77632 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 

sites in Manchester and Nashua if 

elevated CO levels are recorded in 

Londonderry. 

VII. Statutory and Executive Order 

Reviews 

Under the Clean Air Act, the 

Administrator is required to approve a 

SIP submission that complies with the 

provisions of the Act and applicable 

Federal regulations. 42 U.S.C. 7410(k); 

40 CFR 52.02(a). Thus, in reviewing SIP 

submissions, EPA’s role is to approve 

state choices, provided that they meet 

the criteria of the Clean Air Act. 

Accordingly, this proposed action 

merely approves state law as meeting 

Federal requirements and does not 

impose additional requirements beyond 

those imposed by state law. For that 

reason, this proposed action: 

• Is not a ‘‘significant regulatory 

action’’ subject to review by the Office 

of Management and Budget under 

Executive Order 12866 (58 FR 51735, 

October 4, 1993); 

• does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act (44 

U.S.C. 3501 et seq.); 

• is certified as not having a 

significant economic impact on a 

substantial number of small entities 

under the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.); 

• does not contain any unfunded 

mandate or significantly or uniquely 

affect small governments, as described 

in the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4); 

• does not have Federalism 

implications as specified in Executive 

Order 13132 (64 FR 43255, August 10, 

1999); 

• is not an economically significant 

regulatory action based on health or 

safety risks subject to Executive Order 

13045 (62 FR 19885, April 23, 1997); 

• is not a significant regulatory action 

subject to Executive Order 13211 (66 FR 

28355, May 22, 2001); 

• is not subject to requirements of 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) because 

application of those requirements would 

be inconsistent with the Clean Air Act; 

and 

• does not provide EPA with the 

discretionary authority to address, as 

appropriate, disproportionate human 

health or environmental effects, using 

practicable and legally permissible 

methods, under Executive Order 12898 

(59 FR 7629, February 16, 1994). 

In addition, this rule does not have 

tribal implications as specified by 

Executive Order 13175 (65 FR 67249, 

November 9, 2000), because the SIP is 

not approved to apply in Indian country 

located in the state, and EPA notes that 

it will not impose substantial direct 

costs on tribal governments or preempt 

tribal law. 

List of Subjects in 40 CFR Part 52 

Environmental protection, Air 

pollution control, Carbon monoxide, 

Incorporation by reference, 

Intergovernmental relations, Lead, 

Nitrogen dioxide, Ozone, Particulate 

matter, Reporting and recordkeeping 

requirements, Sulfur oxides, Volatile 

organic compounds. 

Authority: 42 U.S.C. 7401 et seq. 

Dated: December 10, 2013. 

Michael P. Kenyon, 

Acting Regional Administrator, EPA New 

England. 

[FR Doc. 2013–30576 Filed 12–23–13; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[REG–143172–13] 

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–P] 

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: Proposed rules. 

SUMMARY: This document contains 

proposed rules that would amend the 

regulations regarding excepted benefits 

under the Employee Retirement Income 

Security Act of 1974, the Internal 

Revenue 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. 

DATES: Comments are due on or before 

February 24, 2014. 

ADDRESSES: Written comments may be 

submitted to the Department of Labor as 

specified below. Any comment that is 

submitted will be shared with the other 

Departments and will also be made 

available to the public. Warning: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Comments, identified by ‘‘Excepted 

Benefits,’’ may be submitted by one of 

the following methods: 

Federal eRulemaking Portal: http://

www.regulations.gov. Follow the 

instructions for submitting comments. 

Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: Excepted Benefits. 

Comments received will be posted 

without change to www.regulations.gov 

and available for public inspection at 

the Public Disclosure Room, N–1513, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Washington, DC 20210, 

including any personal information 

provided. 

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 (410) 786–1565. 

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) 


sroberts on DSK5SPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 77633 

1Public Law 104–204, 110 Stat. 2944 (September 

26, 1996). 

2Public Law 110–343, 122 Stat. 3881 (October 3, 

2008). 

3Public Law 104–204, 110 Stat. 2935 (September 

26, 1996). 

4Public Law 105–277, 112 Stat. 2681–436 

(October 21, 1998). 

5Public Law 110–233, 122 Stat. 881 (May 21, 

2008). 

6Public Law 111–3, 123 Stat. 65 (February 4, 

2009). 

7Public Law 110–381, 122 Stat. 4081 (October 9, 

2008). 

8The 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. (They are collectively 

known as the ‘‘Affordable Care Act’’.) 

9The 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. 

10See 62 FR 16894, 16903 (Apr. 8, 1997), which 

states that these benefits are generally not health 

insurance coverage). 

11 26 CFR 54.9831–1(c)(3)(v); 29 CFR 

2590.732(c)(3)(v); 45 CFR 146.145(c)(3)(v). 

12 26 CFR 54.9831–1(c)(4); 29 CFR 2590.732(c)(4); 

45 CFR 146.145(c)(4). See also Q7 in FAQs about 

Affordable Care Act Implementation Part XI, 

available at http://www.dol.gov/ebsa/faqs/faqaca11.html. 

