Correction: My March 17 post on the wraparound coverage rule (below) was based on a misunderstanding of how the Multi-State Plan program wrap works. In fact, employer coverage would not wrap around MSP SHOP coverage but rather around individual MSP coverage. Under prior guidance the employer would still not be able to pay for the primary individual MSP coverage, but would only pay for the wrap.
The employer could offer some categories of employees comprehensive coverage and other categories of employees only wrap coverage, as long as coverage offers did not discriminate on the basis of preexisting conditions or health status or in favor of highly compensated employees. Alternatively, the employer might offer all emloyees the option of either comprehensive coverage or wrap coverage, in which case employees who opted for wrap coverage would not qualify for premium tax credits unless employer coverage was in fact inadequate or unaffordable.
Employers would in any event be required to continue to make a total aggregate contribution toward primary and wrap coverage for all employees that was “substantially the same” as the amount contributed for coverage of all full-time employees for plan years that began in 2013 and 2014. The employer could be liable for the employer mandate penalty if the employer failed to offer adequate and affordable coverage to some employees that resulted in those employees receiving premium tax credits through the marketplace.
With open enrollment closed for 2015 and the Departments having finalized the Benefit and Payment Parameters Rule and Letter to Issuers for 2016, we have entered the Spring Affordable Care Act regulatory doldrums. Reports, minor regulations, guidances, and court decisions continue to appear, however. Two appeared on March 16. This post addresses the final wraparound coverage excepted benefits rule, and a report on health insurance coverage and the ACA (technical appendix here), both released on March 16, 2015.
The wraparound coverage rule creates a new category of excepted benefits. The concept of excepted benefits was created by the Health Insurance Portability and Accountability Act of 1996 and is carried forward in the ACA. Excepted benefits plans provide benefits that resemble in some way the health benefits that have been regulated by HIPAA and are now regulated by the ACA, but are more limited or are more tangential to medical care. These include benefits that are not generally medical benefits but do afford some medical coverage (auto liability, workers’ compensation); health coverage that is not medical coverage (dental, vision, long-term care); benefits that are not coordinated with medical benefits (specific disease coverage, fixed dollar indemnity coverage); and coverage that is supplemental to medical coverage (such as Medicare supplement policies). Additional specific conditions must be met for some of these benefits to qualify as excepted benefits.
Excepted benefits are generally not subject to Affordable Care Act requirements, such as the ban on dollar coverage limits or preexisting conditions clauses. But excepted benefit coverage explicitly does not qualify as minimum essential coverage. An individual who has only excepted benefit coverage and does not qualify for a shared responsibility requirement exception must still pay the individual mandate penalty. Large employers that offer only excepted benefits may have to pay the employer responsibility penalty, but individuals offered only excepted benefits by their employers are not disqualified from receiving premium tax credits to purchase individual coverage through the marketplaces. Read the rest of this entry »