exceed 15 percent of
the cost of coverage under the primary
plan offered to employees eligible for
the wraparound coverage.22 For this
purpose, the cost of coverage includes
both employer and employee
contributions towards coverage and is
determined in the same manner as that
in which the applicable premium is
calculated under a COBRA continuation
provision.23 This is similar to the
standard in the 2007 enforcement safe
harbor for treating supplemental health
insurance coverage as excepted benefits.
Under the safe harbor, the cost of
coverage under the supplemental
policy, certificate, or contract of
insurance must not exceed 15 percent of
22 If an employer provides more than one primary
plan option (for example, a health maintenance
organization option and a preferred provider
organization option), and one primary plan does not
satisfy the 15% standard but another plan does, the
Departments would consider the 15% standard to
be met if the average value of the primary plan
options meets the 15% standard.
23 Under the COBRA rules, plans are generally
permitted to charge up to 102 percent of the
applicable premium. The cost of coverage for
purposes of these proposed regulations is 100
percent of the applicable premium, not 102 percent
of the applicable premium that the plan is generally
permitted to charge under the COBRA rules.
E:\FR\FM\24DEP1.SGM
24DEP1
77636
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
sroberts on DSK5SPTVN1PROD with PROPOSALS
the cost of primary coverage.24 The
Departments solicit comment on the
level of this threshold, as well as other
possible thresholds that could be used
to ensure that the benefit is limited in
amount, such as whether other
thresholds used in the context of health
FSAs or health savings accounts (HSAs)
would be easier to administer or more
appropriate.
The fifth and final condition for the
limited wraparound coverage to qualify
as excepted benefits relates to
nondiscrimination. The limited
wraparound coverage must not
differentiate among individuals in
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual),
consistent with the requirements of
section 2705 of the PHS Act (as
incorporated into ERISA section 715
and Code section 9815) and its
implementing regulations. This
condition is similar to the standard in
the 2007 enforcement safe harbor
treating supplemental health insurance
coverage as excepted benefits. In
addition to the cost standard mentioned
above, the safe harbor requires that such
coverage be similar to Medicare
Supplemental Coverage in that it must
not differentiate among individuals in
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual).
In addition, to satisfy the fifth
condition, the limited wraparound
coverage must not impose any
preexisting condition exclusion,
consistent with the requirements of
section 2704 of the PHS Act (as
incorporated into ERISA section 715
and Code section 9815) and its
implementing regulations. Finally, both
the primary coverage and the limited
wraparound coverage must not
discriminate in favor of highly
compensated individuals, consistent
with the provisions of section 2716 of
the PHS Act (also incorporated by
reference into ERISA section 715 and
Code section 9815) and section 105(h) of
the Code, and its implementing
regulations at 26 CFR 1.105–11 as
applicable.25 These limitations are
24 The Departments issued parallel guidance
regarding supplemental health insurance coverage
as excepted benefits under HIPAA and related
legislation. See EBSA Field Assistance Bulletin No.
2007–04 (available at https://www.dol.gov/ebsa/pdf/
fab2007-4.pdf); CMS Insurance Standards Bulletin
08–01 (available at https://www.cms.gov/CCIIO/
Resources/Files/Downloads/hipaa_08_01_508.pdf);
and IRS Notice 2008–23 (available at https://
www.irs.gov/irb/2008-07_IRB/ar09.html).
25 Section 2716 of the PHS Act (as incorporated
into ERISA and the Code) generally applies to
insured coverage and section 105(h) of the Code
and its implementing regulations generally apply to
self-insured coverage.
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
intended to ensure the coverage is
available regardless of health status and
to prevent employers from shifting
employees with high medical costs to an
Exchange. Conditioning excepted
benefit status on meeting standards
consistent with the compensation-based
nondiscrimination rules, in combination
with the requirement that the primary
plan be affordable for a majority of the
employees eligible for it, helps ensure
that employers will not be able to use
wraparound coverage to send excessive
numbers of low wage workers to the
Exchanges. Comments are invited as to
whether additional nondiscrimination
standards are needed to prevent such
cost-shifting and abuse.
C. Employee Assistance Programs
Employee assistance programs (EAPs)
are typically programs offered by
employers that can provide a wideranging set of benefits to address
circumstances that might otherwise
adversely affect employees’ work and
health. Benefits may include short-term
substance use disorder or mental health
counseling or referral services, as well
as financial counseling and legal
services. They are typically available
free of charge to employees and are
often provided through third-party
vendors. To the extent an EAP provides
benefits for medical care, it would
generally be considered group health
plan coverage, which would generally
be subject to the HIPAA and Affordable
Care Act market reform requirements,
unless the EAP meets the criteria for
being excepted benefits.
Since enactment of the Affordable
Care Act, various stakeholders have
asked the Departments to treat EAPs as
excepted benefits for reasons analogous
to the arguments described above with
respect to vision and dental benefits.
Specifically, some employers
represented that compliance with the
prohibition on annual limits could be
problematic as such benefits are
typically very limited, and that EAPs
generally are intended to provide
benefits in addition to those provided
under other group health plans
sponsored by employers. Moreover,
consumer groups have represented that
EAPs with very limited benefits, which
may be the only coverage offered to
employees, may prohibit the employee
from obtaining a premium tax credit
under section 36B of the Code if the
EAP is treated as minimum essential
coverage under section 5000A of the
Code. At the same time, the
Departments recognize that no universal
definition exists for EAPs, and are
concerned that employers not act to
shift primary coverage to a separate
PO 00000
Frm 00033
Fmt 4702
Sfmt 4702
‘‘EAP plan,’’ exempt from the consumer
protection provisions of title XXVII of
the PHS Act, part 7 of ERISA, and
chapter 100 of the Code, including the
mental health parity provisions.26
The Departments issued guidance on
September 13, 2013, which stated the
Departments’ intent to amend the
excepted benefits regulations with
respect to EAPs.27 The guidance also
provided transition relief, stating,
‘‘[u]ntil rulemaking is finalized, through
at least 2014, the Departments will
consider an employee assistance
program or EAP to constitute excepted
benefits only if the employee assistance
program or EAP does not provide
significant benefits in the nature of
medical care or treatment. For this
purpose, employers may use a
reasonable, good faith interpretation of
whether an employee assistance
program or EAP provides significant
benefits in the nature of medical care or
treatment.’’
These proposed regulations 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. First,
the program cannot provide significant
benefits in the nature of medical care.
The Departments invite comments on
how to define ‘‘significant.’’ For
example, the Departments request
comments as to whether a program that
provides no more than 10 outpatient
visits for mental health or substance use
disorder counseling, an annual wellness
checkup, immunizations, and diabetes
counseling, with no inpatient care
benefits, should be considered to
provide significant benefits in the
nature of medical care.28
26 The mental health parity provisions are
included in PHS Act section 2726, ERISA section
712, and Code section 9812.
27 See IRS Notice 2013–54 (available at https://
www.irs.gov/pub/irs-drop/n-13-54.pdf) and DOL
Technical Release 2013–03 (available at https://
www.dol.gov/ebsa/newsroom/tr13-03.html), Q&A 9.
See also CMS Insurance Standards Bulletin—
Application of Affordable Care Act Provisions to
Certain Healthcare Arrangements (available at
https://www.cms.gov/CCIIO/Resources/Regulationsand-Guidance/Downloads/cms-hra-notice-9-162013.pdf).
28 Other examples of EAPs that do not provide
significant benefits in the nature of medical care,
discussed in IRS Notice 2004–50 Q&A–10 include
(1) an EAP with benefits that consist primarily of
free or low-cost confidential short-term counseling
(which could address substance abuse, alcoholism,
mental health or emotional disorders, financial or
legal difficulties, and dependent care needs) to
identify an employee’s problem that may affect job
performance and, when appropriate, referrals to an
outside organization, facility or program to assist
the employee in resolving the problem; and (2) a
wellness program that provides a wide-range of
education and fitness services (also including sports
and recreation activities, stress management, and
E:\FR\FM\24DEP1.SGM
24DEP1
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
sroberts on DSK5SPTVN1PROD with PROPOSALS
The second criterion for an EAP to
constitute excepted benefits is that its
benefits cannot be coordinated with
benefits under another group health
plan. The Departments propose three
conditions to meet this standard.
Participants in the separate group health
plan must not be required to exhaust
benefits under the EAP (making the EAP
a ‘‘gatekeeper’’) before an individual is
eligible for benefits under the other
group health plan. Moreover,
participant eligibility for benefits under
the EAP must not be dependent on
participation in another group health
plan. Lastly, benefits under the EAP
must not be financed by another group
health plan.
The third criterion for an EAP to
constitute excepted benefits is that no
employee premiums or contributions be
required to participate in the EAP. The
fourth criterion is that there is no cost
sharing under the EAP.
These criteria are intended to ensure
that employers are able to continue
offering EAPs as supplemental benefits
to other coverage, and to ensure that in
circumstances in which an EAP with
limited benefits is the only coverage, or
the only affordable coverage provided to
an employee, that the coverage does not
unreasonably disqualify an employee
from otherwise being eligible for the
premium tax credit for enrolling in
coverage through an Exchange. The
Departments request comments on
whether the criteria proposed are
sufficient to prevent the potential for
abuse, including the evasion of
compliance with the mental health
parity provisions, and whether different
or additional standards should be
included.
D. Comment Solicitation, Applicability
Date and Reliance
The Departments invite comments on
these proposed regulations generally,
and on the specific issues identified in
this preamble. Until rulemaking is
finalized, through at least 2014, for
purposes of enforcing the provisions of
title XXVII of the PHS Act, part 7 of
ERISA, and chapter 100 of the Code, the
Departments will consider dental and
vision benefits, and EAP benefits,
meeting the conditions of these
proposed regulations to qualify as
excepted benefits. To the extent final
regulations or other guidance with
respect to vision or dental benefits or
EAPs is more restrictive on plans and
issuers than these proposed regulations,
health screenings) designed to improve the overall
health of the employees and prevent illness, where
any costs charged to the individual for participating
in the services are separate from the individual’s
coverage under the health plan.
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
the final regulations or other guidance
will not be effective prior to January 1,
2015.
III. Economic Impact and Paperwork
Burden
A. Summary—Department of Labor and
Department of Health and Human
Services
As stated above, these proposed
regulations would amend the definition
of limited excepted benefits to: (1)
Eliminate the requirement that
participants in self-insured plans pay an
additional contribution for limitedscope vision or dental benefits to qualify
as benefits that are not an integral part
of a plan (and therefore as excepted
benefits); (2) allow plan sponsors in
limited circumstances to offer
wraparound coverage to individuals
who, but for the unaffordability of the
premium, would receive such benefits
through their group health plan; and (3)
set forth the criteria under which EAPs
that do not provide significant benefits
in the nature of medical care constitute
excepted benefits.
B. Executive Order 12866—Department
of Labor and Department of Health and
Human Services
OMB has determined that this
regulatory action is significant within
the meaning of section 3(f)(4) of the
Executive Order, and the Departments
accordingly provide the following
assessment of its potential benefits and
costs. The Departments expect the
impact of these proposed regulations to
be limited because they do not require
any action or impose any requirements
on employers and plan sponsors. The
proposed modifications to vision,
dental, and EAP benefits are primarily
clarifications. Additionally, the
Departments expect that the take-up
with respect to limited wraparound
coverage will be limited for several
reasons. The proposed rules are
designed so that the wraparound
coverage could not replace group
coverage for employers who drop
coverage or who otherwise do not offer
minimum value coverage. Instead, 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. Moreover, the
proposed rules aim to prevent plan
sponsors from structuring wraparound
coverage so that low-income workers
receive fewer primary benefits than
PO 00000
Frm 00034
Fmt 4702
Sfmt 4702
77637
high-income workers. Lastly, the
Departments note that provision of
excepted benefits will not satisfy an
applicable large employer’s
responsibilities under section 4980H of
the Code.