13 26 CFR 54.9831–1(c)(5); 29 CFR 2590.732(c)(5); 

45 CFR 146.145(c)(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/hipaa_08_01_508.pdf); and IRS Notice 

2008–23 (available at http://www.irs.gov/irb/2008- 

07_IRB/ar09.html). 

14 69 FR 78720 (Dec. 30, 2004). 

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

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. 

II. Overview of the Proposed 

Regulations 

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. 

The second category of excepted 

benefits is limited excepted benefits, 

which may include limited scope vision 

or dental benefits, and benefits for longterm care, nursing home care, home 

health care, or community based care. 

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 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 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. 

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. 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

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

These proposed regulations would 

amend the second category of excepted 

benefits, limited excepted benefits. 

A. Dental and Vision Benefits 

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.) 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 


sroberts on DSK5SPTVN1PROD with PROPOSALS
77634 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 

15Under paragraph (c)(3)(v) of 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. 

16See PHS Act section 2708. See also proposed 

regulations, published on March 21, 2013, at 78 FR 

17313, stating that ‘‘the Departments will consider 

compliance with these proposed regulations as 

compliance with PHS Act section 2708 at least 

through the end of 2014.’’ (78 FR at 17317). 

17See PHS Act section 2711 and its implementing 

regulations at 26 CFR 54.9815–2711T, 29 CFR 

2590.715–2711, and 45 CFR 147.126. 

18For more information on grandfathered health 

plans, see section 1251 of the Affordable Care Act 

and its implementing regulations at 26 CFR 

54.9815–1251T, 29 CFR 2590.715–1251, and 45 

CFR 147.140. For more information on essential 

health benefits, see 45 CFR 156.110, incorporated 

into the regulations through 78 FR 12834, Patient 

Protection and Affordable Care Act; Standards 

Related to Essential Health Benefits, Actuarial 

Value, and Accreditation; Final Rule, Feb. 25, 2013. 

19 45 CFR 156.100, 78 FR 12840. 

20Section 4980H of the Code generally provides 

that an applicable large employer is subject to an 

assessable payment if one or more full-time 

employees is certified to the employer as having 

received an applicable premium tax credit or costsharing reduction and either (1) the employer fails 

to offer to its full-time employees (and their 

dependents) the opportunity to enroll in minimum 

essential coverage (MEC) under an eligible 

employer sponsored plan, or (2) the employer offers 

its full-time employees (and their dependents) the 

opportunity to enroll in MEC under an eligible 

employer-sponsored plan but the coverage fails to 

meet requirements for affordability and minimum 

value. Section 5000A of the Code provides that 

MEC includes group health plans that are selfinsured or are offered in the large or small group 

market within a State. Under section 5000A, 

nonexempt individuals must either maintain MEC 

for themselves and any nonexempt family members 

or include an additional payment with their Federal 

income tax return. Section 36B of the Code allows 

a premium tax credit to certain taxpayers who 

enroll (or whose family members enroll) in a 

qualified health plan (QHP) through an Exchange. 

The credit subsidizes a portion of the premiums for 

the QHP. In general, the premium tax credit may 

not subsidize coverage for an individual who is 

eligible for other MEC. If the MEC is eligible 

employer-sponsored coverage, however, an 

individual is treated as eligible for that coverage 

only if the coverage is affordable and provides 

minimum value or if the individual enrolls in the 

coverage. 

21See Congressional Budget Office, CBO and JCT 

Estimates of the Effects of the Affordable Care Act 

on the Number of People Obtaining EmployerBased Insurance, March 2012, at Table 2, available 

at http://www.cbo.gov/sites/default/files/cbofiles/

attachments/03-15-ACA_and_Insurance_2.pdf. See 

also Carter C. Price & Evan Saltzman, Delaying the 

Employer Mandate, July 2013, available at http:// 

www.rand.org/pubs/research_reports/RR411.html. 

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 it. By contrast, health 

FSA benefits could qualify as excepted 

benefits without any participant 

contribution under the HIPAA 

regulations.15

Following enactment of the 

Affordable Care Act, various 

stakeholders asked the Departments to 

amend the 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 the Affordable Care 

Act provisions (including the 90-day 

waiting period limitation 16 and the 

prohibition on annual limits) 17

presented additional challenges. These 

employers argued that, where employers 

are providing such benefits on a selfinsured 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 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 

unaffordable to individuals, but limitedscope vision or dental coverage that is 

affordable, such limited-scope vision or 

dental coverage should qualify as 

excepted benefits so as not to make such 

individuals ineligible for the premium 

tax credit under section 36B of the Code 

for enrolling in coverage through an 

Affordable Insurance Exchange, or 

‘‘Exchange’’ (also called a Health 

Insurance Marketplace or Marketplace). 

In response to these concerns, and to 

level the playing field between insured 

and self-insured coverage, these 

proposed regulations would 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 benefits that are not an 

integral part of a plan (and therefore as 

excepted benefits). The Departments 

invite comments on this approach. 

