```

[Federal Register Volume 79, Number 190 (Wednesday, October 1, 2014)]
[Rules and Regulations]
[Pages 59130-59137]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23323]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

[T.D. 9697]
RIN 1545-BL90

DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2590

RIN 1210-AB60

DEPARTMENT OF HEALTH AND HUMAN SERVICES

[CMS-9946-F]

45 CFR Part 146

RIN 0938-AS16

Amendments to Excepted Benefits

AGENCY: Internal Revenue Service, Department of the Treasury; Employee 
Benefits Security Administration, Department of Labor; Centers for 
Medicare & Medicaid Services, Department of Health and Human Services.

ACTION: Final rules.

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SUMMARY: This document contains final regulations that amend the 
regulations regarding excepted benefits under the Employee Retirement 
Income Security Act of 1974, the Internal Revenue Code (the Code), and 
the Public Health Service Act. Excepted benefits are generally exempt 
from the health reform requirements that were added to those laws by 
the Health Insurance Portability and Accountability Act and the Patient 
Protection and Affordable Care Act. In addition, eligibility for 
excepted benefits does not preclude an individual from eligibility for 
a premium tax credit under section 36B of the Code if an individual 
chooses to enroll in coverage under a Qualified Health Plan through an 
Affordable Insurance Exchange. These regulations finalize some but not 
all of the proposed rules with minor modifications; additional guidance 
on limited wraparound coverage is forthcoming.

DATES: Effective date. These final regulations are effective on 
December 1, 2014.
    Applicability date. These final regulations apply to group health 
plans and group health insurance issuers for plan years beginning on or 
after January 1, 2015.

FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee 
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the 
Treasury, at (202) 317-5500; Jacob Ackerman, Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, at (301) 
492-4179.
    Customer Service Information: Individuals interested in obtaining 
information from the Department of Labor concerning employment-based 
health coverage laws, may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health 
insurance for consumers can be found on the Centers for Medicare & 
Medicaid Services (CMS) Web site (www.cms.gov/cciio) and information on 
health reform can be found at www.HealthCare.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Health Insurance Portability and Accountability Act of 1996 
(HIPAA), Public Law 104-191, 110 Stat. 1936, added title XXVII of the 
Public Health Service Act (PHS Act), part 7 of the Employee Retirement 
Income Security Act of 1974 (ERISA), and chapter 100 of the Internal 
Revenue Code (the Code), providing portability and nondiscrimination 
provisions with respect to health coverage. These provisions of the PHS 
Act, ERISA, and the Code were later augmented by other consumer 
protection laws, including the Mental Health Parity Act of 1996,\1\ the 
Mental Health Parity and Addiction Equity Act of 2008,\2\ the Newborns' 
and Mothers' Health Protection Act,\3\ the Women's Health and Cancer 
Rights Act,\4\ the Genetic Information Nondiscrimination Act of 
2008,\5\ the Children's Health Insurance Program Reauthorization Act of 
2009,\6\ Michelle's Law,\7\ and the Affordable Care Act.\8\
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    \1\ Public Law 104-204, 110 Stat. 2944 (September 26, 1996).
    \2\ Public Law 110-343, 122 Stat. 3881 (October 3, 2008).
    \3\ Public Law 104-204, 110 Stat. 2935 (September 26, 1996).
    \4\ Public Law 105-277, 112 Stat. 2681-436 (October 21, 1998).
    \5\ Public Law 110-233, 122 Stat. 881 (May 21, 2008).
    \6\ Public Law 111-3, 123 Stat. 65 (February 4, 2009).
    \7\ Public Law 110-381, 122 Stat. 4081 (October 9, 2008).
    \8\ The Patient Protection and Affordable Care Act, Public Law 
111-148, was enacted on March 23, 2010, and the Health Care and 
Education Reconciliation Act, Public Law 111-152, was enacted on 
March 30, 2010. (These statutes are collectively known as the 
``Affordable Care Act''.)
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    The Affordable Care Act reorganizes, amends, and adds to the 
provisions of part A of title XXVII of the PHS Act relating to group 
health plans and health insurance issuers in the group and individual 
markets. The term ``group health plan'' includes both insured and self-
insured group health plans.\9\ Section 715(a)(1) of ERISA and section 
9815(a)(1) of the Code, as added by the Affordable Care Act, 
incorporate the provisions of part A of title XXVII of the PHS Act into 
ERISA and the Code to make them applicable to group health plans and 
health insurance issuers providing health insurance coverage in 
connection with group health plans. The PHS Act sections incorporated 
by these references are sections 2701 through 2728.
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    \9\ The term ``group health plan'' is used in title XXVII of the 
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is 
distinct from the term ``health plan,'' as used in other provisions 
of title I of the Affordable Care Act. The term ``health plan'' does 
not include self-insured group health plans.
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    Sections 2722 and 2763 of the PHS Act, section 732 of ERISA, and 
section 9831 of the Code provide that the requirements of title XXVII 
of the PHS Act, part 7 of ERISA, and chapter 100 of the Code, 
respectively, generally do not apply to excepted benefits. Excepted 
benefits are described in section 2791 of the PHS Act, section 733 of 
ERISA, and section 9832 of the Code.
    The parallel statutory provisions establish four categories of 
excepted benefits. The first category includes benefits that are 
generally not health coverage\10\ (such as automobile insurance, 
liability insurance, workers compensation, and accidental death and 
dismemberment coverage). The benefits in this category are excepted in 
all circumstances. In contrast, the benefits in the second, third, and 
fourth categories are types of health coverage but are excepted only if 
certain conditions are met.
