New Guidelines for Employee Assistance Programs | Practical Law

New Guidelines for Employee Assistance Programs | Practical Law

The Departments of Health and Human Services (HHS), Labor (DOL) and Treasury have issued final regulations addressing when certain benefits, including employee assistance programs (EAPs), are considered excepted benefits. The regulations finalize proposed rules issued by the Departments in December 2013.

New Guidelines for Employee Assistance Programs

Practical Law Legal Update 6-582-7587 (Approx. 5 pages)

New Guidelines for Employee Assistance Programs

by Practical Law Employee Benefits & Executive Compensation
Published on 01 Oct 2014 • USA (National/Federal)
The Departments of Health and Human Services (HHS), Labor (DOL) and Treasury have issued final regulations addressing when certain benefits, including employee assistance programs (EAPs), are considered excepted benefits. The regulations finalize proposed rules issued by the Departments in December 2013.
On September 26, 2014, the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (Departments) issued final regulations addressing when certain kinds of benefits qualify as excepted benefits, and are therefore exempt from HIPAA's portability rules and requirements under the Affordable Care Act (ACA) (see Practice Note, The Affordable Care Act (ACA) Overview). The regulations finalize the proposed version of these rules, which the Departments issued in December 2013 (see Legal Update, Proposed Rules Include Excepted Benefits Wraparound Coverage Option and EAP Guidance).
The final regulations:
  • Eliminate a requirement that participants pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as excepted benefits.
  • Establish four requirements under which employee assistance programs (EAPs) may constitute excepted benefits.
Eligibility for excepted benefits does not prevent an individual from being eligible for a premium tax credit under the ACA's insurance exchanges if the individual enrolls in a qualified health plan under the exchanges (see Practice Note, Health Insurance Exchange and Related Requirements Under the ACA).
Although the proposed regulations also addressed limited wraparound coverage, the Departments indicate in these final rules that limited wraparound coverage will be the topic of additional guidance to be issued in the future (and reflecting the significant comments the Departments received regarding such coverage).

Vision and Dental Benefits

The final regulations amend the scope of one of the four excepted benefits categories (known as limited excepted benefits), which include limited-scope vision or dental benefits and certain health flexible spending arrangements (see Practice Note, Cafeteria Plans). Under HIPAA regulations issued in 2004, vision and dental benefits are excepted if they are limited in scope and are either:
Under the 2004 HIPAA regulations, vision and dental benefits generally are not integral if participants:
  • May elect not to receive coverage for the benefits.
  • Who choose to receive coverage for the benefits pay an additional premium or contribution for the coverage.
The final regulations eliminate the requirement under the 2004 HIPAA regulations that participants pay an additional premium or contribution for limited-scope vision or dental benefits to qualify as excepted. Without this change:
  • Employers that sponsor self-insured plans could be required to charge participants a nominal contribution so that limited-scope vision and dental benefits would qualify as excepted.
  • The cost of administering this contribution could be more than the contribution itself.

Employee Assistance Programs

Employers have indicated to the Departments that requiring EAPs to comply with ACA requirements (for example, its prohibition on annual dollar limits) could be difficult in that EAP benefits are generally very limited (see Practice Note, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA). As a result, the final regulations, like the proposed regulations, include four criteria for an EAP to qualify as excepted benefits. Under the final regulations, an EAP is considered excepted benefits if:
  • It does not provide significant benefits in the nature of medical care. This requirement considers the amount, scope and duration of covered services. For example, an EAP generally does not provide significant benefits in the nature of medical care if it provides a wide-range of education and fitness services to improve employees' overall health and prevent illness. The Departments rejected a proposal under which EAPs would have been allowed to provide wellness and disease management programs, if such programs did not provide significant benefits in the nature of medical care (see Practice Note, Wellness Programs).
  • Its benefits are not coordinated with benefits under another group health plan. For an EAP to satisfy this condition:
    • participants in the other group health plan must not be required to exhaust benefits under the EAP before being eligible for benefits under the other group health plan; and
    • participant eligibility for EAP benefits must not depend on participation in another group health plan. In response to comments, the final regulations eliminate a requirement under the proposed regulations that EAP benefits, in order to be excepted, cannot be financed by another group health plan.
  • No employee premiums or contributions are required for participation in the EAP.
  • There is no cost sharing under the EAP.
The general intent of these requirements is to ensure that EAPs are supplemental to other coverage offered by employers.

Effective Date

The final excepted benefits regulations apply to group health plans and health insurers offering group coverage for plan years beginning on or after January 1, 2015. The final regulations do not apply to insurers offering individual health coverage. Through 2014, dental, vision and EAP benefits that meet either the proposed regulations' or the final regulations' conditions will qualify as excepted benefits.

Practical Impact: Scope of Significant Benefits Under EAPs

The Departments offer at least some insight regarding the condition that EAPs may not provide significant benefits in the nature of medical care, though additional guidance in this area would be welcome. According to the Departments:
  • An EAP does not provide significant benefits in the nature of medical care by offering only limited, short-term outpatient counseling for substance use disorder services, without:
    • covering inpatient, residential, partial residential or intensive outpatient care; and
    • requiring preauthorization or review for medical necessity.
  • A program that provides disease management services (for example, laboratory testing, counseling and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant benefits in the nature of medical care.
The Departments indicated that they may provide additional guidance in the future to clarify which programs provide "significant" benefits in the nature of medical care.