Many employers offer benefits packages that provide employees with more than just health insurance coverage. Though some of these benefits, like pre-paid legal service plans, are clearly not health-related, others may provide employees with some health-related benefits. Does this mean they are subject to the Affordable Care Act’s health insurance market reforms? Not necessarily.

Certain types of benefits, due to their nature, are not subject to a number of health-related laws, including the Affordable Care Act, the Health Insurance Portability and Accountability Act, the Mental Health Parity Act and the Genetic Information Nondiscrimination Act. These are known as excepted benefits.

There are four categories of excepted benefits.

  1.         Benefits Excepted In All Circumstances

The following benefits, or any combination thereof, are considered excepted benefits in all circumstances:

  • Coverage only for accident (including accidental death and dismemberment)
  • Disability income coverage
  • Liability insurance, including general liability and automobile insurance
  • Coverage issued as a supplement to liability insurance
  • Workers’ compensation or similar coverage
  • Automobile medical payment insurance
  • Credit-only insurance (for example, mortgage insurance)
  • Coverage for on-site medical clinics
  1.         Limited Excepted Benefits

A number of benefits may be considered excepted benefits if they are provided under a separate policy, certificate or contract of insurance. They can also qualify as a limited excepted benefit if they are not an integral part of a group health plan, which means that participants may decline coverage or that claims for benefits are administered under a separate contract than claims for any other benefits under the plan.

One or more of the following benefits may qualify as a limited excepted benefit:

  • Limited-scope dental benefits
  • Limited-scope vision benefits
  • Long-term care benefits
  • Health flexible spending arrangements
  • Employee assistance programs (EAPs)
  1.         Noncoordinated Excepted Benefits

Coverage for only a specified disease or illness, such as a cancer-only policy, may qualify as a noncoordinated excepted benefit. Hospital indemnity or other fixed indemnity insurance may also qualify if it pays a fixed dollar amount per day (or per other period) of hospitalization or illness regardless of the amount of expenses incurred.

To qualify as a noncoordinated excepted benefit:

  • Benefits must be provided under a separate policy, certificate or contract of insurance;
  • There is no coordination between the benefits provided and an exclusion of benefits under any group health plan maintained by the same employer; and
  • Benefits are paid regardless of whether benefits are provided under any group health plan maintained by the same employer.
  1.         Supplemental Excepted Benefits

The following benefits may qualify as supplemental excepted benefits if they are provided under a separate policy, certificate or contract of insurance:

  • Medicare supplemental health insurance (Medigap or MedSupp insurance);
  • Coverage supplemental to the managed health care program established by the Department of Defense (TRICARE); and
  • Similar supplemental coverage specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but which does not include coverage that becomes secondary or supplemental only under a coordination-of-benefits provision.

Excepted benefits must satisfy a number of specific requirements set forth in the federal regulations. Employers should consult a knowledgeable and licensed professional before taking action or making changes to their benefits packages.

If you would like more information about excepted benefits or would like to see how Setnor Byer Insurance & Risk can help with your employee benefits package, contact us.

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