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    \10\ See 62 FR 16894, 16903 (Apr. 8, 1997), which states that 
these benefits are generally not health insurance coverage.
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    The second category of excepted benefits is limited excepted 
benefits, which may include limited-scope vision or dental benefits, 
and benefits for long-term care, nursing home care, home health care, 
or community-based care.

[[Page 59131]]

Section 2791(c)(2)(C) of the PHS Act, section 733(c)(2)(C) of ERISA, 
and section 9832(c)(2)(C) of the Code authorize the Secretaries of 
Health and Human Services (HHS), Labor, and the Treasury (collectively, 
the Secretaries) to issue regulations establishing other similar 
limited benefits as excepted benefits. The Secretaries exercised this 
authority previously with respect to certain health flexible spending 
arrangements (health FSAs).\11\ To be excepted under this second 
category, the statute (specifically, ERISA section 732(c)(1), PHS Act 
section 2722(c)(1), and section 9831(c)(1) of the Code) provides that 
limited benefits must either: (1) Be provided under a separate policy, 
certificate, or contract of insurance; or (2) otherwise not be an 
integral part of a group health plan, whether insured or self-insured.
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    \11\ 26 CFR 54.9831-1(c)(3)(v); 29 CFR 2590.732(c)(3)(v); 45 CFR 
146.145(b)(3)(v).
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    The third category of excepted benefits, referred to as 
``noncoordinated excepted benefits,'' includes both coverage for only a 
specified disease or illness (such as cancer-only policies), and 
hospital indemnity or other fixed indemnity insurance. In the group 
market, these benefits are excepted only if all of the following 
conditions are met: (1) The benefits are provided under a separate 
policy, certificate, or contract of insurance; (2) there is no 
coordination between the provision of such benefits and any exclusion 
of benefits under any group health plan maintained by the same plan 
sponsor; and (3) the benefits are paid with respect to any event 
without regard to whether benefits are provided under any group health 
plan maintained by the same plan sponsor.\12\
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    \12\ 26 CFR 54.9831-1(c)(4); 29 CFR 2590.732(c)(4); 45 CFR 
146.145(b)(4). See also Q7 in FAQs about Affordable Care Act 
Implementation Part XI, available at http://www.dol.gov/ebsa/faqs/faq-aca11.html.
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    The fourth category of excepted benefits is supplemental excepted 
benefits. Such benefits must be: (1) Coverage supplemental to Medicare, 
coverage supplemental to the Civilian Health and Medical Program of the 
Department of Veterans Affairs (CHAMPVA) or to Tricare, or similar 
coverage that is supplemental to coverage provided under a group health 
plan; and (2) provided under a separate policy, certificate, or 
contract of insurance.\13\
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    \13\ 26 CFR 54.9831-1(c)(5); 29 CFR 2590.732(c)(5); 45 CFR 
146.145(b)(5). The Departments issued additional guidance regarding 
supplemental health insurance coverage as excepted benefits. See 
EBSA Field Assistance Bulletin No. 2007-04 (available at http://www.dol.gov/ebsa/pdf/fab2007-4.pdf); CMS Insurance Standards 
Bulletin 08-01 (available at http://www.cms.gov/CCIIO/Resources/
Files/Downloads/hipaa0801508.pdf); and 
IRS Notice 2008-23 (available at http://www.irs.gov/irb/2008-
07IRB/ar09.html).
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    In 2004, the Departments of the Treasury, Labor, and HHS published 
final regulations with respect to excepted benefits (the HIPAA 
regulations).\14\ (Subsequent references to the ``Departments'' include 
all three Departments, unless the headings or context indicate 
otherwise.) On December 24, 2013, the Departments issued proposed 
regulations with respect to the second category of excepted benefits, 
limited excepted benefits (2013 proposed regulations).\15\ The 2013 
proposed regulations proposed to: (1) Eliminate the requirement that 
participants pay an additional premium or contribution for limited-
scope vision or dental benefits to qualify as benefits that are not an 
integral part of the plan; (2) set forth the criteria under which 
employee assistance programs (EAPs) constitute excepted benefits; and 
(3) allow plan sponsors in limited circumstances to offer, as excepted 
benefits, coverage that wraps around certain individual health 
insurance coverage. The Departments stated that, until rulemaking is 
finalized, through at least 2014, for purposes of enforcing the 
provisions of title XXVII of the PHS Act, part 7 of ERISA, and chapter 
100 of the Code, the Departments will consider dental and vision 
benefits and EAP benefits meeting the conditions of the 2013 proposed 
regulations to qualify as excepted benefits.
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    \14\ 69 FR 78720 (Dec. 30, 2004).
    \15\ 78 FR 77632.
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    After consideration of comments on the 2013 proposed regulations, 
the Departments are publishing final regulations regarding dental and 
vision benefits and EAP benefits. The Departments also intend to 
publish regulations that address limited wraparound coverage in the 
future, taking into account the extensive comments received on this 
issue.

