EBSA Releases HIPAA Safe Harbor for Supplemental Health Plans

December 7, 2007 (PLANSPONSOR.COM) - Federal regulators on Friday released a Field Assistance Bulletin (FAB) laying out a safe harbor about whether supplemental health insurance coverage is properly deemed "excepted."

Daniel J. Maguire, director of Health Plan Standards and Compliance Assistance in the   U.S. Department of Labor’s Employee Benefits Security Administration (EBSA), indicated in FAB 2007-04 that the agency had grown concerned that group policies being marketed as similar supplemental coverage properly qualified for that designation under federal benefit laws.


The new enforcement safe harbor describes the circumstances under which such supplemental health policies are considered “excepted” under the Employee Retirement Income Security Act (ERISA) and the Health Insurance Portability and Accountability Act (HIPAA).

Policies not meeting the safe harbor standards may generate enforcement actions by the department, the FAB said.

According to   Maguire, to fall within the safe harbor, a policy, certificate, or contract of insurance must meet four criteria:

  • independent of primary coverage,
  • supplemental for gaps in primary coverage,
  • supplemental in value of coverage,
  • similar to Medicare supplemental coverage.

In other words, the FAB indicated, the insurance must be issued by an entity that does not provide the primary coverage under the plan and must be specifically designed to fill gaps in primary coverage.

In addition, EBSA said in the FAB that the value of the supplemental coverage must be significantly less than the value of the primary coverage that it supplements.

Specifically, to fall within the enforcement safe harbor, the cost of supplemental coverage may not be more than 15% of the cost of the plan’s primary coverage. EBSA will determine cost in the same manner as the “applicable premium” is calculated under a Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation provision.

To fall within the enforcement safe harbor, the coverage may not differentiate among individuals in eligibility, benefits, or premiums based upon any health factor of the individual.

The FAB is    here .