There’s more to benefits than just major medical coverage. Other types of insurance are utilized by employers; however, confusion reigns in the murky waters of these “other” types of coverage. On June 10, 2016, the Departments of Labor (DOL), Health and Human Services (HHS) and the IRS (“The Departments”) issued proposed regulations with respect to requirements for short-term limited-duration insurance, travel insurance, similar supplemental health coverage, and prohibition on lifetime and annual limits.
Final rules for these excepted benefits and prohibition on lifetime and annual dollar limits were issued October 28, 2016, and apply to group health plans and health insurance issuers beginning on the first day of the first plan year (or, in the individual market, the first day of the first policy year) beginning on or after January 1, 2017.
Short-Term, Limited-Duration Insurance is designed to fill temporary gaps in coverage when someone is moving from one plan to another or changing jobs, is not an excepted benefit, and is not exempt from the annual or lifetime annual dollar limits. It cannot take the place of regular insurance coverage either.
In order for short-term insurance to qualify as an excepted benefit, the coverage must be less than three months in duration. The plan must have an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder with or without the issuer’s consent) that is less than three months after the original effective date of the contract. The plan also must prominently display in the contract or any application materials, in at least 14 point type, “THIS IS NOT QUALIFYING HEALTH COVERAGE (“MINIMUM ESSENTIAL COVERAGE”) THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON’T HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE ADDITIONAL PAYMENT WITH YOUR TAXES.”
Travel Insurance is defined as insurance coverage for personal risks related to planned travel and is a new category of excepted benefits. It may include, but is not limited to, interruption or cancellation of a trip or event, loss of baggage or personal effects, damages to accommodations or rental vehicles, and sickness, accident, disability, or death occurring during travel. Travel insurance is an excepted benefit provided that the health benefits are not offered on a stand-alone basis and are incidental to other coverage.
Similar Supplemental Health Coverage is designed to fill in the gaps in cost sharing of the primary coverage only if the benefits covered by supplemental insurance products are not an essential health benefit (EHB). If any benefit provided by the supplemental policy is either included in the primary coverage or is an EHB in the state where the coverage is issued, the insurance coverage would not be supplemental excepted benefits.
However, supplemental health insurance products that both fill in the gaps of cost sharing in the primary coverage, such as coinsurance and deductibles, and cover additional categories of benefits that are not EHB, would be considered supplemental excepted benefits provided all other criteria are met.
Definition of EHB for Purposes of the Prohibition on Lifetime and Annual Limits
For plan years or policy years beginning on or after January 1, 2017, a plan or issuer that is not required to provide EHB must define EHB for purposes of the prohibition on lifetime and annual dollar limits in a manner consistent with any (1) one of the EHB-benchmark plans applicable in a state under 45 CFR 156.110, and includes coverage of any additional required benefits that are considered EHB consistent with 45 CFR 155.170(a)(2); or (2) one of the three Federal Employees Health Benefit Program (FEHBP) plan options as defined by 45 CFR 156.100(a)(3), supplemented as necessary, to meet the standards in 45 CFR 156.110.
The revised definitions apply to policy years beginning on or after January 1, 2017. However, due to policies currently in force, HHS will not take enforcement action against the issuer before April 1, 2017.
The Departments intend to address hospital indemnity or other fixed indemnity insurance and expatriate health plans in further rulemaking, taking into account comments received on these issues.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.