One objective of the Affordable Care
Act is to allow individuals with
comprehensive health insurance plans
to maintain their current level of
benefits. The Departments recognize
that many plan sponsors provide
generous health benefits to their
workers. Some employers offer EAPs or
other additional benefits to their
employees as part of a comprehensive
set of benefits. Others are interested in
newly offering wraparound coverage to
employees who qualify for tax credits in
an Exchange to provide them with
coverage comparable to employees who
enroll in a group health plan. These
proposed regulations would clarify the
circumstances under which plan
sponsors can provide such limited
wraparound coverage to make their
employees’ coverage ‘‘whole.’’
Specifically, these proposed
regulations would allow plan sponsors
to provide coverage for limited vision,
dental, wraparound, and EAP benefits
consistent with the qualifications for
excepted benefits. These proposed
improvements would help employees
by continuing to maintain their access
to health coverage that new
requirements could constrain. The
Departments expect these proposed
regulations to have some costs, but these
costs could be limited because they
would not require any action or impose
any requirements on employers and
plan sponsors; take-up may be low; and
the proposed modifications to vision,
dental, and EAP benefits are primarily
clarifications. With respect to vision and
dental benefits, the proposed
regulations would allow self-insured
plans to offer dental and vision benefits
to employees without charging a
nominal contribution. With respect to
EAPs, the proposed regulations would
clarify the extent to which such benefits
constitute excepted benefits rather than
primary coverage.
With respect to wraparound coverage,
the proposed regulations would allow
plan sponsors to offer limited
wraparound coverage to employees in
certain limited circumstances. This
proposal is not intended to replace
group coverage for employers who drop
coverage or who do not otherwise offer
it, and offering the wraparound coverage
will not satisfy an applicable large
employer’s responsibilities under
section 4980H of the Code. Instead, the
proposal is intended for plan sponsors
whose goal is to provide health benefits
E:\FR\FM\24DEP1.SGM
24DEP1
sroberts on DSK5SPTVN1PROD with PROPOSALS
77638
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
to employees eligible for coverage
through an Exchange that is, in total,
comparable to the benefits offered
through the sponsor’s minimum value
group health plan. As such, the targets
of the proposed regulation are plan
sponsors who otherwise would provide
the full range of health benefits to
qualifying enrollees. The wraparound
coverage may only be offered to
individuals eligible for the primary plan
coverage the plan sponsor offers; and
that primary coverage must provide
minimum value and must be affordable
for a majority of employees who are
eligible for the primary plan coverage.
Plan designs will be limited by
nondiscrimination rules aimed at
preventing plan sponsors from
discriminating in favor of highly
compensated employees or offering
different benefits for workers along
other dimensions such as health status
(i.e., discriminating against those with
high medical costs).
The proposal provides additional
flexibility for sponsors and does not
impose additional costs on sponsors.
The Federal budget impact of the
proposal also depends on assumptions
about the choices made by employers
and workers. As with other group health
coverage, employer contributions to the
limited wraparound coverage would be
excluded from employee income for tax
purposes. The budget implications of
adding limited wraparound coverage as
a form of excepted benefits depend on
the number of employers that elect this
option and the number of employees
that in turn receive it. As previously
described, this proposal targets a narrow
group of plan sponsors: those that offer
minimum value coverage that is
affordable for a majority of employees.
The Departments seek input on this
standard, including whether the
majority level is an appropriate level (or
whether the primary plan should
provide coverage that is affordable for a
larger or smaller fraction of employees),
recognizing the goal of preventing plan
sponsors from shifting employees from
the primary plan to the individual
market with limited wraparound
coverage, and on the cost implications
of different definitions. The cost of this
proposal is difficult to quantify, as it is
unclear how many plan sponsors will be
eligible to offer and how many
employees will elect the wraparound
coverage. It is important to note that the
cost of the proposed limited
wraparound coverage can be reduced by
limiting its availability. This could be
accomplished by modifying the
‘‘majority’’ standard so that a greater
proportion of employees would have to
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
be offered a primary plan that is
affordable. The majority level was
proposed to help minimize the
implications for the primary plan’s risk
pool by preventing a large number of
low-wage workers from leaving the
primary plan for Exchange coverage.
The Departments invite input on this
level, and on other standards that would
achieve these goals.
Another factor in assessing the
proposal’s cost is that the decision to
offer the wraparound coverage is
optional. There is greater administrative
complexity associated with the
wraparound coverage than primary
coverage and, given a choice, some plan
sponsors may choose to increase the
affordability of their primary coverage
rather than offer limited wraparound
coverage. Some plan sponsors may not
have that choice: the employers may not
be in a financial position to make their
primary health plans affordable, let
alone contribute to wraparound
coverage. Employers may also continue
to allow employees to simply obtain
Exchange coverage with no additional
wraparound benefit, and these
employers would continue to pay any
shared responsibility payments as
applicable, resulting in no additional
Federal costs.
The Departments seek comment on
the effects of the proposal. Specifically,
the Departments request detailed data
that would inform the following
questions: How many employers offer
coverage that provides minimum value
and is affordable for a majority of the
employees who are eligible for
coverage? What is the total number of
individuals who are eligible for primary
plan coverage that provides minimum
value and is affordable for a majority of
eligible employees, but would not find
it affordable? To what extent would this
proposed rule cause employers to drop
health insurance coverage or avoid
newly offering it, and what is the dollar
value associated with such dropped
coverage? To what extent would wraparound coverage be offered more widely
as a result of this rule, and what is the
average dollar value associated with
such coverage? To what extent would
premiums for relatively generous health
coverage change in the presence and in
the absence of this rule?
C. Regulatory Flexibility Act—
Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
PO 00000
Frm 00035
Fmt 4702
Sfmt 4702
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency certifies that a proposed rule is
not likely to have a significant economic
impact on a substantial number of small
entities, section 603 of RFA requires
that the agency present an initial
regulatory flexibility analysis at the time
of the publication of the notice of
proposed rulemaking describing the
impact of the rule on small entities and
seeking public comment on such
impact. Small entities include small
businesses, organizations and
governmental jurisdictions.
For purposes of the RFA, the
Departments continue to consider a
small entity to be an employee benefit
plan with fewer than 100 participants.
The basis for this definition is found in
section 104(a)(2) of the act, which
permits the Secretary of Labor to
prescribe simplified annual reports for
pension plans that cover fewer than 100
participants. Pursuant to the authority
of section 104(a)(3), the Department of
Labor has previously issued at 29 CFR
2520.104–20, 2520.104–21, 2520.104–
41, 2520.104–46 and 2520.104b-10
certain simplified reporting provisions
and limited exemptions from reporting
and disclosure requirements for small
plans, including unfunded or insured
welfare plans covering fewer than 100
participants and satisfying certain other
requirements.
Further, while some large employers
may have small plans, in general small
employers maintain most small plans.
Thus, the Departments believe that
assessing the impact of these proposed
rules on small plans is an appropriate
substitute for evaluating the effect on
small entities. The definition of small
entity considered appropriate for this
purpose differs, however, from a
definition of small business that is
based on size standards promulgated by
the Small Business Administration (13
CFR 121.201) pursuant to the Small
Business Act (15 U.S.C. 631 et seq.). The
Departments therefore request
comments on the appropriateness of the
size standard used in evaluating the
impact of this proposed rule on small
entities.
Because the proposed rules would
impose no additional costs on
employers or plans, the Departments
believe that it would not have a
significant economic impact on a
substantial number of small entities.
Accordingly, pursuant to section 605(b)
of the RFA, the Departments hereby
certify that the proposed rules, if
promulgated, would not have a
E:\FR\FM\24DEP1.SGM
24DEP1
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
significant economic impact on a
substantial number of small entities.
D. Special Analyses—Department of the
Treasury
For purposes of the Department of the
Treasury it has been determined that
this notice of proposed rulemaking is
not a significant regulatory action as
defined in Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. It has also
been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
proposed regulations, and, because
these proposed regulations do not
impose a collection of information on
small entities, a Regulatory Flexibility
Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is
not required. Pursuant to section 7805(f)
of the Code, this notice of proposed
rulemaking has been submitted to the
Small Business Administration for
comment on its impact on small
business.
sroberts on DSK5SPTVN1PROD with PROPOSALS
E. Unfunded Mandates Reform Act
For purposes of the Unfunded
Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order
12875, these proposed rules do not
include any Federal mandate that may
result in expenditures by State, local, or
tribal governments, or the private sector,
which may impose an annual burden of
$100 million adjusted for inflation since
1995.
F. Federalism—Department of Labor
and Department of Health and Human
Services
Executive Order 13132 outlines
fundamental principles of federalism. It
requires adherence to specific criteria by
Federal agencies in formulating and
implementing policies that have
‘‘substantial direct effects’’ on the
States, the relationship between the
national government and States, or on
the distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
these federalism implications must
consult with State and local officials,
and describe the extent of their
consultation and the nature of the
concerns of State and local officials in
the preamble to the final regulation.
In the Departments’ view, the
proposed regulations, by clarifying
policy regarding certain excepted
benefits options that can be designed by
employers to support their employees,
would provide more certainty to
employers and others in the regulated
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
community as well as States and
political subdivisions regarding the
treatment of such arrangements under
ERISA. Accordingly, the Departments
will affirmatively engage in outreach
with officials of State and political
subdivisions regarding the proposed
rules and seek their input on the
proposed rules and any federalism
implications that they believe may be
presented by it.
G. Congressional Review Act
These proposed regulations are
subject to the Congressional Review Act
provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), and, if
finalized, will be transmitted to the
Congress and to the Comptroller General
for review in accordance with such
provisions.
IV. Statutory Authority
The Department of the Treasury
regulations are proposed to be adopted
pursuant to the authority contained in
sections 7805 and 9833 of the Code.
The Department of Labor regulations
are proposed to be adopted pursuant to
the authority contained in 29 U.S.C.
1027, 1059, 1135, 1161–1168, 1169,
1181–1183, 1181 note, 1185, 1185a,
1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Public Law 104–191, 110
Stat. 1936; sec. 401(b), Public Law 105–
200, 112 Stat. 645 (42 U.S.C. 651 note);
sec. 512(d), Public Law 110–343, 122
Stat. 3765; Public Law 110–460, 122
Stat. 5123; Secretary of Labor’s Order 1–
2011, 77 FR 1088 (January 9, 2012).
The Department of Health and Human
Services regulations are proposed to be
adopted pursuant to the authority
contained in sections 2701 through
2763, 2791, and 2792 of the PHS Act (42
U.S.C. 300gg through 300gg–63, 300gg91, and 300gg–92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance,
Reporting and recordkeeping
PO 00000
Frm 00036
Fmt 4702
Sfmt 4702
77639
requirements, and State regulation of
health insurance.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Signed this 11th day of December, 2013.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: November 22, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare &
Medicaid Services.
Dated: December 3, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human
Services.
Department of The Treasury
Internal Revenue Service
Accordingly, 26 CFR Part 54 is
proposed to be amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 continues to read, in part, as
follows:
■
Authority: 26 U.S.C. 7805. * * *
Section 54.9831–1 also issued under 26
U.S.C. 9833; * * *
Paragraph 2. Section 54.9831–1 is
amended by revising paragraphs (c)(3)(i)
and (c)(3)(ii), and adding paragraphs
(c)(3)(vi) and (c)(3)(vii), to read as
follows:
■
§ 54.9831–1 Special rules relating to group
health plans.
*
*
*
*
*
(c) * * *
(3) * * *
(i) In general. Limited-scope dental
benefits, limited-scope vision benefits,
or long-term care benefits are excepted
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 as
described in paragraph (c)(3)(ii) of this
section. In addition, benefits provided
under a health flexible spending
arrangement are excepted benefits if
they satisfy the requirements of
paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound
individual health insurance coverage
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vi) of
this section, and benefits provided
under an employee assistance program
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of
this section.