II. Overview of the Final Regulations

A. Dental and Vision Benefits

    Under the HIPAA regulations, vision and dental benefits are 
excepted if they are limited in scope (described as benefits, 
substantially all of which are for treatment of the eyes or mouth, 
respectively) and are either: (1) Provided under a separate policy, 
certificate, or contract of insurance; or (2) are otherwise not an 
integral part of a group health plan. While only insured coverage may 
qualify under the first test, both insured and self-insured coverage 
may qualify under the second test. The HIPAA regulations provided that 
benefits are not an integral part of a plan if participants have the 
right to elect not to receive coverage for the benefits, and, if 
participants elect to receive coverage for such benefits, they pay an 
additional premium or contribution for the coverage. By contrast, 
health FSA benefits could qualify as excepted benefits without any 
participant contribution under the HIPAA regulations.\16\
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    \16\ Under the HIPAA regulations, benefits provided under a 
health FSA are only excepted for a class of participants if other 
group health coverage, not limited to excepted benefits, is made 
available for the year to the class of participants; and the 
arrangement is structured so that the maximum benefit payable to any 
participant in the class for a year does not exceed an amount 
specified in the regulations.
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    As stated in the preamble to the 2013 proposed regulations, 
following enactment of the Affordable Care Act, various stakeholders 
asked the Departments to amend the HIPAA regulations in order to remove 
conditions for limited-scope vision and dental benefits to be treated 
as excepted benefits. Specifically, some employers represented that, 
although their vision and dental benefits complied with the pre-
Affordable Care Act requirements in title XXVII of the PHS Act, part 7 
of ERISA, and chapter 100 of the Code (such as the nondiscrimination 
and preexisting condition exclusion provisions), compliance with 
certain Affordable Care Act provisions presented additional challenges. 
These employers argued that, where employers are providing such 
benefits on a self-insured basis and without a contribution from 
employees, employers should not be required to charge a nominal 
contribution from participants simply for the benefits to qualify as 
excepted benefits. In some cases, the cost of collecting the nominal 
contribution would be greater than the contribution itself. Moreover, 
they pointed out that employers providing dental and vision benefits 
through a separate insurance policy are not required to charge a 
participant any premium or contribution in order for the dental or 
vision benefits to be considered excepted benefits. Similarly, consumer 
groups argued that, if an employer offers primary group health coverage 
that is treated as unaffordable under the Code, but offers limited-
scope vision or dental coverage, such limited-scope vision or dental 
coverage should qualify as excepted benefits so as not to make such 
individuals ineligible to receive a premium tax credit under section 
36B of the Code if they enroll in

[[Page 59132]]

coverage under a Qualified Health Plan (QHP) through an Affordable 
Insurance Exchange, or ``Exchange'' (also called a Health Insurance 
Marketplace or Marketplace).
    In response to these concerns, and to achieve greater consistency 
between insured and self-insured coverage, the 2013 proposed 
regulations proposed eliminating the requirement under the HIPAA 
regulations that participants pay an additional premium or contribution 
for limited-scope vision or dental benefits to qualify as benefits that 
are not an integral part of a plan (and therefore to qualify as 
excepted benefits).
    The Departments invited comments on this approach. Many comments 
supported the concept of achieving greater consistency regarding the 
excepted benefits requirements for dental and vision benefits between 
insured and self-insured plans. One comment argued that the proposal 
undermined the inclusion of pediatric vision and dental coverage as an 
essential health benefit. Other comments requested clarification as to 
whether separately-administered and stand-alone dental and vision 
benefits offered separate from, or without a connection to, a primary 
plan could qualify as excepted benefits.
    Consistent with the 2013 proposed regulations, these final 
regulations eliminate the requirement under the HIPAA regulations that 
participants pay an additional premium or contribution for limited-
scope vision or dental benefits to qualify as excepted benefits. As 
explained in the preamble to the 2013 proposed regulations, without 
this change, an employer that establishes or maintains a self-insured 
plan could be required to charge a nominal contribution from 
participants simply for limited-scope vision and dental benefits to 
qualify as excepted benefits and, in some cases, the cost of collecting 
the nominal contribution would be greater than the contribution itself. 
In addition, if an employer offers primary group health coverage that 
is unaffordable to individuals, but limited-scope vision or dental 
coverage, without this modification, accepting the vision or dental 
coverage could make such individuals ineligible to receive a premium 
tax credit under section 36B of the Code if they enroll in coverage 
under a QHP through the Exchange.
    In addition, it is the Departments' view that the final regulations 
do not undermine the inclusion of pediatric vision or dental coverage 
as essential health benefits. The requirement that issuers in the small 
group market offer coverage of essential health benefits is not 
changed, and that rule does not apply to large or self-insured plans. 
Moreover, PHS Act section 2711 (as incorporated into ERISA by section 
715 and the Code by section 9815) allows self-insured plans to choose 
any definition of essential health benefits that is authorized by the 
Secretary of HHS for purposes of the prohibition on lifetime or annual 
dollar limits on essential health benefits.\17\
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    \17\ See CMS, Frequently Asked Questions on Essential Health 
Benefits Bulletin, Q10 (February 17, 2012) http://www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf.
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    These final regulations clarify that limited-scope vision or dental 
benefits do not have to be offered in connection with a separate offer 
of major medical or ``primary'' group health coverage under the plan, 
in order to meet the statutory criterion that such benefits are 
``otherwise not an integral part of the plan.'' To meet this criterion, 
limited-scope vision or dental benefits can be provided without 
connection to a primary plan, or the limited-scope vision or dental 
benefits can be offered separately from the major medical or 
``primary'' coverage under the plan (as described in these final 
regulations). Under the 2013 proposed regulations, in order to satisfy 
the statutory excepted benefits criterion that such benefits cannot 
otherwise be ``an integral part of the plan,'' participants must be 
able to decline coverage. These final regulations provide that this 
criterion is satisfied if participants may decline coverage or the 
claims for the benefits are administered under a contract separate from 
claims administration for any other benefits under the plan.
