On October 21, 2016, the DOL, HHS, and Treasury (the Departments) issued FAQ guidance addressing premium reduction arrangements and student health plan coverage under the ACA. The guidance extends enforcement relief issued in 2013 under the ACA for certain health care premium reduction arrangements offered in connection with student health plans (DOL Technical Release 2013-03; see Legal Update, Guidance Addresses the ACA's Impact on EAPs, HRAs, and Health FSAs).

Under guidance for employers generally, the DOL has addressed whether and how certain premium reduction arrangements may comply with the ACA (DOL Tech. Rel. 2013-03). This guidance defines an employer payment plan (EPP) as a group health plan under which an employer either:

EPPs and health reimbursement arrangements (HRAs) are group health plans and therefore must comply with the ACA's group market reforms (see Practice Note, Affordable Care Act (ACA) Overview), including the ACA's:

Regarding HRAs, see Practice Note, Defined Contribution Health Plans: Health Reimbursement Arrangements (HRAs).

EPPs and HRAs do not satisfy the ACA's market reforms because they reimburse or pay employee medical expenses up to only a certain dollar limit each year. However, these arrangements do not fail to meet the ACA market reform provisions when integrated with a group health plan that otherwise complies with those provisions.

Also, because these arrangements cannot be integrated with individual market policies to satisfy the ACA's market reforms, the arrangements may be subject to penalties, including certain excise taxes under the Internal Revenue Code (26 U.S.C. § 4980D; see Legal Update, IRS Provides Penalty Relief for Employer Payment Plans Offered by Small Employers).

In March 2012, HHS issued final regulations governing student health insurance coverage under the ACA and the Public Health Service Act (PHSA) (see Legal Update, Final HHS Rules for Student Health Plans Include Phase-In of Annual Limit Requirement). Under these regulations, student health insurance coverage is individual market coverage offered to students and their dependents under a written agreement between a higher education institution and an insurer.

According to the DOL, many colleges and universities provide student health coverage to graduate students at greatly reduced or no cost as part of their student package, which may include:

A school may reduce the cost of coverage through a credit, offset, reimbursement, stipend, or similar arrangement (a premium reduction arrangement). Because students receiving premium reduction arrangements may perform services for the related college or university, some commenters asked whether these arrangements are group health plans that fail to meet the ACA's group market provisions.

In February 2016, the Departments provided enforcement relief indicating that they would not view a premium reduction arrangement as failing to satisfy the ACA's annual limit and preventive services requirement if it is offered in connection with other student health coverage, whether insured or self-funded, for plan or policy years beginning before January 1, 2017 (DOL Tech. Rel. 2016-01; IRS Notice 2016-17). Now, under their October 2016 FAQ guidance, the Departments have extended the February 2016 guidance to colleges and universities for certain health premium reduction arrangements offered in connection with student health plans.

In extending the February 2016 relief, the Departments recognized that: