SECOND OPINIONS: Agencies Issue New HIPAA Excepted Benefits Proposed Rules
The Agencies say plans may rely on these proposed rules until final rulemaking, at least through 2014, except where otherwise noted. Comments are due February 24, 2014.
Below we summarize the existing list of HIPAA excepted benefits and describe the new benefits added to this list. We also highlight the requirements from which these benefits are excepted.
What are the Existing HIPAA Excepted Benefits?
The HIPAA portability rules, which were in place prior to the ACA, included a list of “excepted benefits.” ERISA §733; PHSA §9832; Code §9832. This list of excepted benefits includes an “Overall Exception” and then specific categories of exceptions.
· The “Overall Exception” includes accident insurance, disability insurance, liability and liability supplement insurance, workers’ compensation, automobile medical payment insurance, credit-only insurance, and on-site medical clinics.
The other current exceptions include:
· Limited scope dental and vision coverage either offered under a separate insurance policy or where there is a separate election and contribution required;
· Benefits for long-term care or nursing home care;
· Coverage only for specified disease or illness, such as a cancer-only policy;
· Hospital indemnity or other fixed indemnity insurance offered under a separate policy;
· Medicare supplemental health insurance; and
· Similar supplemental coverage under a group health plan that is offered under a separate policy and where the value falls below a specified amount.
From Which Laws Are HIPAA Excepted Benefits Exempt?
HIPAA excepted benefits are exempt from the pre-ACA HIPAA portability rules, such as requirements for pre-existing conditions, special enrollment, and most notably, nondiscrimination and wellness, including the new HIPAA wellness rules. These benefits also are also exempt from Title I of the Genetic Information Nondiscrimination Act (GINA), the Mental Health Parity & Equity Act, the Women’s Health & Cancer Rights Act, and the Newborn’s & Mother’s Health Protection Act.
The ACA’s insurance market reforms adopted the same HIPAA excepted benefits rules. For example, HIPAA excepted benefits are not required to comply with the annual limit prohibition, coverage to age 26 rules, out-of-pocket limits, and preventive care mandates.
Importantly, not all laws incorporate the HIPAA excepted benefits rule. ERISA, COBRA, the ADA, and Title II of GINA (applicable to employers) still apply to HIPAA excepted benefits. In addition, the HIPAA privacy and security rules apply to most HIPAA excepted benefits, unless they fall into the “Overall Exception” category described above.
What are the New HIPAA Excepted Benefits?
The proposed rules include three major changes from the existing rules:
· Dental & Vision Benefits – Under the existing rules, dental and vision benefits only are excepted if they either are offered under a separate insurance policy or if there is a separate election and contribution required. For self-funded plans, this has meant that the plan must have a separate election and premium contribution, so benefits that are automatic or “no cost” could not qualify for the exception. The agencies informally have said that dental and vision plans must at least charge a “nominal” amount to qualify for the exception, which seemed to penalize more generous employers or unions that traditionally had offered no-cost coverage.
The proposed rule removes the requirement that there be a separate contribution amount. So, plans may now offer no-cost dental and vision coverage and still meet the exception as long as there is a separate election (or opt out) for dental and vision coverage or the coverage is offered under a separate insurance policy.
· Employee Assistance Programs (EAPs) – The proposed rules add a new category of excepted benefits for certain EAPs that do not provide “significant benefits in the nature of medical care.” In addition to restricting the “medical care” that may be provided, to meet the exception, (1) no contributions or cost sharing may be required for the EAP coverage; (2) the EAP cannot be coordinated with other group health plan coverage; (3) participants may not be required to exhaust benefits under the EAP before being eligible for the group health plan; (4) participation in the EAP must not be dependent on coverage under another group health plan; and (5) benefits under the EAP cannot be financed by another group health plan.
Many employers offer EAPs that have at least some limited benefits, such as counseling, that could qualify as medical care. These EAP benefits never were intended to be stand-alone medical coverage. However, there was no exception for these benefits under the ACA, so it appeared that all of the ACA requirements applied. If this was the case, it would be virtually impossible for an employer to offer an EAP that had robust enough benefits to meet the ACA. In addition, there was some question about how to count EAP coverage when someone otherwise would qualify for a premium subsidy under the Exchange. The Exchange rules require that individuals not be enrolled in other coverage in order to qualify for a subsidy. Since most employers automatically cover employees in their EAPs, these employees could be precluded from qualifying for a premium subsidy under the Exchange even if they qualified based on income or other factors.
By allowing some EAPs to continue as HIPAA excepted benefits, the proposed rules provide relief from the ACA requirements for many employers who are offering traditional, limited EAPs, as well as close the loophole that would have precluded some individuals from earning a premium subsidy on the Exchange.
· Wraparound Coverage – The proposed rules add another new category of excepted benefits for coverage that is specifically designed to “wrap around” individual insurance coverage, such as that offered through the Exchange. The Preamble says that this category would be effective for plan years starting in 2015.
The wraparound coverage must provide coverage for non-essential benefits or out-of-network providers (or both) and may provide benefits for cost-sharing – costs that may not be covered under the individual policy. To meet the exception, the employer that sponsors the wraparound coverage also must provide a “primary” plan that meets the ACA affordability and minimum value test, and the cost of coverage in the wraparound plan may not exceed 15% of the cost of coverage in the primary plan. This means that, while the wraparound plan is designed to be offered to those with individual coverage who generally would not be in the employer’s group health plan, the employer cannot simply offer a wraparound plan and nothing else and still fall under the exception.
There is some question as to what type of coverage this new exception is intended to exempt. The Preamble says that some employers who provide minimum value / affordable coverage may have some employees who still may want to enroll in Exchange coverage to obtain a premium subsidy. These employers may want to provide some additional wraparound coverage for this group and under the exception, would be able to do so without having to comply with the other requirements of the ACA or HIPAA portability rules. In addition, this wraparound coverage would not disqualify an individual from eligibility for the premium tax credit.
Plans should be on the look-out for further guidance on this exception.
How Do The HIPAA Excepted Benefits Apply Under the ACA?
Both the existing and new HIPAA excepted benefits are exempt from the insurance market reforms under the ACA. This includes the rules regarding pre-existing conditions, out-of-pocket and deductible limits, waiting periods, clinical trials, annual and lifetime limits, preventive care, coverage to age 26, SBC notices, and new appeals rules.
For other ACA provisions, plans will need to review the specific provision. Some provisions, such as the PCORI and reinsurance fees, incorporate the excepted benefits rule. Others, such as the W-2 requirement, incorporate some, but not all, of the exceptions.
For both employers and insurers, it will be important to know if a particular benefit is a HIPAA “excepted benefit” and from which specific laws the benefit is exempt.
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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