    While coverage for long-term care benefits is not the focus of this 
rule, such benefits are also subject to the ``not an integral part of a 
group health plan'' standard in order to be classified as excepted 
benefits. Accordingly, the revisions discussed in this section of the 
preamble also apply to coverage of long-term care benefits.

B. Employee Assistance Programs

    EAPs are typically programs offered by employers that can provide a 
wide-ranging set of benefits to address circumstances that might 
otherwise adversely affect employees' work and health. Benefits may 
include referral services and short-term substance use disorder or 
mental health counseling, as well as financial counseling and legal 
services. They are typically available free of charge to employees and 
are often provided through third-party vendors. Benefits for medical 
care provided through an EAP would generally be considered group health 
plan coverage (and, therefore, minimum essential coverage), which would 
generally be subject to the HIPAA and Affordable Care Act market reform 
requirements (and could make individuals receiving benefits under an 
EAP ineligible to receive a premium tax credit under section 36B of the 
Code if they enroll in coverage under a QHP through the Exchange), 
unless the EAP meets the criteria for being excepted benefits.
    Since enactment of the Affordable Care Act, various stakeholders 
have asked the Departments to treat EAPs as excepted benefits for 
reasons analogous to the arguments described above with respect to 
vision and dental benefits. Specifically, some employers represented 
that compliance with the prohibition on annual dollar limits could be 
problematic as such benefits are typically very limited, and that EAPs 
generally are intended to provide benefits in addition to those 
provided under other group health plans sponsored by employers. 
Moreover, consumer groups have represented that EAPs with very limited 
benefits, which may be the only coverage offered to employees, could 
make such employees ineligible to receive a premium tax credit under 
section 36B of the Code if they enroll in coverage under a QHP through 
the Exchange. At the same time, the Departments recognize that no 
universal definition exists for EAPs, and are concerned that employers 
not act to shift primary coverage to a separate ``EAP plan,'' exempt 
from the consumer protection provisions of title XXVII of the PHS Act, 
part 7 of ERISA, and chapter 100 of the Code, including the mental 
health parity provisions.\18\
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    \18\ The mental health parity provisions are included in PHS Act 
section 2726, ERISA section 712, and Code section 9812. See also 
final regulations on mental health parity, published at 78 FR 68239 
(November 13, 2013).
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    In guidance issued on September 13, 2013, the Departments stated 
their intent to amend the excepted benefits regulations with respect to 
EAPs.\19\ The guidance also provided transition relief, stating, 
``[u]ntil rulemaking is finalized, through at least 2014, the 
Departments will consider an employee assistance program or EAP to 
constitute excepted benefits only if the employee assistance

[[Page 59133]]

program or EAP does not provide significant benefits in the nature of 
medical care or treatment. For this purpose, employers may use a 
reasonable, good faith interpretation of whether an employee assistance 
program or EAP provides significant benefits in the nature of medical 
care or treatment.''
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    \19\ See IRS Notice 2013-54 (available at http://www.irs.gov/pub/irs-drop/n-13-54.pdf) and DOL Technical Release 2013-03 
(available at http://www.dol.gov/ebsa/newsroom/tr13-03.html), Q&A 9. 
See also CMS Insurance Standards Bulletin--Application of Affordable 
Care Act Provisions to Certain Healthcare Arrangements (available at 
http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/cms-hra-notice-9-16-2013.pdf).
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    The 2013 proposed regulations set forth criteria for an EAP to 
qualify as excepted benefits beginning in 2015. Under the 2013 proposed 
regulations, benefits provided under EAPs are excepted if four criteria 
are met. First, the program cannot provide significant benefits in the 
nature of medical care. The Departments invited comments on how to 
define ``significant.'' For example, the Departments requested comments 
as to whether a program that provides no more than 10 outpatient visits 
for mental health or substance use disorder counseling, an annual 
wellness checkup, immunizations, and diabetes counseling, with no 
inpatient care benefits, should be considered to provide significant 
benefits in the nature of medical care.\20\
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    \20\ Other examples of EAPs that do not provide significant 
benefits in the nature of medical care, discussed in IRS Notice 
2004-50 Q&A-10 include (1) an EAP with benefits that consist 
primarily of free or low-cost confidential short-term counseling 
(which could address substance abuse, alcoholism, mental health or 
emotional disorders, financial or legal difficulties, and dependent 
care needs) to identify an employee's problem that may affect job 
performance and, when appropriate, referrals to an outside 
organization, facility or program to assist the employee in 
resolving the problem; and (2) a wellness program that provides a 
wide-range of education and fitness services (also including sports 
and recreation activities, stress management, and health screenings) 
designed to improve the overall health of the employees and prevent 
illness, where any costs charged to the individual for participating 
in the services are separate from the individual's coverage under 
the health plan.
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    The second proposed criterion for an EAP to constitute excepted 
benefits under the 2013 proposed regulations is that its benefits 
cannot be coordinated with benefits under another group health plan. 
The Departments outlined three conditions to meet this proposed 
criterion: (i) participants in the separate group health plan must not 
be required to exhaust benefits under the EAP (making the EAP a 
``gatekeeper'') before an individual is eligible for benefits under the 
other group health plan; (ii) participant eligibility for benefits 
under the EAP must not be dependent on participation in another group 
health plan; and (iii) benefits under the EAP must not be financed by 
another group health plan.