(ii) Not an integral part of a group
health plan. For purposes of this
paragraph (c)(3), benefits are not an
E:\FR\FM\24DEP1.SGM
24DEP1
sroberts on DSK5SPTVN1PROD with PROPOSALS
77640
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
integral part of a group health plan
(whether the benefits are provided
through the same plan or a separate
plan) only if participants have the right
to elect not to receive coverage for the
benefits.
*
*
*
*
*
(vi) Limited wraparound coverage.
Limited benefits that wraparound
benefits provided through individual
health insurance coverage are excepted
benefits if all of the following
requirements are satisfied—
(A) Wraps around certain individual
health insurance coverage. The
individual health insurance coverage is
not a grandfathered health plan (as
described in section 1251 of the
Affordable Care Act) and does not
consist solely of excepted benefits (as
defined in paragraph (c) of this section).
(B) Covers benefits or providers not
covered by individual health insurance
coverage. The wraparound coverage is
specifically designed to wrap around
the individual health insurance
coverage described in paragraph
(c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must
provide coverage of benefits that are not
essential health benefits, or reimburse
the cost of health care providers that are
considered out-of-network under the
individual health insurance coverage, or
both. The wraparound coverage may
also provide benefits for participants’
otherwise applicable cost sharing under
the individual health insurance policy.
(2) The wraparound coverage must
not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of
the plan. The plan sponsor with respect
to the wraparound coverage must
sponsor another group health plan
meeting minimum value (as defined
under section 36B(c)(2)(C)(ii)) and that
is affordable for a majority of the
employees eligible for that group health
plan (‘‘primary plan’’). Only individuals
eligible for this primary plan may be
eligible for the wraparound coverage.
(D) Limited in amount. The total cost
of coverage under the wraparound
coverage must not exceed 15 percent of
the cost of coverage under the primary
plan (as described in paragraph
(c)(3)(vi)(C) of this section). For this
purpose, the cost of coverage includes
both employer and employee
contributions towards coverage and is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(E) Nondiscrimination. The following
conditions must be satisfied:
(1) The wraparound coverage must
not differentiate among individuals in
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual),
consistent with the requirements of
section 2705 of the PHS Act (as
incorporated into section 9815) and
§ 54.9802–1.
(2) The wraparound coverage must
not impose any preexisting condition
exclusion, consistent with the
requirements of section 2704 of the PHS
Act (as incorporated into section 9815).
(3) To the extent the primary coverage
is insured, the primary coverage must
not be discriminatory under section
2716 the PHS Act (as incorporated into
section 9815). To the extent the primary
coverage is self-insured, the primary
coverage must not be discriminatory
under section 105(h) and § 1.105–11.
(4) To the extent the wraparound
coverage is insured, the wraparound
coverage must not be discriminatory
under section 2716 the PHS Act (as
incorporated into section 9815) and to
the extent the wraparound coverage is
self-insured, the wraparound coverage
must not be discriminatory under
section 105(h) and § 1.105–11.
(vii) Employee assistance programs.
Benefits provided under employee
assistance programs are excepted if they
satisfy all of the following
requirements—
(A) The program does not provide
significant benefits in the nature of
medical care.
(B) The benefits under the employee
assistance program cannot be
coordinated with benefits under another
group health plan, as follows:
(1) Participants in the other group
health plan must not be required to
exhaust benefits under the employee
assistance program (making the
employee assistance program a
gatekeeper) before an individual is
eligible for benefits under the other
group health plan;
(2) Participant eligibility for benefits
under the employee assistance program
must not be dependent on participation
in another group health plan; and
(3) Benefits under the employee
assistance program must not be financed
by another group health plan.
(C) No employee premiums or
contributions may be required as a
condition of participation in the
employee assistance program.
(D) There is no cost sharing under the
employee assistance program.
*
*
*
*
*
PO 00000
Frm 00037
Fmt 4702
Sfmt 4702
Employee Benefits Security
Administration
29 CFR Chapter XXV
For the reasons set forth above, 29
CFR part 2590 is proposed to be
amended as follows:
PART 2590—RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
1. The authority citation for part 2590
continues to read as follows:
■
Authority: Secs. 29 U.S.C. 1027, 1059,
1135, 1161–1168, 1169, 1181–1183, 1181
note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public Law
104–191, 110 Stat. 1936; sec. 401(b), Public
Law 105–200, 112 Stat. 645 (42 U.S.C. 651
note); sec. 512(d), Public Law 110–343, 122
Stat. 3765; Public Law 110–460, 122 Stat.
5123; Secretary of Labor’s Order 1–2011, 77
FR 1088 (January 9, 2012).
2. Section 2590.732 is amended by
revising paragraphs (c)(3)(i) and
(c)(3)(ii), and adding paragraphs
(c)(3)(vi) and (c)(3)(vii), to read as
follows:
■
§ 2590.732 Special rules relating to group
health plans.
*
*
*
*
*
(c) * * *
(3) * * *
(i) In general. Limited-scope dental
benefits, limited-scope vision benefits,
or long-term care benefits are excepted
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 as
described in paragraph (c)(3)(ii) of this
section. In addition, benefits provided
under a health flexible spending
arrangement are excepted benefits if
they satisfy the requirements of
paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound
individual health insurance coverage
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vi) of
this section, and benefits provided
under an employee assistance program
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of
this section.
(ii) Not an integral part of a group
health plan. For purposes of this
paragraph (c)(3), benefits are not an
integral part of a group health plan
(whether the benefits are provided
through the same plan or a separate
plan) only if participants have the right
to elect not to receive coverage for the
benefits.
*
*
*
*
*
(vi) Limited wraparound coverage.
Limited benefits that wraparound
benefits provided through individual
E:\FR\FM\24DEP1.SGM
24DEP1
sroberts on DSK5SPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
health insurance coverage are excepted
benefits if all of the following
requirements are satisfied—
(A) Wraps around certain individual
health insurance coverage. The
individual health insurance coverage is
not a grandfathered health plan (as
described in section 1251 of the
Affordable Care Act and § 2590.715–
1251 of this part) and does not consist
solely of excepted benefits (as defined
in paragraph (c) of this section).
(B) Covers benefits or providers not
covered by individual health insurance
coverage. The wraparound coverage is
specifically designed to wrap around
the individual health insurance
coverage described in paragraph
(c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must
provide coverage of benefits that are not
essential health benefits, or reimburse
the cost of health care providers that are
considered out-of-network under the
individual health insurance coverage, or
both. The wraparound coverage may
also provide benefits for participants’
otherwise applicable cost sharing under
the individual health insurance policy.
(2) The wraparound coverage must
not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of
the plan. The plan sponsor with respect
to the wraparound coverage must
sponsor another group health plan
meeting minimum value (as defined
under section 36B(c)(2)(C)(ii) of the
Code) and that is affordable for a
majority of the employees eligible for
that group health plan (‘‘primary plan’’).
Only individuals eligible for this
primary plan may be eligible for the
wraparound coverage.
(D) Limited in amount. The total cost
of coverage under the wraparound
coverage must not exceed 15 percent of
the cost of coverage under the primary
plan (as described in paragraph
(c)(3)(vi)(C) of this section). For this
purpose, the cost of coverage includes
both employer and employee
contributions towards coverage and is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(E) Nondiscrimination. The following
conditions must be satisfied:
(1) The wraparound coverage must
not differentiate among individuals in
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual),
consistent with the requirements of
section 2705 of the PHS Act (as
incorporated into ERISA section 715)
and § 2590.715–2705.
(2) The wraparound coverage must
not impose any preexisting condition
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
exclusion, consistent with the
requirements of section 2704 of the PHS
Act (as incorporated into ERISA section
715) and § 2590.715–2704.
(3) To the extent the primary coverage
is insured, the primary coverage must
not be discriminatory under section
2716 the PHS Act (as incorporated into
ERISA section 715). To the extent the
primary coverage is self-insured, the
primary coverage must not be
discriminatory under section 105(h) of
the Code and 26 CFR 1.105–11.
(4) To the extent the wraparound
coverage is insured, the wraparound
coverage must not be discriminatory
under section 2716 the PHS Act (as
incorporated into ERISA section 715).
To the extent the wraparound coverage
is self-insured, the wraparound coverage
must not be discriminatory under
section 105(h) of the Code and 26 CFR
1.105–11.
(vii) Employee assistance programs.
Benefits provided under employee
assistance programs are excepted if they
satisfy all of the following
requirements—
(A) The program does not provide
significant benefits in the nature of
medical care.
(B) The benefits under the employee
assistance program cannot be
coordinated with benefits under another
group health plan, as follows:
(1) Participants in the other group
health plan must not be required to
exhaust benefits under the employee
assistance program (making the
employee assistance program a
gatekeeper) before an individual is
eligible for benefits under the other
group health plan;
(2) Participant eligibility for benefits
under the employee assistance program
must not be dependent on participation
in another group health plan; and
(3) Benefits under the employee
assistance program must not be financed
by another group health plan.
(C) No employee premiums or
contributions may be required as a
condition of participation in the
employee assistance program.
(D) There is no cost sharing under the
employee assistance program.
*
*
*
*
*
Department of Health and Human
Services
45 CFR Subtitle A
For the reasons set forth in the
preamble, the Department of Health and
Human Services proposes to amend 45
CFR part 146 as set forth below:
PO 00000
Frm 00038
Fmt 4702
Sfmt 4702
77641
PART 146—REQUIREMENTS FOR THE
GROUP HEALTH INSURANCE
MARKET
1. The authority citation for part 146
continues to read as follows:
■
Authority: Secs. 2702 through 2705, 2711
through 2723, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg–1 through 300gg–5, 300gg–
11 through 300gg–23, 300gg–91, and 300gg–
92).
2. Section 146.145 is amended by
revising paragraphs (c)(3)(i) and
(c)(3)(ii), and adding paragraphs
(c)(3)(vi) and (c)(3)(vii), to read as
follows:
■
§ 146.145 Special rules relating to group
health plans.
*
*
*
*
*
(c) * * *
(3) * * *
(i) In general. Limited-scope dental
benefits, limited-scope vision benefits,
or long-term care benefits are excepted
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 as
described in paragraph (c)(3)(ii) of this
section. In addition, benefits provided
under a health flexible spending
arrangement are excepted benefits if
they satisfy the requirements of
paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound
individual health insurance coverage
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vi) of
this section, and benefits provided
under an employee assistance program
are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of
this section.
(ii) Not an integral part of a group
health plan. For purposes of this
paragraph (c)(3), benefits are not an
integral part of a group health plan
(whether the benefits are provided
through the same plan or a separate
plan) only if participants have the right
to elect not to receive coverage for the
benefits.
*
*
*
*
*
(vi) Limited wraparound coverage.
Limited benefits that wraparound
benefits provided through individual
health insurance coverage are excepted
benefits if all of the following
requirements are satisfied—
(A) Wraps around certain individual
health insurance coverage. The
individual health insurance coverage is
not a grandfathered health plan (as
described in section 1251 of the
Affordable Care Act and § 147.140 of
this subchapter) and does not consist
solely of excepted benefits (as defined
in paragraph (c) of this section).
E:\FR\FM\24DEP1.SGM
24DEP1
77642
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules
sroberts on DSK5SPTVN1PROD with PROPOSALS
(B) Covers benefits or providers not
covered by individual health insurance
coverage. The wraparound coverage is
specifically designed to wrap around
the individual health insurance
coverage described in paragraph
(c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must
provide coverage of benefits that are not
essential health benefits, or reimburse
the cost of health care providers that are
considered out-of-network under the
individual health insurance coverage, or
both. The wraparound coverage may
also provide benefits for participants’
otherwise applicable cost sharing under
the individual health insurance policy.
