On October 1, 2014, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) published regulations finalizing a proposed amendment to the “excepted benefit” rules, i.e., the rules that govern when certain types of benefits are exempt from HIPAA’s portability rules as well as various requirements under ERISA (including applicability of the Mental Health Parity and Addiction Equity Act) and the Affordable Care Act (“ACA”), including the ACA’s market reforms (such as the prohibition on lifetime and annual limits, etc.). These final rules largely adopted proposed rules from December 2013, with a few clarifications and changes.

After the enactment of the ACA, various stakeholders became increasingly concerned about whether or not an employee assistance program (“EAP”) would be considered to be a “group health plan” under the ACA, and thus subject to all of the ACA’s market reforms. Because the benefits provided under an EAP are generally very limited, most (if not all) EAPs would have difficulty meeting these market reforms (including, particularly, the ACA’s prohibition on annual dollar limits). The final rules largely adopted the provisions of the proposed rule that specify that EAPs will be considered to be excepted benefits (and thus not subject to the ACA’s market reforms) if they meet four criteria (which, the Departments make clear, are intended to ensure that EAPs are supplemental to other coverage offered by employers):

  1. The EAP must not provide significant benefits in the nature of medical care.-Note that this requirement considers the amount, scope and duration of covered services.

    -The Departments specified that an EAP does not provide significant benefits in the nature of medical care if it offers limited, short-duration outpatient counseling for mental health and substance use disorders, without covering inpatient, residential, partial hospitalization or intensive outpatient care; and without requiring preauthorization or review for medical necessity. Furthermore, the Departments also clarified that a program that provides disease management services (e.g., laboratory testing, counseling, prescription drugs) for individuals with chronic conditions (such as diabetes) does not provide significant benefits in the nature of medical care.

    -The Departments also indicated that they may provide additional guidance in the future to clarify which programs provide “significant” benefits in the nature of medical care.
  2. Benefits under the EAP must not be coordinated with benefits under a group health plan.-For an EAP to satisfy this condition, participants in the group health plan must not be required to exhaust benefits under the EAP before being eligible for benefits under that plan, and a participant’s eligibility for EAP benefits must not depend on participation in the group health plan.

    -Note that, in response to comments, the final rules eliminate a requirement under the proposed rules that, in order to be considered excepted benefits, EAP benefits cannot be financed by another group health plan.
  3. No employee premiums or contributions are required for participation in the EAP.
  4. There is no cost sharing under the EAP.

Additionally, under the excepted benefit rules, a “limited scope” vision or dental benefit is one of the categories of benefits that can be classified as excepted benefits. Under the original 2004 regulations, vision or dental benefits were “limited scope” if they were (a) provided under a separate policy, certificate or insurance contract, and (b) not an “integral” part of a group health plan, whether insured or self-insured. The 2004 regulations went on to states that such benefits were not “integral” so long as participants (a) may elect not to receive coverage for the benefits, and (b) must pay an additional premium or contribution if they elect the coverage. The final rules eliminate the requirement that participants must pay an additional premium for the coverage in order for it to be integral. This change is important, in that it allows issuers and employer plan sponsors to avoid charging nominal contributions for limited-scope vision and dental benefits (an administrative hassle that could well cost more than the contribution itself).

In addition to the above, the Departments, in the preamble to the final rules, indicated that additional guidance will be forthcoming in the future on the topic of when limited wraparound coverage will constitute an excepted benefit (a topic which was covered in the December 2013 proposed regulations, but one which the Departments appear to have receive significant comments on, thus necessitating the need for additional time to respond to and reflect the comments).

The final rules apply to group health plans and health insurance issuers offering group (not individual) coverage for plan or policy years beginning on or after January 1, 2015. (The final rules do not apply to individual coverage.) Until January 1, 2015, dental, vision and EAP benefits that meet the conditions of either the proposed rules or the final rules will, per the Departments, qualify as excepted benefits.