    The third proposed criterion for an EAP to constitute excepted 
benefits under the 2013 proposed regulations is that no employee 
premiums or contributions be required to participate in the EAP. The 
fourth proposed criterion is that there is no cost sharing under the 
EAP.
    The criteria in the 2013 proposed regulations were intended to 
ensure that employers are able to continue offering EAPs as 
supplemental benefits to other coverage, and to ensure that in 
circumstances in which an EAP with limited benefits is the only 
coverage, or the only affordable coverage provided to an employee, that 
the coverage does not unreasonably disqualify an employee from 
potential eligibility to receive a premium tax credit under section 36B 
of the Code if the employee enrolls in coverage under a QHP through the 
Exchange. The Departments requested comments on whether the criteria 
proposed are sufficient to prevent the potential for abuse, including 
the evasion of compliance with the mental health parity provisions, and 
whether different or additional standards should be included.
    The Departments received a number of comments relating to the 
treatment of EAPs as excepted benefits. While the comments generally 
supported treating EAPs as excepted benefits, there were many 
suggestions for clarifying or modifying the specific requirements in 
the 2013 proposed regulations for EAPs to constitute excepted benefits. 
In particular, many comments included suggestions for clarifying what 
is meant by significant benefits in the nature of medical care. Most of 
these comments raised concerns about the suggestion in the preamble to 
propose using numerical limits on the number of visits.
    Some comments requested that EAPs be allowed to provide wellness 
and disease management programs, provided such programs do not provide 
significant benefits in the nature of medical care. However, treating 
wellness programs as excepted benefits by including them in an EAP 
would circumvent consumer protections contained in the statutory 
standards for wellness programs under section 2705(j) of the PHS Act as 
enacted by the Affordable Care Act. This suggestion is not adopted in 
these final regulations.
    Several comments opposed the prohibition in the 2013 proposed 
regulations on an EAP being financed by the other group health plan to 
qualify as excepted benefits. In particular, the comments noted that 
often the EAP and the group health plan are financed by a single 
payment or otherwise combined, and the requirement would result in 
disruptions of existing commercial arrangements. Moreover, these 
comments noted, the other requirements sufficiently protected against 
inappropriate coordination of the EAP benefits with the benefits of the 
other group health plan. In addition, there were a number of comments 
concerning EAPs that were beyond the scope of the 2013 proposed 
regulations.
    After consideration of the comments, the Departments are finalizing 
the proposal, with one modification related to financing, described 
below.\21\ As with the 2013 proposed regulations, these final 
regulations provide that, for an EAP to constitute excepted benefits, 
the EAP must satisfy four requirements.
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    \21\ In the 2013 proposed regulations, the requirements 
regarding EAPs were proposed in paragraph (c)(3)(vii) of 26 CFR 
54.9831-1, 29 CFR 2590.732, and 45 CFR 146.145. However, HHS 
regulations published on October 30, 2013 and effective December 30, 
2013 redesignated 45 CFR 146.145(c) as paragraph (b) (78 FR at 
65092). Additionally, because these regulations are finalizing only 
the requirements related to dental and vision benefits and EAP 
benefits, these final regulations have been renumbered so that the 
requirements regarding EAPs are now contained in paragraph 
(c)(3)(vi) of 26 CFR 54.9831-1 and 29 CFR 2590.732, and in paragraph 
(b)(3)(vi) of 45 CFR 146.145. As stated earlier in this preamble, 
the Departments also intend to publish regulations that address 
limited wraparound coverage in the future, taking into account the 
extensive comments received on this issue. Those provisions are 
intended to be codified in paragraph (c)(3)(vii) of 26 CFR 54.9831-1 
and 29 CFR 2590.732, and in paragraph (b)(3)(vii) of 45 CFR 146.145.
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    The first requirement of the 2013 proposed regulations and these 
final regulations is that the EAP does not provide significant benefits 
in the nature of medical care. For this purpose, the amount, scope, and 
duration of covered services are taken into account. For example, an 
EAP that provides only limited, short-term outpatient counseling for 
substance use disorder services (without covering inpatient, 
residential, partial residential or intensive outpatient care) without 
requiring prior authorization or review for medical necessity does not 
provide significant benefits in the nature of medical care. At the same 
time, a program that provides disease management services (such as 
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 may, through 
guidance, provide additional clarification in the future regarding when 
a program provides significant benefits in the nature of medical care.
    The second requirement of these final regulations is that for an 
EAP to constitute excepted benefits, its benefits cannot be coordinated 
with the benefits under another group health plan. This requirement has 
two elements: (1)

[[Page 59134]]

Participants in the other group health plan must not be required to use 
and exhaust benefits under the EAP (making the EAP a ``gatekeeper'') 
before an individual is eligible for benefits under the other group 
health plan; and (2) participant eligibility for benefits under the EAP 
must not be dependent on participation in another group health plan. In 
response to comments, these final regulations do not include the 
requirement set forth in the 2013 proposed regulations that EAP 
benefits cannot be financed by another group health plan in order to 
qualify as excepted benefits.
    The third requirement of the 2013 proposed regulations and these 
final regulations for EAPs to constitute excepted benefits is that no 
employee premiums or contributions may be required as a condition of 
participation in the EAP. Finally, as with the 2013 proposed 
regulations, the final regulations provide that an EAP that constitutes 
excepted benefits may not impose any cost-sharing requirements.