(2) The wraparound coverage must
not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of
the plan. The plan sponsor with respect
to the wraparound coverage must
sponsor another group health plan
meeting minimum value (as defined
under section 36B(c)(2)(C)(ii) of the
Code) and that is affordable for a
majority of the employees eligible for
that group health plan (‘‘primary plan’’).
Only individuals eligible for this
primary plan may be eligible for the
wraparound coverage.
(D) Limited in amount. The total cost
of coverage under the wraparound
coverage must not exceed 15 percent of
the cost of coverage under the primary
plan (as described in paragraph
(c)(3)(vi)(C) of this section). For this
VerDate Mar<15>2010
16:33 Dec 23, 2013
Jkt 232001
purpose, the cost of coverage includes
both employer and employee
contributions towards coverage and is
determined in the same manner as the
applicable premium is calculated under
a COBRA continuation provision.
(E) Nondiscrimination. The following
conditions must be satisfied:
(1) The wraparound coverage must
not differentiate among individuals in
eligibility, benefits, or premiums based
on any health factor of an individual (or
any dependent of the individual),
consistent with the requirements of
section 2705 of the PHS Act and
§ 147.110 of this subchapter.
(2) The wraparound coverage must
not impose any preexisting condition
exclusion, consistent with the
requirements of section 2704 of the PHS
Act and § 147.108 of this subchapter.
(3) To the extent the primary coverage
is insured, the primary coverage must
not be discriminatory under section
2716 the PHS Act. To the extent the
primary coverage is self-insured, the
primary coverage must not be
discriminatory under section 105(h) of
the Code and 26 CFR 1.105–11.
(4) To the extent the wraparound
coverage is insured, the wraparound
coverage must not be discriminatory
under section 2716 the PHS Act. To the
extent the wraparound coverage is selfinsured, the wraparound coverage must
not be discriminatory under section
105(h) of the Code and 26 CFR 1.105–
11.
PO 00000
Frm 00039
Fmt 4702
Sfmt 9990
(vii) Employee assistance programs.
Benefits provided under employee
assistance programs are excepted if they
satisfy all of the following
requirements—
(A) The program does not provide
significant benefits in the nature of
medical care.
(B) The benefits under the employee
assistance program cannot be
coordinated with benefits under another
group health plan, as follows:
(1) Participants in the other group
health plan must not be required to
exhaust benefits under the employee
assistance program (making the
employee assistance program a
gatekeeper) before an individual is
eligible for benefits under the other
group health plan;
(2) Participant eligibility for benefits
under the employee assistance program
must not be dependent on participation
in another group health plan; and
(3) Benefits under the employee
assistance program must not be financed
by another group health plan.
(C) No employee premiums or
contributions may be required as a
condition of participation in the
employee assistance program.
(D) There is no cost sharing under the
employee assistance program.
*
*
*
*
*
[FR Doc. 2013–30553 Filed 12–20–13; 11:15 am]
BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P
E:\FR\FM\24DEP1.SGM
24DEP1
]]>Agencies
[Federal Register Volume 78, Number 247 (Tuesday, December 24, 2013)]
[Proposed Rules]
[Pages 77632-77642]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30553]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[REG-143172-13]
RIN 1545-BL90
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB60
DEPARTMENT OF HEALTH AND HUMAN SERVICES
[CMS-9946-P]
45 CFR Part 146
RIN 0938-AS16
Amendments to Excepted Benefits
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Proposed rules.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed rules that would amend the
regulations regarding excepted benefits under the Employee Retirement
Income Security Act of 1974, the Internal Revenue Code, and the Public
Health Service Act. Excepted benefits are generally exempt from the
health reform requirements that were added to those laws by the Health
Insurance Portability and Accountability Act and the Patient Protection
and Affordable Care Act.
DATES: Comments are due on or before February 24, 2014.
ADDRESSES: Written comments may be submitted to the Department of Labor
as specified below. Any comment that is submitted will be shared with
the other Departments and will also be made available to the public.
Warning: Do not include any personally identifiable information (such
as name, address, or other contact information) or confidential
business information that you do not want publicly disclosed. All
comments may be posted on the Internet and can be retrieved by most
Internet search engines. No deletions, modifications, or redactions
will be made to the comments received, as they are public records.
Comments may be submitted anonymously.
Comments, identified by ``Excepted Benefits,'' may be submitted by
one of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: Excepted Benefits.
Comments received will be posted without change to
www.regulations.gov and available for public inspection at the Public
Disclosure Room, N-1513, Employee Benefits Security Administration, 200
Constitution Avenue NW., Washington, DC 20210, including any personal
information provided.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the
Treasury, at (202) 317-5500; Jacob Ackerman, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at (410)
786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws, may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (https://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS)
[[Page 77633]]
Web site (www.cms.gov/cciio) and information on health reform can be
found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Health Insurance Portability and Accountability Act of 1996
(HIPAA), Public Law 104-191, 110 Stat. 1936 added title XXVII of the
Public Health Service Act (PHS Act), part 7 of the Employee Retirement
Income Security Act of 1974 (ERISA), and chapter 100 of the Internal
Revenue Code (the Code), providing portability and nondiscrimination
provisions with respect to health coverage. These provisions of the PHS
Act, ERISA, and the Code were later augmented by other consumer
protection laws, including the Mental Health Parity Act of 1996,\1\ the
Mental Health Parity and Addiction Equity Act of 2008,\2\ the Newborns'
and Mothers' Health Protection Act,\3\ the Women's Health and Cancer
Rights Act,\4\ the Genetic Information Nondiscrimination Act of
2008,\5\ the Children's Health Insurance Program Reauthorization Act of
2009,\6\ Michelle's Law,\7\ and the Affordable Care Act.\8\
---------------------------------------------------------------------------
\1\ Public Law 104-204, 110 Stat. 2944 (September 26, 1996).
\2\ Public Law 110-343, 122 Stat. 3881 (October 3, 2008).
\3\ Public Law 104-204, 110 Stat. 2935 (September 26, 1996).
\4\ Public Law 105-277, 112 Stat. 2681-436 (October 21, 1998).
\5\ Public Law 110-233, 122 Stat. 881 (May 21, 2008).
\6\ Public Law 111-3, 123 Stat. 65 (February 4, 2009).
\7\ Public Law 110-381, 122 Stat. 4081 (October 9, 2008).
\8\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act, Public Law 111-152, was enacted on
March 30, 2010. (They are collectively known as the ``Affordable
Care Act''.)
---------------------------------------------------------------------------
The Affordable Care Act reorganizes, amends, and adds to the
provisions of part A of title XXVII of the PHS Act relating to group
health plans and health insurance issuers in the group and individual
markets. The term ``group health plan'' includes both insured and self-
insured group health plans.\9\ Section 715(a)(1) of ERISA and section
9815(a)(1) of the Code, as added by the Affordable Care Act,
incorporate the provisions of part A of title XXVII of the PHS Act into
ERISA and the Code to make them applicable to group health plans and
health insurance issuers providing health insurance coverage in
connection with group health plans. The PHS Act sections incorporated
by these references are sections 2701 through 2728.
---------------------------------------------------------------------------
\9\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
---------------------------------------------------------------------------
II. Overview of the Proposed Regulations
Sections 2722 and 2763 of the PHS Act, section 732 of ERISA, and
section 9831 of the Code provide that the requirements of title XXVII
of the PHS Act, part 7 of ERISA, and chapter 100 of the Code,
respectively, generally do not apply to excepted benefits. Excepted
benefits are described in section 2791 of the PHS Act, section 733 of
ERISA, and section 9832 of the Code.
The parallel statutory provisions establish four categories of
excepted benefits. The first category includes benefits that are
generally not health coverage \10\ (such as automobile insurance,
liability insurance, workers compensation, and accidental death and
dismemberment coverage). The benefits in this category are excepted in
all circumstances. In contrast, the benefits in the second, third, and
fourth categories are types of health coverage but are excepted only if
certain conditions are met.
---------------------------------------------------------------------------
\10\ See 62 FR 16894, 16903 (Apr. 8, 1997), which states that
these benefits are generally not health insurance coverage).
---------------------------------------------------------------------------
The second category of excepted benefits is limited excepted
benefits, which may include limited scope vision or dental benefits,
and benefits for long-term care, nursing home care, home health care,
or community based care. Section 2791(c)(2)(C) of the PHS Act, section
733(c)(2)(C) of ERISA, and section 9832(c)(2)(C) of the Code authorize
the Secretaries of HHS, Labor, and the Treasury (collectively, the
Secretaries) to issue regulations establishing other, similar limited
benefits as excepted benefits. The Secretaries exercised this authority
previously with respect to certain health flexible spending
arrangements (health FSAs).\11\ To be excepted under this second
category, the statute provides that limited benefits must either: (1)
be provided under a separate policy, certificate, or contract of
insurance; or (2) otherwise not be an integral part of a group health
plan, whether insured or self-insured.
---------------------------------------------------------------------------
\11\ 26 CFR 54.9831-1(c)(3)(v); 29 CFR 2590.732(c)(3)(v); 45 CFR
146.145(c)(3)(v).
---------------------------------------------------------------------------
The third category of excepted benefits, referred to as
``noncoordinated excepted benefits,'' includes both coverage for only a
specified disease or illness (such as cancer-only policies), and
hospital indemnity or other fixed indemnity insurance. These benefits
are excepted only if all of the following conditions are met: (1) The
benefits are provided under a separate policy, certificate, or contract
of insurance; (2) there is no coordination between the provision of
such benefits and any exclusion of benefits under any group health plan
maintained by the same plan sponsor; and (3) the benefits are paid with
respect to any event without regard to whether benefits are provided
under any group health plan maintained by the same plan sponsor.\12\
---------------------------------------------------------------------------
\12\ 26 CFR 54.9831-1(c)(4); 29 CFR 2590.732(c)(4); 45 CFR
146.145(c)(4). See also Q7 in FAQs about Affordable Care Act
Implementation Part XI, available at https://www.dol.gov/ebsa/faqs/faq-aca11.html.
---------------------------------------------------------------------------
The fourth category of excepted benefits is supplemental excepted
benefits. Such benefits must be: (1) Coverage supplemental to Medicare,
coverage supplemental to the Civilian Health and Medical Program of the
Department of Veterans Affairs (CHAMPVA) or to Tricare, or similar
coverage that is supplemental to coverage provided under a group health
plan; and (2) provided under a separate policy, certificate, or
contract of insurance.\13\
---------------------------------------------------------------------------
\13\ 26 CFR 54.9831-1(c)(5); 29 CFR 2590.732(c)(5); 45 CFR
146.145(c)(5). The Departments issued additional guidance regarding
supplemental health insurance coverage as excepted benefits. See
EBSA Field Assistance Bulletin No. 2007-04 (available at https://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS Insurance Standards
Bulletin 08-01 (available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and IRS Notice 2008-23
(available at https://www.irs.gov/irb/2008-07_IRB/ar09.html).
---------------------------------------------------------------------------
These proposed regulations would amend the second category of
excepted benefits, limited excepted benefits.
A. Dental and Vision Benefits
In 2004, the Departments of the Treasury, Labor, and HHS published
final regulations with respect to excepted benefits (the HIPAA
regulations).\14\ (Subsequent references to the ``Departments'' include
all three Departments, unless the headings or context indicate
otherwise.) Under the HIPAA regulations, 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: (1) Provided under a separate policy,
certificate, or contract of insurance; or (2) are otherwise not an
integral part of a group health plan. While only insured coverage may
qualify under the first test, both insured and self-insured coverage
may qualify under the second test. The HIPAA regulations provided that
benefits are not an integral part of a plan if participants have the
right to
[[Page 77634]]
elect not to receive coverage for the benefits, and if participants
elect to receive coverage for such benefits, they pay an additional
premium or contribution for it. By contrast, health FSA benefits could
qualify as excepted benefits without any participant contribution under
the HIPAA regulations.\15\
---------------------------------------------------------------------------
\14\ 69 FR 78720 (Dec. 30, 2004).
