On February 13, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued Part XXIII of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding “excepted benefits,” i.e., benefits that are exempt from the portability rules under HIPAA as well as various requirements under ERISA (including MHPAEA) and the ACA, including the ACA’s market reforms (such as the prohibition on lifetime and annual limits, etc.). Specifically, the FAQ focuses on a subcategory of excepted benefits known as “supplemental excepted benefits,” which generally are benefits provided under a separate policy, certificate or contract of insurance which are designed to “fill gaps” in primary coverage.
The FAQ notes that, in determining whether insurance coverage sold as a supplement to group health coverage can be considered “similar supplemental coverage” (and hence an excepted benefit), they will continue to apply four criteria previously set forth by the Departments in subregulatory guidance issued in 2007 and 2008:
- The policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan;
- The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles;
- The cost of the supplemental coverage may not exceed 15 percent of the cost of the primary coverage; and
- Supplemental coverage sold in the group insurance market must not differentiate among individuals in eligibility, benefit or premiums based upon any health factor of the individual (or any dependents of the individual)
In addition to reiterating their support for the above four criteria, the Departments indicated that they intend to propose regulations clarifying the circumstances under which supplemental insurance products that do not fill in cost-sharing under the primary plan are considered to be specifically designed to fill gaps in primary coverage. Specifically, the Departments indicated that these proposed regulations would state that coverage of additional categories of benefits will be considered to “fill in the gaps” of the primary coverage only if the additional categories of benefits are not an essential health benefit (“EHB”) in the state where the insurance product is being marketed. If the supplemental coverage provides any benefits that are EHBs, then, under the proposed regulations, the supplemental coverage would not be an “excepted benefit” and would hence be required to comply with HIPAA, MHPAEA, the ACA’s market reforms and various provisions of ERISA.
Finally, the FAQ notes that, pending publication and finalization of the contemplated proposed regulations, the Departments will not initiate an enforcement action against coverage that purports to be supplemental excepted benefits if the coverage (1) provides coverage of additional categories of benefits that are not EHB in the applicable state (as opposed to filling in cost-sharing gaps under the primary plan); (2) complies with the above-listed four criteria; and (3) has been filed and approved with the State (as may be required under State law).