C. Applicability Date and Reliance

    In the preamble to the 2013 proposed regulations, the Departments 
stated that, until rulemaking is finalized, through at least 2014, for 
purposes of enforcing the provisions of title XXVII of the PHS Act, 
part 7 of ERISA, and chapter 100 of the Code, the Departments will 
consider dental and vision benefits, and EAP benefits, meeting the 
conditions of the 2013 proposed regulations to qualify as excepted 
benefits and that, to the extent final regulations or other guidance 
with respect to vision or dental benefits or EAPs is more restrictive 
on plans and issuers than the 2013 proposed regulations, the final 
regulations or other guidance will not be effective prior to January 1, 
2015. These final regulations apply to group health plans and group 
health insurance issuers for plan years beginning on or after January 
1, 2015. They do not apply to health insurance issuers offering 
individual health insurance coverage. Until the applicability date of 
these final regulations, the Departments will consider dental and 
vision benefits and EAP benefits meeting the conditions of the 2013 
proposed regulations or these final regulations to qualify as excepted 
benefits.

III. Economic Impact and Paperwork Burden

A. Summary--Department of Labor and Department of Health and Human 
Services

    As stated above, these final regulations eliminate the requirement 
under the HIPAA regulations that participants pay an additional premium 
or contribution for limited-scope vision or dental benefits to qualify 
as excepted benefits, and set forth four requirements for an EAP to 
constitute excepted benefits.

B. Executive Order 12866--Department of Labor and Department of Health 
and Human Services

    OMB has determined that this regulatory action is significant 
within the meaning of section 3(f)(4) of the Executive Order, and the 
Departments accordingly provide the following assessment of its 
potential benefits and costs. The Departments expect the impact of 
these final regulations to be limited.
    Specifically, with respect to vision and dental benefits, the final 
regulations allow group health plans to offer dental and vision 
benefits to employees without charging a premium or contribution. As 
stated earlier in the preamble, this eliminates a difference that would 
otherwise exist between insured and self-insured coverage. With respect 
to EAPs, the final regulations clarify the conditions that be must be 
satisfied for such benefits to constitute excepted benefits, which are 
not subject to the group market requirements under the PHS Act, ERISA, 
and the Code.
    Some employers represented to the Departments that compliance with 
the Affordable Care Act presented challenges for their limited-scope 
vision and dental benefits and EAPs. The clarifications provided in 
these final regulations will benefit employees by ensuring continued 
access to these benefits. The Departments expect these final 
regulations to have some costs, but these costs will be limited because 
the Departments expect the primary result of the final regulations will 
be that employers providing limited-scope dental and vision and EAP 
benefits will continue to provide such benefits and that the number of 
employers who will begin providing such benefits for the first time 
will be small.

C. Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to Federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely 
to have a significant economic impact on a substantial number of small 
entities. Unless an agency certifies that a proposed rule is not likely 
to have a significant economic impact on a substantial number of small 
entities, section 603 of RFA requires that the agency present an 
initial regulatory flexibility analysis at the time of the publication 
of the notice of proposed rulemaking describing the impact of the rule 
on small entities and seeking public comment on such impact. Small 
entities include small businesses, organizations and governmental 
jurisdictions.
    For purposes of the RFA, the Departments continue to consider a 
small entity to be an employee benefit plan with fewer than 100 
participants. The basis for this definition is found in section 
104(a)(2) of the act, which permits the Secretary of Labor to prescribe 
simplified annual reports for pension plans that cover fewer than 100 
participants. Pursuant to the authority of section 104(a)(3), the 
Department of Labor has previously issued at 29 CFR 2520.104-20, 
2520.104-21, 2520.104-41, 2520.104-46 and 2520.104b-10 certain 
simplified reporting provisions and limited exemptions from reporting 
and disclosure requirements for small plans, including unfunded or 
insured welfare plans covering fewer than 100 participants and 
satisfying certain other requirements.
    Further, while some large employers may have small plans, in 
general small employers maintain most small plans. Thus, the 
Departments believe that assessing the impact of these final 
regulations on small plans is an appropriate substitute for evaluating 
the effect on small entities. The definition of small entity considered 
appropriate for this purpose differs, however, from a definition of 
small business that is based on size standards promulgated by the Small 
Business Administration (13 CFR 121.201) pursuant to the Small Business 
Act (15 U.S.C. 631 et seq.).
    As noted above, the Departments expect the costs imposed by these 
regulations to be limited for those employers that provide dental, 
vision and EAP benefits, and that they will not affect employers who do 
not provide such benefits. The final regulations allow employers to 
decide based on their own costs and benefits what action to take. This 
is true for large and small plans alike. Accordingly, the Departments 
believe that these final regulations do not have a significant economic 
impact on a substantial number of small entities. Accordingly, pursuant 
to section 605(b) of the RFA, the Departments hereby certify that these 
final regulations will not have a significant economic impact on a 
substantial number of small entities.

[[Page 59135]]

D. Special Analyses--Department of the Treasury

    For purposes of the Department of the Treasury it has been 
determined that these final regulations are not a significant 
regulatory action as defined in Executive Order 12866, as supplemented 
by Executive Order 13563. Therefore, a regulatory assessment is not 
required. It has also been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these final regulations, and, because these final regulations do not 
impose a collection of information on small entities, a Regulatory 
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. 
chapter 6) is not required. Pursuant to section 7805(f) of the Code, 
these final regulations have been submitted to the Small Business 
Administration for comment on its impact on small business.

E. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1501 et seq.), as well as Executive Order 12875, these final 
regulations do not include any Federal mandate that may result in 
expenditures by State, local, or tribal governments, or the private 
sector, which may impose an annual burden of $100 million adjusted for 
inflation since 1995.

F. Federalism--Department of Labor and Department of Health and Human 
Services

    Executive Order 13132 outlines fundamental principles of 
federalism. It requires adherence to specific criteria by Federal 
agencies in formulating and implementing policies that have 
``substantial direct effects'' on the States, the relationship between 
the national government and States, or on the distribution of power and 
responsibilities among the various levels of government. Federal 
agencies promulgating regulations that have these federalism 
implications must consult with State and local officials, and describe 
the extent of their consultation and the nature of the concerns of 
State and local officials in the preamble to the final regulation.
    In the Departments' view, the final regulations, by clarifying 
policy regarding certain excepted benefits options that can be designed 
by employers to support their employees, would provide more certainty 
to employers and others in the regulated community as well as States 
and political subdivisions regarding the treatment of such arrangements 
under the PHS Act, ERISA and the Code. Through the regular course of 
outreach the Departments normally engage in with officials of States 
(and political subdivisions), the Departments are aware of no special 
federalism implications presented by these final regulations. The 
Departments will continue to conduct regular outreach activities with 
States.

G. Congressional Review Act

    These final regulations are subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.), and will be transmitted to the Congress 
and to the Comptroller General for review in accordance with such 
provisions.

IV. Statutory Authority

    The Department of the Treasury regulations are adopted pursuant to 
the authority contained in sections 7805 and 9833 of the Code.
    The Department of Labor regulations are adopted pursuant to the 
authority contained in 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 
1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 
1191c; sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b), 
Public Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), 
Public Law 110-343, 122 Stat. 3765; Public Law 110-460, 122 Stat. 5123; 
Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9, 2012).
    The Department of Health and Human Services regulations are adopted 
pursuant to the authority contained in sections 2701 through 2763, 
2791, and 2792 of the PHS Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.

List of Subjects

26 CFR Part 54

    Excise taxes, Health care, Health insurance, Pensions, Reporting 
and recordkeeping requirements.

29 CFR Part 2590

    Continuation coverage, Disclosure, Employee benefit plans, Group 
health plans, Health care, Health insurance, Medical child support, 
Reporting and recordkeeping requirements.

45 CFR Part 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue 
Service.

    Approved: September 25, 2014.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).

    Signed this 25th day of September, 2014.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.

    Dated: September 11, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.

    Dated: September 19, 2014.
Sylvia Burwell,
Secretary, Department of Health and Human Services.

DEPARTMENT OF THE TREASURY

Internal Revenue Service

    Accordingly, 26 CFR part 54 is amended as follows:

PART 54--PENSION EXCISE TAXES

0
Paragraph 1. The authority citation for part 54 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805. * * *

    Section 54.9831-1 is also issued under 26 U.S.C. 9833; * * *

0
Par. 2. Section 54.9831-1 is amended by revising paragraphs (c)(3)(i) 
and (c)(3)(ii), and adding paragraph (c)(3)(vi), to read as follows:

Sec.  54.9831-1  Special rules relating to group health plans.

* * * * *
    (c) * * *
    (3) * * *
    (i) In general. Limited-scope dental benefits, limited-scope vision 
benefits, or long-term care benefits are excepted if they are provided 
under a separate policy, certificate, or contract of insurance, or are 
otherwise not an integral part of a group health plan as described in 
paragraph (c)(3)(ii) of this section. In addition, benefits provided 
under a health flexible spending arrangement are excepted benefits if 
they satisfy the requirements of paragraph (c)(3)(v) of this section. 
Furthermore, benefits provided under an employee assistance program are 
excepted benefits if they satisfy the requirements of paragraph 
(c)(3)(vi) of this section.
    (ii) Not an integral part of a group health plan. For purposes of 
this

[[Page 59136]]

paragraph (c)(3), benefits are not an integral part of a group health 
plan (whether the benefits are provided through the same plan, a 
separate plan, or as the only plan offered to participants) if either 
paragraph (c)(3)(ii)(A) or (B) are satisfied.
    (A) Participants may decline coverage. For example, a participant 
may decline coverage if the participant can opt out of the coverage 
upon request, whether or not there is a participant contribution 
required for the coverage.
    (B) Claims for the benefits are administered under a contract 
separate from claims administration for any other benefits under the 
plan.
* * * * *
    (vi) Employee assistance programs. Benefits provided under employee 
assistance programs are excepted if they satisfy all of the 
requirements of this paragraph (c)(3)(vi).
    (A) The program does not provide significant benefits in the nature 
of medical care. For this purpose, the amount, scope and duration of 
covered services are taken into account.
    (B) The benefits under the employee assistance program are not 
coordinated with benefits under another group health plan, as follows:
    (1) Participants in the other group health plan must not be 
required to use and exhaust benefits under the employee assistance 
program (making the employee assistance program a gatekeeper) before an 
individual is eligible for benefits under the other group health plan; 
and
    (2) Participant eligibility for benefits under the employee 
assistance program must not be dependent on participation in another 
group health plan.
    (C) No employee premiums or contributions are required as a 
condition of participation in the employee assistance program.
    (D) There is no cost sharing under the employee assistance program.
* * * * *

DEPARTMENT OF LABOR

Employee Benefits Security Administration

    For the reasons stated in the preamble, the Department of Labor 
amends 29 CFR part 2590 as follows:

PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS

0
3. The authority citation for part 2590 is revised to read as follows:

    Authority:  29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1185d, 1191, 1191a, 1191b, and 
1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), 
Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 12(d), 
Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. 