\15\ Under paragraph (c)(3)(v) of the HIPAA regulations,
benefits provided under a health FSA are only excepted for a class
of participants if other group health coverage, not limited to
excepted benefits, is made available for the year to the class of
participants; and the arrangement is structured so that the maximum
benefit payable to any participant in the class for a year does not
exceed an amount specified in the regulations.
---------------------------------------------------------------------------
Following enactment of the Affordable Care Act, various
stakeholders asked the Departments to amend the regulations in order to
remove conditions for limited-scope vision and dental benefits to be
treated as excepted benefits. Specifically, some employers represented
that, although their vision and dental benefits complied with the pre-
Affordable Care Act requirements in title XXVII of the PHS Act, part 7
of ERISA, and chapter 100 of the Code (such as the nondiscrimination
and preexisting condition exclusion provisions), compliance with the
Affordable Care Act provisions (including the 90-day waiting period
limitation \16\ and the prohibition on annual limits) \17\ presented
additional challenges. These employers argued that, where employers are
providing such benefits on a self-insured basis and without a
contribution from employees, employers should not be required to charge
a nominal contribution from participants simply for the benefits to
qualify as excepted benefits. In some cases, the cost of collecting the
nominal contribution would be greater than the contribution itself.
Moreover, they pointed out that employers providing dental and vision
benefits through a separate insurance policy are not required to charge
a participant any premium in order for the dental or vision benefits to
be considered excepted benefits. Similarly, consumer groups argued
that, if an employer offers primary group health coverage that is
unaffordable to individuals, but limited-scope vision or dental
coverage that is affordable, such limited-scope vision or dental
coverage should qualify as excepted benefits so as not to make such
individuals ineligible for the premium tax credit under section 36B of
the Code for enrolling in coverage through an Affordable Insurance
Exchange, or ``Exchange'' (also called a Health Insurance Marketplace
or Marketplace).
---------------------------------------------------------------------------
\16\ See PHS Act section 2708. See also proposed regulations,
published on March 21, 2013, at 78 FR 17313, stating that ``the
Departments will consider compliance with these proposed regulations
as compliance with PHS Act section 2708 at least through the end of
2014.'' (78 FR at 17317).
\17\ See PHS Act section 2711 and its implementing regulations
at 26 CFR 54.9815-2711T, 29 CFR 2590.715-2711, and 45 CFR 147.126.
---------------------------------------------------------------------------
In response to these concerns, and to level the playing field
between insured and self-insured coverage, these proposed regulations
would 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 plan (and therefore as excepted benefits). The
Departments invite comments on this approach.
B. Limited Wraparound Coverage
The Affordable Care Act requires that non-grandfathered health
plans in the individual and small group markets cover essential health
benefits (EHB), which include items and services in ten statutorily
specified categories that are equal in scope to a typical employer
plan.\18\ Because employer group coverage varies from State to State,
HHS regulations at 45 CFR 156.100 provide for States to adopt
individual benchmarks from among a range of primarily small group plan
offerings in each State to serve as a reference plan, reflecting both
the scope of services and limits offered by a typical employer plan in
that State.\19\
---------------------------------------------------------------------------
\18\ For more information on grandfathered health plans, see
section 1251 of the Affordable Care Act and its implementing
regulations at 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and 45
CFR 147.140. For more information on essential health benefits, see
45 CFR 156.110, incorporated into the regulations through 78 FR
12834, Patient Protection and Affordable Care Act; Standards Related
to Essential Health Benefits, Actuarial Value, and Accreditation;
Final Rule, Feb. 25, 2013.
\19\ 45 CFR 156.100, 78 FR 12840.
---------------------------------------------------------------------------
Prior to the Affordable Care Act, there was no Federal requirement
that health coverage in the individual and small group market include a
standardized set of benefits such as those included in EHB. Self-
insured group health plans and health insurance coverage in the large
group market often cover items and services in addition to the types of
services included in EHB. For example, items and services that either
cannot be or are unlikely to be included in EHB include routine adult
vision and dental care, long-term/custodial nursing home care, non-
medically necessary pediatric orthodontia, and coverage that extends
beyond the benchmark plan's coverage of wellness programs, manipulative
treatment, infertility, home health care, private duty nursing,
hospice, or certain non-traditional treatments. In addition, some of
these group health plans may provide broader provider networks, in
terms of the number and types of contracted providers, than those often
included in the individual and small group market. Federal law is
designed to encourage employers to provide group coverage for their
employees.\20\
---------------------------------------------------------------------------
\20\ Section 4980H of the Code generally provides that an
applicable large employer is subject to an assessable payment if one
or more full-time employees is certified to the employer as having
received an applicable premium tax credit or cost-sharing reduction
and either (1) the employer fails to offer to its full-time
employees (and their dependents) the opportunity to enroll in
minimum essential coverage (MEC) under an eligible employer
sponsored plan, or (2) the employer offers its full-time employees
(and their dependents) the opportunity to enroll in MEC under an
eligible employer-sponsored plan but the coverage fails to meet
requirements for affordability and minimum value. Section 5000A of
the Code provides that MEC includes group health plans that are
self-insured or are offered in the large or small group market
within a State. Under section 5000A, nonexempt individuals must
either maintain MEC for themselves and any nonexempt family members
or include an additional payment with their Federal income tax
return. Section 36B of the Code allows a premium tax credit to
certain taxpayers who enroll (or whose family members enroll) in a
qualified health plan (QHP) through an Exchange. The credit
subsidizes a portion of the premiums for the QHP. In general, the
premium tax credit may not subsidize coverage for an individual who
is eligible for other MEC. If the MEC is eligible employer-sponsored
coverage, however, an individual is treated as eligible for that
coverage only if the coverage is affordable and provides minimum
value or if the individual enrolls in the coverage.
---------------------------------------------------------------------------
Experts suggest that most workers who are offered minimum value
employer-sponsored coverage will not meet the criteria for the premiums
to be considered to be ``unaffordable'' and thus not qualify for the
premium tax credit for enrolling in coverage through an Exchange.\21\
Nevertheless, in some cases, employer plans may be unaffordable for
some employees. These individuals might purchase coverage through an
Exchange with a premium tax credit. While such individuals might pay
lower premiums for coverage through an Exchange, they might also have
less generous coverage in terms of benefits or a different provider
network than they would have had in their group health plan. Some group
health plan sponsors have asked whether wraparound coverage could be
provided for employees for whom the employer premium is unaffordable
and who obtain coverage through an Exchange. This approach would allow
employers
[[Page 77635]]
to provide such employees with overall coverage that is comparable to
the group health plan coverage, taking into account both the wraparound
coverage and the Exchange coverage.
---------------------------------------------------------------------------
\21\ See Congressional Budget Office, CBO and JCT Estimates of
the Effects of the Affordable Care Act on the Number of People
Obtaining Employer-Based Insurance, March 2012, at Table 2,
available at https://www.cbo.gov/sites/default/files/cbofiles/attachments/03-15-ACA_and_Insurance_2.pdf. See also Carter C.
Price & Evan Saltzman, Delaying the Employer Mandate, July 2013,
available at https://www.rand.org/pubs/research_reports/RR411.html.
---------------------------------------------------------------------------
Accordingly, the Departments have developed these proposed
regulations to treat certain wraparound coverage provided under a group
health plan as excepted benefits when it is offered to individuals who
could receive such benefits through their group health plan if they
could afford the premiums, but who do not enroll in the employer-
sponsored plan because the premium is unaffordable under the law. As
excepted benefits, the coverage would generally be exempt from the
HIPAA and Affordable Care Act market reform requirements of ERISA, the
PHS Act, and the Code. Wraparound coverage would only qualify as
excepted benefits under limited circumstances in order to alleviate two
concerns. First, the wraparound coverage could not replace group
coverage for employers who drop coverage or who otherwise do not offer
minimum value coverage. Instead, 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. Second, the proposed rules aim to prevent plan sponsors
from structuring wraparound coverage so that low-income workers receive
fewer primary benefits than high-income workers. These proposed
regulations are intended to allow a plan sponsor to maintain a
comparable level of benefits for all potential enrollees, including not
only high-income workers in their group health plan but also low-income
workers that enroll in non-grandfathered individual market coverage,
promoting equity in coverage.
The proposed regulations, which the Departments are proposing would
be effective for plan years starting in 2015, describe the
circumstances under which employer-provided wraparound coverage would
constitute excepted benefits (limited wraparound coverage) and
therefore would not disqualify an employee from eligibility for the
premium tax credit and cost-sharing reductions. The Departments note
that provision of excepted benefits will not satisfy an applicable
large employer's responsibilities under section 4980H of the Code.
Under these proposed regulations, limited wraparound coverage is an
excepted benefit if five conditions are met.
First, the coverage can wrap around only certain coverage provided
through the individual market. Specifically, the individual health
insurance coverage must be non-grandfathered and cannot consist solely
of excepted benefits. In States that elect to establish a Basic Health
Program (BHP), certain low-income individuals (for example, those with
household income between 133% and 200% of the Federal poverty level)
who would otherwise qualify for a tax credit to obtain a qualified
health plan through an Exchange will instead be enrolled in coverage
through the BHP. Therefore, the Departments invite comments on how an
employer might make wraparound coverage available to BHP enrollees.
Second, the limited wraparound coverage must be specifically
designed to provide benefits beyond those offered by the individual
health insurance coverage. Specifically, the limited wraparound
coverage must provide either benefits that are in addition to EHBs, or
reimburse the cost of health care providers considered out-of-network
under the individual health insurance coverage, or both. The
Departments invite comments on the types of benefits and provider
arrangements that could be included in this coverage as well as their
similarities to, or differences from, other types of excepted benefits
described in the HIPAA regulations. The Departments also invite
comments on whether the proposed standard should be modified to require
that these wraparound coverage benefits be ``substantial'' or
``material'' and, if so, how those terms should be defined.
The limited wraparound coverage may, but is not required to, also
provide benefits to reimburse for participants' otherwise applicable
cost sharing under the individual health insurance policy, but that
cannot be its primary purpose. For the benefits to be considered
specifically designed to wrap around the individual health insurance
coverage, it must provide additional wraparound benefits as discussed
in the immediately preceding paragraph; the coverage cannot provide
benefits solely pursuant to a coordination-of-benefits provision that
simply pays benefits whenever the individual health insurance policy
does not cover all or part of a medical expense.
The third condition requires the limited wraparound coverage to be
otherwise not an integral part of a group health plan. That is, under
the proposed regulations, the plan sponsor offering the limited
wraparound coverage must sponsor another group health plan meeting
minimum value (as defined under section 36B(c)(2)(C)(ii) of the Code)
for the plan year, referred to as the ``primary plan.'' This primary
plan must be affordable for a majority of the employees eligible for
the primary plan. Only individuals eligible for this primary plan may
be eligible for the limited wraparound coverage. The Departments seek
input on this proposed standard, including whether the majority level
is an appropriate level (or whether the primary plan should provide
coverage that is affordable for a higher or lower percentage of
employees), recognizing the goal of preventing plan sponsors from
shifting participants from the employer-sponsored primary plan to the
individual market with limited wraparound coverage. Assuming use of the
9.5% of income test set forth in section 36B(c)(2)(C)(i) of the Code as
the basic definition of ``affordable,'' the Departments also request
comments on how to implement that definition here--for example, whether
the Departments should use a Form W-2 safe harbor based on employee
wages like the one set forth in the proposed regulations under Code
section 4980H.
