Agencies Issue Final Rules Amending Definitions of Excepted Benefits
The IRS, Department of Labor (DOL) and Department of Health and Human Services (HHS) (collectively the “Agencies”) finalized regulations expanding the criteria for certain health and welfare coverage to qualify as “excepted benefits.” Excepted benefits are generally exempt from the ACA’s market reform requirements, as well as the requirements of the Public Health Service Act, the Internal Revenue Code (the “Code”), and the Health Insurance Portability and Accountability Act (HIPAA). The final regulations are largely unchanged from the proposed regulations issued in December of 2013.
Most importantly, the regulations provide that stand-alone vision or dental coverage qualifies as an excepted benefit if the coverage is either:
- provided under a separate policy, certificate, or contract of insurance; or
- not an integral part of the health plan—this simply requires the plan to offer participants the ability to opt out of receiving dental or vision coverage without dropping their major medical coverage.
The first criterion is only available for fully insured coverage, while the second is available to both fully insured and self-insured coverage. Similar to the 2013 proposed regulations, the final regulations no longer require participants to pay an additional premium for stand-alone dental and vision coverage in order for such coverage to qualify as an excepted benefit.