L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-52, 124 Stat. 
1029; Secretary of Labor's Order 1-2011, 77 FR 1088 (January 9, 
2012).

0
4. Section 2590.732 is amended by revising paragraphs (c)(3)(i) and 
(c)(3)(ii), and adding paragraph (c)(3)(vi), to read as follows:

Sec.  2590.732  Special rules relating to group health plans.

* * * * *
    (c) * * *
    (3) * * *
    (i) In general. Limited-scope dental benefits, limited-scope vision 
benefits, or long-term care benefits are excepted if they are provided 
under a separate policy, certificate, or contract of insurance, or are 
otherwise not an integral part of a group health plan as described in 
paragraph (c)(3)(ii) of this section. In addition, benefits provided 
under a health flexible spending arrangement are excepted benefits if 
they satisfy the requirements of paragraph (c)(3)(v) of this section. 
Furthermore, benefits provided under an employee assistance program are 
excepted benefits if they satisfy the requirements of paragraph 
(c)(3)(vi) of this section.
    (ii) Not an integral part of a group health plan. For purposes of 
this paragraph (c)(3), benefits are not an integral part of a group 
health plan (whether the benefits are provided through the same plan, a 
separate plan, or as the only plan offered to participants) if either 
paragraph (c)(3)(ii)(A) or (B) are satisfied.
    (A) Participants may decline coverage. For example, a participant 
may decline coverage if the participant can opt out of the coverage 
upon request, whether or not there is a participant contribution 
required for the coverage.
    (B) Claims for the benefits are administered under a contract 
separate from claims administration for any other benefits under the 
plan.
* * * * *
    (vi) Employee assistance programs. Benefits provided under employee 
assistance programs are excepted if they satisfy all of the 
requirements of this paragraph (c)(3)(vi).
    (A) The program does not provide significant benefits in the nature 
of medical care. For this purpose, the amount, scope and duration of 
covered services are taken into account.
    (B) The benefits under the employee assistance program are not 
coordinated with benefits under another group health plan, as follows:
    (1) Participants in the other group health plan must not be 
required to use and exhaust benefits under the employee assistance 
program (making the employee assistance program a gatekeeper) before an 
individual is eligible for benefits under the other group health plan; 
and
    (2) Participant eligibility for benefits under the employee 
assistance program must not be dependent on participation in another 
group health plan.
    (C) No employee premiums or contributions are required as a 
condition of participation in the employee assistance program.
    (D) There is no cost sharing under the employee assistance program.
* * * * *

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Subtitle A

    For the reasons stated in the preamble, the Department of Health 
and Human Services amends 45 CFR part 146 as set forth below:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
5. The authority citation for part 146 continues to read as follows:

    Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and 
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 
through 300gg-23, 300gg-91, and 300gg-92).

0
6. Section 146.145 is amended by revising paragraphs (b)(3)(i) and 
(b)(3)(ii), and adding paragraph (b)(3)(vi), to read as follows:

Sec.  146.145  Special rules relating to group health plans.

* * * * *
    (b) * * *
    (3) * * *
    (i) In general. Limited-scope dental benefits, limited-scope vision 
benefits, or long-term care benefits are excepted if they are provided 
under a separate policy, certificate, or contract of insurance, or are 
otherwise not an integral part of a group health plan as described in 
paragraph (b)(3)(ii) of this section. In addition, benefits provided 
under a health flexible spending arrangement are excepted benefits if 
they satisfy the requirements of paragraph (b)(3)(v) of this section. 
Furthermore, benefits provided under an employee assistance program are 
excepted benefits if they satisfy the requirements of paragraph 
(b)(3)(vi) of this section.
    (ii) Not an integral part of a group health plan. For purposes of 
this

[[Page 59137]]

paragraph (b)(3), benefits are not an integral part of a group health 
plan (whether the benefits are provided through the same plan, a 
separate plan, or as the only plan offered to participants) if either 
paragraph (b)(3)(ii)(A) or (B) are satisfied.
    (A) Participants may decline coverage. For example, a participant 
may decline coverage if the participant can opt out of the coverage 
upon request, whether or not there is a participant contribution 
required for the coverage.
    (B) Claims for the benefits are administered under a contract 
separate from claims administration for any other benefits under the 
plan.
* * * * *
    (vi) Employee assistance programs. Benefits provided under employee 
assistance programs are excepted if they satisfy all of the 
requirements of this paragraph (b)(3)(vi).
    (A) The program does not provide significant benefits in the nature 
of medical care. For this purpose, the amount, scope and duration of 
covered services are taken into account.
    (B) The benefits under the employee assistance program are not 
coordinated with benefits under another group health plan, as follows:
    (1) Participants in the other group health plan must not be 
required to use and exhaust benefits under the employee assistance 
program (making the employee assistance program a gatekeeper) before an 
individual is eligible for benefits under the other group health plan; 
and
    (2) Participant eligibility for benefits under the employee 
assistance program must not be dependent on participation in another 
group health plan.
    (C) No employee premiums or contributions are required as a 
condition of participation in the employee assistance program.
    (D) There is no cost sharing under the employee assistance program.
* * * * *

[FR Doc. 2014-23323 Filed 9-26-14; 4:15 pm]
BILLING CODE 4150-28-P; 4830-01-P; 4510-29-P]
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