Under the fourth condition set forth in the proposed regulations,
the limited wraparound coverage must be limited in amount.
Specifically, the total cost of coverage under the limited wraparound
coverage must not exceed 15 percent of the cost of coverage under the
primary plan offered to employees eligible for the wraparound
coverage.\22\ For this purpose, the cost of coverage includes both
employer and employee contributions towards coverage and is determined
in the same manner as that in which the applicable premium is
calculated under a COBRA continuation provision.\23\ This is similar to
the standard in the 2007 enforcement safe harbor for treating
supplemental health insurance coverage as excepted benefits. Under the
safe harbor, the cost of coverage under the supplemental policy,
certificate, or contract of insurance must not exceed 15 percent of
[[Page 77636]]
the cost of primary coverage.\24\ The Departments solicit comment on
the level of this threshold, as well as other possible thresholds that
could be used to ensure that the benefit is limited in amount, such as
whether other thresholds used in the context of health FSAs or health
savings accounts (HSAs) would be easier to administer or more
appropriate.
---------------------------------------------------------------------------
\22\ If an employer provides more than one primary plan option
(for example, a health maintenance organization option and a
preferred provider organization option), and one primary plan does
not satisfy the 15% standard but another plan does, the Departments
would consider the 15% standard to be met if the average value of
the primary plan options meets the 15% standard.
\23\ Under the COBRA rules, plans are generally permitted to
charge up to 102 percent of the applicable premium. The cost of
coverage for purposes of these proposed regulations is 100 percent
of the applicable premium, not 102 percent of the applicable premium
that the plan is generally permitted to charge under the COBRA
rules.
\24\ The Departments issued parallel guidance regarding
supplemental health insurance coverage as excepted benefits under
HIPAA and related legislation. See EBSA Field Assistance Bulletin
No. 2007-04 (available at https://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS Insurance Standards Bulletin 08-01 (available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf);
and IRS Notice 2008-23 (available at https://www.irs.gov/irb/2008-07_IRB/ar09.html).
---------------------------------------------------------------------------
The fifth and final condition for the limited wraparound coverage
to qualify as excepted benefits relates to nondiscrimination. The
limited wraparound coverage must not differentiate among individuals in
eligibility, benefits, or premiums based on any health factor of an
individual (or any dependent of the individual), consistent with the
requirements of section 2705 of the PHS Act (as incorporated into ERISA
section 715 and Code section 9815) and its implementing regulations.
This condition is similar to the standard in the 2007 enforcement safe
harbor treating supplemental health insurance coverage as excepted
benefits. In addition to the cost standard mentioned above, the safe
harbor requires that such coverage be similar to Medicare Supplemental
Coverage in that it must not differentiate among individuals in
eligibility, benefits, or premiums based on any health factor of an
individual (or any dependent of the individual).
In addition, to satisfy the fifth condition, the limited wraparound
coverage must not impose any preexisting condition exclusion,
consistent with the requirements of section 2704 of the PHS Act (as
incorporated into ERISA section 715 and Code section 9815) and its
implementing regulations. Finally, both the primary coverage and the
limited wraparound coverage must not discriminate in favor of highly
compensated individuals, consistent with the provisions of section 2716
of the PHS Act (also incorporated by reference into ERISA section 715
and Code section 9815) and section 105(h) of the Code, and its
implementing regulations at 26 CFR 1.105-11 as applicable.\25\ These
limitations are intended to ensure the coverage is available regardless
of health status and to prevent employers from shifting employees with
high medical costs to an Exchange. Conditioning excepted benefit status
on meeting standards consistent with the compensation-based
nondiscrimination rules, in combination with the requirement that the
primary plan be affordable for a majority of the employees eligible for
it, helps ensure that employers will not be able to use wraparound
coverage to send excessive numbers of low wage workers to the
Exchanges. Comments are invited as to whether additional
nondiscrimination standards are needed to prevent such cost-shifting
and abuse.
---------------------------------------------------------------------------
\25\ Section 2716 of the PHS Act (as incorporated into ERISA and
the Code) generally applies to insured coverage and section 105(h)
of the Code and its implementing regulations generally apply to
self-insured coverage.
---------------------------------------------------------------------------
C. Employee Assistance Programs
Employee assistance programs (EAPs) are typically programs offered
by employers that can provide a wide-ranging set of benefits to address
circumstances that might otherwise adversely affect employees' work and
health. Benefits may include short-term substance use disorder or
mental health counseling or referral services, as well as financial
counseling and legal services. They are typically available free of
charge to employees and are often provided through third-party vendors.
To the extent an EAP provides benefits for medical care, it would
generally be considered group health plan coverage, which would
generally be subject to the HIPAA and Affordable Care Act market reform
requirements, unless the EAP meets the criteria for being excepted
benefits.
Since enactment of the Affordable Care Act, various stakeholders
have asked the Departments to treat EAPs as excepted benefits for
reasons analogous to the arguments described above with respect to
vision and dental benefits. Specifically, some employers represented
that compliance with the prohibition on annual limits could be
problematic as such benefits are typically very limited, and that EAPs
generally are intended to provide benefits in addition to those
provided under other group health plans sponsored by employers.
Moreover, consumer groups have represented that EAPs with very limited
benefits, which may be the only coverage offered to employees, may
prohibit the employee from obtaining a premium tax credit under section
36B of the Code if the EAP is treated as minimum essential coverage
under section 5000A of the Code. At the same time, the Departments
recognize that no universal definition exists for EAPs, and are
concerned that employers not act to shift primary coverage to a
separate ``EAP plan,'' exempt from the consumer protection provisions
of title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the
Code, including the mental health parity provisions.\26\
---------------------------------------------------------------------------
\26\ The mental health parity provisions are included in PHS Act
section 2726, ERISA section 712, and Code section 9812.
---------------------------------------------------------------------------
The Departments issued guidance on September 13, 2013, which stated
the Departments' intent to amend the excepted benefits regulations with
respect to EAPs.\27\ The guidance also provided transition relief,
stating, ``[u]ntil rulemaking is finalized, through at least 2014, the
Departments will consider an employee assistance program or EAP to
constitute excepted benefits only if the employee assistance program or
EAP does not provide significant benefits in the nature of medical care
or treatment. For this purpose, employers may use a reasonable, good
faith interpretation of whether an employee assistance program or EAP
provides significant benefits in the nature of medical care or
treatment.''
---------------------------------------------------------------------------
\27\ See IRS Notice 2013-54 (available at https://www.irs.gov/pub/irs-drop/n-13-54.pdf) and DOL Technical Release 2013-03
(available at https://www.dol.gov/ebsa/newsroom/tr13-03.html), Q&A 9.
See also CMS Insurance Standards Bulletin--Application of Affordable
Care Act Provisions to Certain Healthcare Arrangements (available at
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/cms-hra-notice-9-16-2013.pdf).
---------------------------------------------------------------------------
These proposed regulations 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. First, the program cannot provide significant benefits in the
nature of medical care. The Departments invite comments on how to
define ``significant.'' For example, the Departments request comments
as to whether a program that provides no more than 10 outpatient visits
for mental health or substance use disorder counseling, an annual
wellness checkup, immunizations, and diabetes counseling, with no
inpatient care benefits, should be considered to provide significant
benefits in the nature of medical care.\28\
---------------------------------------------------------------------------
\28\ Other examples of EAPs that do not provide significant
benefits in the nature of medical care, discussed in IRS Notice
2004-50 Q&A-10 include (1) an EAP with benefits that consist
primarily of free or low-cost confidential short-term counseling
(which could address substance abuse, alcoholism, mental health or
emotional disorders, financial or legal difficulties, and dependent
care needs) to identify an employee's problem that may affect job
performance and, when appropriate, referrals to an outside
organization, facility or program to assist the employee in
resolving the problem; and (2) a wellness program that provides a
wide-range of education and fitness services (also including sports
and recreation activities, stress management, and health screenings)
designed to improve the overall health of the employees and prevent
illness, where any costs charged to the individual for participating
in the services are separate from the individual's coverage under
the health plan.
---------------------------------------------------------------------------
[[Page 77637]]
The second criterion for an EAP to constitute excepted benefits is
that its benefits cannot be coordinated with benefits under another
group health plan. The Departments propose three conditions to meet
this standard. Participants in the separate group health plan must not
be required to exhaust benefits under the EAP (making the EAP a
``gatekeeper'') before an individual is eligible for benefits under the
other group health plan. Moreover, participant eligibility for benefits
under the EAP must not be dependent on participation in another group
health plan. Lastly, benefits under the EAP must not be financed by
another group health plan.
The third criterion for an EAP to constitute excepted benefits is
that no employee premiums or contributions be required to participate
in the EAP. The fourth criterion is that there is no cost sharing under
the EAP.
These criteria are intended to ensure that employers are able to
continue offering EAPs as supplemental benefits to other coverage, and
to ensure that in circumstances in which an EAP with limited benefits
is the only coverage, or the only affordable coverage provided to an
employee, that the coverage does not unreasonably disqualify an
employee from otherwise being eligible for the premium tax credit for
enrolling in coverage through an Exchange. The Departments request
comments on whether the criteria proposed are sufficient to prevent the
potential for abuse, including the evasion of compliance with the
mental health parity provisions, and whether different or additional
standards should be included.
D. Comment Solicitation, Applicability Date and Reliance
The Departments invite comments on these proposed regulations
generally, and on the specific issues identified in this preamble.
Until rulemaking is finalized, through at least 2014, for purposes of
enforcing the provisions of title XXVII of the PHS Act, part 7 of
ERISA, and chapter 100 of the Code, the Departments will consider
dental and vision benefits, and EAP benefits, meeting the conditions of
these proposed regulations to qualify as excepted benefits. To the
extent final regulations or other guidance with respect to vision or
dental benefits or EAPs is more restrictive on plans and issuers than
these proposed regulations, the final regulations or other guidance
will not be effective prior to January 1, 2015.
III. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
As stated above, these proposed regulations would amend the
definition of limited excepted benefits to: (1) Eliminate the
requirement that participants in self-insured plans pay an additional
contribution for limited-scope vision or dental benefits to qualify as
benefits that are not an integral part of a plan (and therefore as
excepted benefits); (2) allow plan sponsors in limited circumstances to
offer wraparound coverage to individuals who, but for the
unaffordability of the premium, would receive such benefits through
their group health plan; and (3) set forth the criteria under which
EAPs that do not provide significant benefits in the nature of medical
care constitute excepted benefits.
B. Executive Order 12866--Department of Labor and Department of Health
and Human Services
OMB has determined that this regulatory action is significant
within the meaning of section 3(f)(4) of the Executive Order, and the
Departments accordingly provide the following assessment of its
potential benefits and costs. The Departments expect the impact of
these proposed regulations to be limited because they do not require
any action or impose any requirements on employers and plan sponsors.
The proposed modifications to vision, dental, and EAP benefits are
primarily clarifications. Additionally, the Departments expect that the
take-up with respect to limited wraparound coverage will be limited for
several reasons. The proposed rules are designed so that the wraparound
coverage could not replace group coverage for employers who drop
coverage or who otherwise do not offer minimum value coverage. Instead,
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. Moreover, the proposed
rules aim to prevent plan sponsors from structuring wraparound coverage
so that low-income workers receive fewer primary benefits than high-
income workers. Lastly, the Departments note that provision of excepted
benefits will not satisfy an applicable large employer's
responsibilities under section 4980H of the Code.
One objective of the Affordable Care Act is to allow individuals
with comprehensive health insurance plans to maintain their current
level of benefits. The Departments recognize that many plan sponsors
provide generous health benefits to their workers. Some employers offer
EAPs or other additional benefits to their employees as part of a
comprehensive set of benefits. Others are interested in newly offering
wraparound coverage to employees who qualify for tax credits in an
Exchange to provide them with coverage comparable to employees who
enroll in a group health plan. These proposed regulations would clarify
the circumstances under which plan sponsors can provide such limited
wraparound coverage to make their employees' coverage ``whole.''
Specifically, these proposed regulations would allow plan sponsors
to provide coverage for limited vision, dental, wraparound, and EAP
benefits consistent with the qualifications for excepted benefits.
These proposed improvements would help employees by continuing to
maintain their access to health coverage that new requirements could
constrain. The Departments expect these proposed regulations to have
some costs, but these costs could be limited because they would not
require any action or impose any requirements on employers and plan
sponsors; take-up may be low; and the proposed modifications to vision,
dental, and EAP benefits are primarily clarifications. With respect to
vision and dental benefits, the proposed regulations would allow self-
insured plans to offer dental and vision benefits to employees without
charging a nominal contribution. With respect to EAPs, the proposed
regulations would clarify the extent to which such benefits constitute
excepted benefits rather than primary coverage.
With respect to wraparound coverage, the proposed regulations would
allow plan sponsors to offer limited wraparound coverage to employees
in certain limited circumstances. This proposal is not intended to
replace group coverage for employers who drop coverage or who do not
otherwise offer it, and offering the wraparound coverage will not
satisfy an applicable large employer's responsibilities under section
4980H of the Code. Instead, the proposal is intended for plan sponsors
whose goal is to provide health benefits
[[Page 77638]]
to employees eligible for coverage through an Exchange that is, in
total, comparable to the benefits offered through the sponsor's minimum
value group health plan. As such, the targets of the proposed
regulation are plan sponsors who otherwise would provide the full range
of health benefits to qualifying enrollees. The wraparound coverage may
only be offered to individuals eligible for the primary plan coverage
the plan sponsor offers; and that primary coverage must provide minimum
value and must be affordable for a majority of employees who are
eligible for the primary plan coverage. Plan designs will be limited by
nondiscrimination rules aimed at preventing plan sponsors from
discriminating in favor of highly compensated employees or offering
different benefits for workers along other dimensions such as health
status (i.e., discriminating against those with high medical costs).
The proposal provides additional flexibility for sponsors and does
not impose additional costs on sponsors. The Federal budget impact of
the proposal also depends on assumptions about the choices made by
employers and workers. As with other group health coverage, employer
contributions to the limited wraparound coverage would be excluded from
employee income for tax purposes. The budget implications of adding
limited wraparound coverage as a form of excepted benefits depend on
the number of employers that elect this option and the number of
employees that in turn receive it. As previously described, this
proposal targets a narrow group of plan sponsors: those that offer
minimum value coverage that is affordable for a majority of employees.
The Departments seek input on this standard, including whether the
majority level is an appropriate level (or whether the primary plan
should provide coverage that is affordable for a larger or smaller
fraction of employees), recognizing the goal of preventing plan
sponsors from shifting employees from the primary plan to the
individual market with limited wraparound coverage, and on the cost
implications of different definitions. The cost of this proposal is
difficult to quantify, as it is unclear how many plan sponsors will be
eligible to offer and how many employees will elect the wraparound
coverage. It is important to note that the cost of the proposed limited
wraparound coverage can be reduced by limiting its availability. This
could be accomplished by modifying the ``majority'' standard so that a
greater proportion of employees would have to be offered a primary plan
that is affordable. The majority level was proposed to help minimize
the implications for the primary plan's risk pool by preventing a large
number of low-wage workers from leaving the primary plan for Exchange
coverage. The Departments invite input on this level, and on other
standards that would achieve these goals.
Another factor in assessing the proposal's cost is that the
decision to offer the wraparound coverage is optional. There is greater
administrative complexity associated with the wraparound coverage than
primary coverage and, given a choice, some plan sponsors may choose to
increase the affordability of their primary coverage rather than offer
limited wraparound coverage. Some plan sponsors may not have that
choice: the employers may not be in a financial position to make their
primary health plans affordable, let alone contribute to wraparound
coverage. Employers may also continue to allow employees to simply
obtain Exchange coverage with no additional wraparound benefit, and
these employers would continue to pay any shared responsibility
payments as applicable, resulting in no additional Federal costs.
The Departments seek comment on the effects of the proposal.
Specifically, the Departments request detailed data that would inform
the following questions: How many employers offer coverage that
provides minimum value and is affordable for a majority of the
employees who are eligible for coverage? What is the total number of
individuals who are eligible for primary plan coverage that provides
minimum value and is affordable for a majority of eligible employees,
but would not find it affordable? To what extent would this proposed
rule cause employers to drop health insurance coverage or avoid newly
offering it, and what is the dollar value associated with such dropped
coverage? To what extent would wrap-around coverage be offered more
widely as a result of this rule, and what is the average dollar value
associated with such coverage? To what extent would premiums for
relatively generous health coverage change in the presence and in the
absence of this rule?
C. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
to have a significant economic impact on a substantial number of small
entities. Unless an agency certifies that a proposed rule is not likely
to have a significant economic impact on a substantial number of small
entities, section 603 of RFA requires that the agency present an
initial regulatory flexibility analysis at the time of the publication
of the notice of proposed rulemaking describing the impact of the rule
on small entities and seeking public comment on such impact. Small
entities include small businesses, organizations and governmental
jurisdictions.
For purposes of the RFA, the Departments continue to consider a
small entity to be an employee benefit plan with fewer than 100
participants. The basis for this definition is found in section
104(a)(2) of the act, which permits the Secretary of Labor to prescribe
simplified annual reports for pension plans that cover fewer than 100
participants. Pursuant to the authority of section 104(a)(3), the
Department of Labor has previously issued at 29 CFR 2520.104-20,
2520.104-21, 2520.104-41, 2520.104-46 and 2520.104b-10 certain
simplified reporting provisions and limited exemptions from reporting
and disclosure requirements for small plans, including unfunded or
insured welfare plans covering fewer than 100 participants and
satisfying certain other requirements.
Further, while some large employers may have small plans, in
general small employers maintain most small plans. Thus, the
Departments believe that assessing the impact of these proposed rules
on small plans is an appropriate substitute for evaluating the effect
on small entities. The definition of small entity considered
appropriate for this purpose differs, however, from a definition of
small business that is based on size standards promulgated by the Small
Business Administration (13 CFR 121.201) pursuant to the Small Business
Act (15 U.S.C. 631 et seq.). The Departments therefore request comments
on the appropriateness of the size standard used in evaluating the
impact of this proposed rule on small entities.
Because the proposed rules would impose no additional costs on
employers or plans, the Departments believe that it would not have a
significant economic impact on a substantial number of small entities.
Accordingly, pursuant to section 605(b) of the RFA, the Departments
hereby certify that the proposed rules, if promulgated, would not have
a
[[Page 77639]]
significant economic impact on a substantial number of small entities.
D. Special Analyses--Department of the Treasury
For purposes of the Department of the Treasury it has been
determined that this notice of proposed rulemaking is not a significant
regulatory action as defined in Executive Order 12866, as supplemented
by Executive Order 13563. Therefore, a regulatory assessment is not
required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these proposed regulations, and, because these proposed regulations do
not impose a collection of information on small entities, a Regulatory
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking has been submitted to the Small
Business Administration for comment on its impact on small business.
E. Unfunded Mandates Reform Act
For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1501 et seq.), as well as Executive Order 12875, these proposed rules
do not include any Federal mandate that may result in expenditures by
State, local, or tribal governments, or the private sector, which may
impose an annual burden of $100 million adjusted for inflation since
1995.
F. Federalism--Department of Labor and Department of Health and Human
Services
Executive Order 13132 outlines fundamental principles of
federalism. It requires adherence to specific criteria by Federal
agencies in formulating and implementing policies that have
``substantial direct effects'' on the States, the relationship between
the national government and States, or on the distribution of power and
responsibilities among the various levels of government. Federal
agencies promulgating regulations that have these federalism
implications must consult with State and local officials, and describe
the extent of their consultation and the nature of the concerns of
State and local officials in the preamble to the final regulation.
In the Departments' view, the proposed regulations, by clarifying
policy regarding certain excepted benefits options that can be designed
by employers to support their employees, would provide more certainty
to employers and others in the regulated community as well as States
and political subdivisions regarding the treatment of such arrangements
under ERISA. Accordingly, the Departments will affirmatively engage in
outreach with officials of State and political subdivisions regarding
the proposed rules and seek their input on the proposed rules and any
federalism implications that they believe may be presented by it.
G. Congressional Review Act
These proposed regulations are subject to the Congressional Review
Act provisions of the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.), and, if finalized, will be
transmitted to the Congress and to the Comptroller General for review
in accordance with such provisions.
IV. Statutory Authority
The Department of the Treasury regulations are proposed to be
adopted pursuant to the authority contained in sections 7805 and 9833
of the Code.
The Department of Labor regulations are proposed to be adopted
pursuant to the authority contained in 29 U.S.C. 1027, 1059, 1135,
1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec.
401(b), Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122
Stat. 5123; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9,
2012).
The Department of Health and Human Services regulations are
proposed to be adopted pursuant to the authority contained in sections
2701 through 2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg
through 300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Signed this 11th day of December, 2013.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: November 22, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: December 3, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
Department of The Treasury
Internal Revenue Service
Accordingly, 26 CFR Part 54 is proposed to be amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9831-1 also issued under 26 U.S.C. 9833; * * *
0
Paragraph 2. Section 54.9831-1 is amended by revising paragraphs
(c)(3)(i) and (c)(3)(ii), and adding paragraphs (c)(3)(vi) and
(c)(3)(vii), to read as follows:
Sec. 54.9831-1 Special rules relating to group health plans.
* * * * *
(c) * * *
(3) * * *
(i) In general. Limited-scope dental benefits, limited-scope vision
benefits, or long-term care benefits are excepted 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 as described in
paragraph (c)(3)(ii) of this section. In addition, benefits provided
under a health flexible spending arrangement are excepted benefits if
they satisfy the requirements of paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound individual health insurance
coverage are excepted benefits if they satisfy the requirements of
paragraph (c)(3)(vi) of this section, and benefits provided under an
employee assistance program are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of this section.
(ii) Not an integral part of a group health plan. For purposes of
this paragraph (c)(3), benefits are not an
[[Page 77640]]
integral part of a group health plan (whether the benefits are provided
through the same plan or a separate plan) only if participants have the
right to elect not to receive coverage for the benefits.
* * * * *
(vi) Limited wraparound coverage. Limited benefits that wraparound
benefits provided through individual health insurance coverage are
excepted benefits if all of the following requirements are satisfied--
(A) Wraps around certain individual health insurance coverage. The
individual health insurance coverage is not a grandfathered health plan
(as described in section 1251 of the Affordable Care Act) and does not
consist solely of excepted benefits (as defined in paragraph (c) of
this section).
(B) Covers benefits or providers not covered by individual health
insurance coverage. The wraparound coverage is specifically designed to
wrap around the individual health insurance coverage described in
paragraph (c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must provide coverage of benefits that
are not essential health benefits, or reimburse the cost of health care
providers that are considered out-of-network under the individual
health insurance coverage, or both. The wraparound coverage may also
provide benefits for participants' otherwise applicable cost sharing
under the individual health insurance policy.
(2) The wraparound coverage must not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of the plan. The plan sponsor
with respect to the wraparound coverage must sponsor another group
health plan meeting minimum value (as defined under section
36B(c)(2)(C)(ii)) and that is affordable for a majority of the
employees eligible for that group health plan (``primary plan''). Only
individuals eligible for this primary plan may be eligible for the
wraparound coverage.
(D) Limited in amount. The total cost of coverage under the
wraparound coverage must not exceed 15 percent of the cost of coverage
under the primary plan (as described in paragraph (c)(3)(vi)(C) of this
section). For this purpose, the cost of coverage includes both employer
and employee contributions towards coverage and is determined in the
same manner as the applicable premium is calculated under a COBRA
continuation provision.
(E) Nondiscrimination. The following conditions must be satisfied:
(1) The wraparound coverage must not differentiate among
individuals in eligibility, benefits, or premiums based on any health
factor of an individual (or any dependent of the individual),
consistent with the requirements of section 2705 of the PHS Act (as
incorporated into section 9815) and Sec. 54.9802-1.
(2) The wraparound coverage must not impose any preexisting
condition exclusion, consistent with the requirements of section 2704
of the PHS Act (as incorporated into section 9815).
(3) To the extent the primary coverage is insured, the primary
coverage must not be discriminatory under section 2716 the PHS Act (as
incorporated into section 9815). To the extent the primary coverage is
self-insured, the primary coverage must not be discriminatory under
section 105(h) and Sec. 1.105-11.
(4) To the extent the wraparound coverage is insured, the
wraparound coverage must not be discriminatory under section 2716 the
PHS Act (as incorporated into section 9815) and to the extent the
wraparound coverage is self-insured, the wraparound coverage must not
be discriminatory under section 105(h) and Sec. 1.105-11.
(vii) Employee assistance programs. Benefits provided under
employee assistance programs are excepted if they satisfy all of the
following requirements--
(A) The program does not provide significant benefits in the nature
of medical care.
(B) The benefits under the employee assistance program cannot be
coordinated with benefits under another group health plan, as follows:
(1) Participants in the other group health plan must not be
required to exhaust benefits under the employee assistance program
(making the employee assistance program a gatekeeper) before an
individual is eligible for benefits under the other group health plan;
(2) Participant eligibility for benefits under the employee
assistance program must not be dependent on participation in another
group health plan; and
(3) Benefits under the employee assistance program must not be
financed by another group health plan.
(C) No employee premiums or contributions may be required as a
condition of participation in the employee assistance program.
(D) There is no cost sharing under the employee assistance program.
* * * * *
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons set forth above, 29 CFR part 2590 is proposed to be
amended as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
1. The authority citation for part 2590 continues to read as follows:
Authority: Secs. 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169,
1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b),
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d),
Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122 Stat.
5123; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9,
2012).
0
2. Section 2590.732 is amended by revising paragraphs (c)(3)(i) and
(c)(3)(ii), and adding paragraphs (c)(3)(vi) and (c)(3)(vii), to read
as follows:
Sec. 2590.732 Special rules relating to group health plans.
* * * * *
(c) * * *
(3) * * *
(i) In general. Limited-scope dental benefits, limited-scope vision
benefits, or long-term care benefits are excepted 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 as described in
paragraph (c)(3)(ii) of this section. In addition, benefits provided
under a health flexible spending arrangement are excepted benefits if
they satisfy the requirements of paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound individual health insurance
coverage are excepted benefits if they satisfy the requirements of
paragraph (c)(3)(vi) of this section, and benefits provided under an
employee assistance program are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of this section.
(ii) Not an integral part of a group health plan. For purposes of
this paragraph (c)(3), benefits are not an integral part of a group
health plan (whether the benefits are provided through the same plan or
a separate plan) only if participants have the right to elect not to
receive coverage for the benefits.
* * * * *
(vi) Limited wraparound coverage. Limited benefits that wraparound
benefits provided through individual
[[Page 77641]]
health insurance coverage are excepted benefits if all of the following
requirements are satisfied--
(A) Wraps around certain individual health insurance coverage. The
individual health insurance coverage is not a grandfathered health plan
(as described in section 1251 of the Affordable Care Act and Sec.
2590.715-1251 of this part) and does not consist solely of excepted
benefits (as defined in paragraph (c) of this section).
(B) Covers benefits or providers not covered by individual health
insurance coverage. The wraparound coverage is specifically designed to
wrap around the individual health insurance coverage described in
paragraph (c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must provide coverage of benefits that
are not essential health benefits, or reimburse the cost of health care
providers that are considered out-of-network under the individual
health insurance coverage, or both. The wraparound coverage may also
provide benefits for participants' otherwise applicable cost sharing
under the individual health insurance policy.
(2) The wraparound coverage must not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of the plan. The plan sponsor
with respect to the wraparound coverage must sponsor another group
health plan meeting minimum value (as defined under section
36B(c)(2)(C)(ii) of the Code) and that is affordable for a majority of
the employees eligible for that group health plan (``primary plan'').
Only individuals eligible for this primary plan may be eligible for the
wraparound coverage.
(D) Limited in amount. The total cost of coverage under the
wraparound coverage must not exceed 15 percent of the cost of coverage
under the primary plan (as described in paragraph (c)(3)(vi)(C) of this
section). For this purpose, the cost of coverage includes both employer
and employee contributions towards coverage and is determined in the
same manner as the applicable premium is calculated under a COBRA
continuation provision.
(E) Nondiscrimination. The following conditions must be satisfied:
(1) The wraparound coverage must not differentiate among
individuals in eligibility, benefits, or premiums based on any health
factor of an individual (or any dependent of the individual),
consistent with the requirements of section 2705 of the PHS Act (as
incorporated into ERISA section 715) and Sec. 2590.715-2705.
(2) The wraparound coverage must not impose any preexisting
condition exclusion, consistent with the requirements of section 2704
of the PHS Act (as incorporated into ERISA section 715) and Sec.
2590.715-2704.
(3) To the extent the primary coverage is insured, the primary
coverage must not be discriminatory under section 2716 the PHS Act (as
incorporated into ERISA section 715). To the extent the primary
coverage is self-insured, the primary coverage must not be
discriminatory under section 105(h) of the Code and 26 CFR 1.105-11.
(4) To the extent the wraparound coverage is insured, the
wraparound coverage must not be discriminatory under section 2716 the
PHS Act (as incorporated into ERISA section 715). To the extent the
wraparound coverage is self-insured, the wraparound coverage must not
be discriminatory under section 105(h) of the Code and 26 CFR 1.105-11.
(vii) Employee assistance programs. Benefits provided under
employee assistance programs are excepted if they satisfy all of the
following requirements--
(A) The program does not provide significant benefits in the nature
of medical care.
(B) The benefits under the employee assistance program cannot be
coordinated with benefits under another group health plan, as follows:
(1) Participants in the other group health plan must not be
required to exhaust benefits under the employee assistance program
(making the employee assistance program a gatekeeper) before an
individual is eligible for benefits under the other group health plan;
(2) Participant eligibility for benefits under the employee
assistance program must not be dependent on participation in another
group health plan; and
(3) Benefits under the employee assistance program must not be
financed by another group health plan.
(C) No employee premiums or contributions may be required as a
condition of participation in the employee assistance program.
(D) There is no cost sharing under the employee assistance program.
* * * * *
Department of Health and Human Services
45 CFR Subtitle A
For the reasons set forth in the preamble, the Department of Health
and Human Services proposes to amend 45 CFR part 146 as set forth
below:
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
1. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).
0
2. Section 146.145 is amended by revising paragraphs (c)(3)(i) and
(c)(3)(ii), and adding paragraphs (c)(3)(vi) and (c)(3)(vii), to read
as follows:
Sec. 146.145 Special rules relating to group health plans.
* * * * *
(c) * * *
(3) * * *
(i) In general. Limited-scope dental benefits, limited-scope vision
benefits, or long-term care benefits are excepted 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 as described in
paragraph (c)(3)(ii) of this section. In addition, benefits provided
under a health flexible spending arrangement are excepted benefits if
they satisfy the requirements of paragraph (c)(3)(v) of this section.
Furthermore, benefits that wraparound individual health insurance
coverage are excepted benefits if they satisfy the requirements of
paragraph (c)(3)(vi) of this section, and benefits provided under an
employee assistance program are excepted benefits if they satisfy the
requirements of paragraph (c)(3)(vii) of this section.
(ii) Not an integral part of a group health plan. For purposes of
this paragraph (c)(3), benefits are not an integral part of a group
health plan (whether the benefits are provided through the same plan or
a separate plan) only if participants have the right to elect not to
receive coverage for the benefits.
* * * * *
(vi) Limited wraparound coverage. Limited benefits that wraparound
benefits provided through individual health insurance coverage are
excepted benefits if all of the following requirements are satisfied--
(A) Wraps around certain individual health insurance coverage. The
individual health insurance coverage is not a grandfathered health plan
(as described in section 1251 of the Affordable Care Act and Sec.
147.140 of this subchapter) and does not consist solely of excepted
benefits (as defined in paragraph (c) of this section).
[[Page 77642]]
(B) Covers benefits or providers not covered by individual health
insurance coverage. The wraparound coverage is specifically designed to
wrap around the individual health insurance coverage described in
paragraph (c)(3)(vi)(A) of this section, as follows:
(1) The wraparound coverage must provide coverage of benefits that
are not essential health benefits, or reimburse the cost of health care
providers that are considered out-of-network under the individual
health insurance coverage, or both. The wraparound coverage may also
provide benefits for participants' otherwise applicable cost sharing
under the individual health insurance policy.
(2) The wraparound coverage must not provide benefits only under a
coordination-of-benefits provision.
(C) Otherwise not an integral part of the plan. The plan sponsor
with respect to the wraparound coverage must sponsor another group
health plan meeting minimum value (as defined under section
36B(c)(2)(C)(ii) of the Code) and that is affordable for a majority of
the employees eligible for that group health plan (``primary plan'').
Only individuals eligible for this primary plan may be eligible for the
wraparound coverage.
(D) Limited in amount. The total cost of coverage under the
wraparound coverage must not exceed 15 percent of the cost of coverage
under the primary plan (as described in paragraph (c)(3)(vi)(C) of this
section). For this purpose, the cost of coverage includes both employer
and employee contributions towards coverage and is determined in the
same manner as the applicable premium is calculated under a COBRA
continuation provision.
(E) Nondiscrimination. The following conditions must be satisfied:
(1) The wraparound coverage must not differentiate among
individuals in eligibility, benefits, or premiums based on any health
factor of an individual (or any dependent of the individual),
consistent with the requirements of section 2705 of the PHS Act and
Sec. 147.110 of this subchapter.
(2) The wraparound coverage must not impose any preexisting
condition exclusion, consistent with the requirements of section 2704
of the PHS Act and Sec. 147.108 of this subchapter.
(3) To the extent the primary coverage is insured, the primary
coverage must not be discriminatory under section 2716 the PHS Act. To
the extent the primary coverage is self-insured, the primary coverage
must not be discriminatory under section 105(h) of the Code and 26 CFR
1.105-11.
(4) To the extent the wraparound coverage is insured, the
wraparound coverage must not be discriminatory under section 2716 the
PHS Act. To the extent the wraparound coverage is self-insured, the
wraparound coverage must not be discriminatory under section 105(h) of
the Code and 26 CFR 1.105-11.
(vii) Employee assistance programs. Benefits provided under
employee assistance programs are excepted if they satisfy all of the
following requirements--
(A) The program does not provide significant benefits in the nature
of medical care.
(B) The benefits under the employee assistance program cannot be
coordinated with benefits under another group health plan, as follows:
(1) Participants in the other group health plan must not be
required to exhaust benefits under the employee assistance program
(making the employee assistance program a gatekeeper) before an
individual is eligible for benefits under the other group health plan;
(2) Participant eligibility for benefits under the employee
assistance program must not be dependent on participation in another
group health plan; and
(3) Benefits under the employee assistance program must not be
financed by another group health plan.
(C) No employee premiums or contributions may be required as a
condition of participation in the employee assistance program.
(D) There is no cost sharing under the employee assistance program.
* * * * *
[FR Doc. 2013-30553 Filed 12-20-13; 11:15 am]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P