B. Limited Wraparound Coverage 

The Affordable Care Act requires that 

non-grandfathered health plans in the 

individual and small group markets 

cover essential health benefits (EHB), 

which include items and services in ten 

statutorily specified categories that are 

equal in scope to a typical employer 

plan.18 Because employer group 

coverage varies from State to State, HHS 

regulations at 45 CFR 156.100 provide 

for States to adopt individual 

benchmarks from among a range of 

primarily small group plan offerings in 

each State to serve as a reference plan, 

reflecting both the scope of services and 

limits offered by a typical employer 

plan in that State.19

Prior to the Affordable Care Act, there 

was no Federal requirement that health 

coverage in the individual and small 

group market include a standardized set 

of benefits such as those included in 

EHB. Self-insured group health plans 

and health insurance coverage in the 

large group market often cover items 

and services in addition to the types of 

services included in EHB. For example, 

items and services that either cannot be 

or are unlikely to be included in EHB 

include routine adult vision and dental 

care, long-term/custodial nursing home 

care, non-medically necessary pediatric 

orthodontia, and coverage that extends 

beyond the benchmark plan’s coverage 

of wellness programs, manipulative 

treatment, infertility, home health care, 

private duty nursing, hospice, or certain 

non-traditional treatments. In addition, 

some of these group health plans may 

provide broader provider networks, in 

terms of the number and types of 

contracted providers, than those often 

included in the individual and small 

group market. Federal law is designed to 

encourage employers to provide group 

coverage for their employees.20

Experts suggest that most workers 

who are offered minimum value 

employer-sponsored coverage will not 

meet the criteria for the premiums to be 

considered to be ‘‘unaffordable’’ and 

thus not qualify for the premium tax 

credit for enrolling in coverage through 

an Exchange.21 Nevertheless, in some 

cases, employer plans may be 

unaffordable for some employees. These 

individuals might purchase coverage 

through an Exchange with a premium 

tax credit. While such individuals might 

pay lower premiums for coverage 

through an Exchange, they might also 

have less generous coverage in terms of 

benefits or a different provider network 

than they would have had in their group 

health plan. Some group health plan 

sponsors have asked whether 

wraparound coverage could be provided 

for employees for whom the employer 

premium is unaffordable and who 

obtain coverage through an Exchange. 

This approach would allow employers 


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Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 77635 

22 If an employer provides more than one primary 

plan option (for example, a health maintenance 

organization option and a preferred provider 

organization option), and one primary plan does not 

satisfy the 15% standard but another plan does, the 

Departments would consider the 15% standard to 

be met if the average value of the primary plan 

options meets the 15% standard. 

23Under the COBRA rules, plans are generally 

permitted to charge up to 102 percent of the 

applicable premium. The cost of coverage for 

purposes of these proposed regulations is 100 

percent of the applicable premium, not 102 percent 

of the applicable premium that the plan is generally 

permitted to charge under the COBRA rules. 

to provide such employees with overall 

coverage that is comparable to the group 

health plan coverage, taking into 

account both the wraparound coverage 

and the Exchange coverage. 

Accordingly, the Departments have 

developed these proposed regulations to 

treat certain wraparound coverage 

provided under a group health plan as 

excepted benefits when it is offered to 

individuals who could receive such 

benefits through their group health plan 

if they could afford the premiums, but 

who do not enroll in the employersponsored plan because the premium is 

unaffordable under the law. As excepted 

benefits, the coverage would generally 

be exempt from the HIPAA and 

Affordable Care Act market reform 

requirements of ERISA, the PHS Act, 

and the Code. Wraparound coverage 

would only qualify as excepted benefits 

under limited circumstances in order to 

alleviate two concerns. First, the 

wraparound coverage could not replace 

group coverage for employers who drop 

coverage or who otherwise do not offer 

minimum value coverage. Instead, the 

wraparound coverage would only be 

considered to be an excepted benefit if 

it is used to provide additional coverage 

to individuals and families enrolled in 

non-grandfathered individual health 

insurance coverage and for whom 

minimum value coverage under the 

employer’s group health plan is offered 

but is unaffordable. Second, the 

proposed rules aim to prevent plan 

sponsors from structuring wraparound 

coverage so that low-income workers 

receive fewer primary benefits than 

high-income workers. These proposed 

regulations are intended to allow a plan 

sponsor to maintain a comparable level 

of benefits for all potential enrollees, 

including not only high-income workers 

in their group health plan but also lowincome workers that enroll in nongrandfathered individual market 

coverage, promoting equity in coverage. 

The proposed regulations, which the 

Departments are proposing would be 

effective for plan years starting in 2015, 

describe the circumstances under which 

employer-provided wraparound 

coverage would constitute excepted 

benefits (limited wraparound coverage) 

and therefore would not disqualify an 

employee from eligibility for the 

premium tax credit and cost-sharing 

reductions. The Departments note that 

provision of excepted benefits will not 

satisfy an applicable large employer’s 

responsibilities under section 4980H of 

the Code. Under these proposed 

regulations, limited wraparound 

coverage is an excepted benefit if five 

conditions are met. 

First, the coverage can wrap around 

only certain coverage provided through 

the individual market. Specifically, the 

individual health insurance coverage 

must be non-grandfathered and cannot 

consist solely of excepted benefits. In 

States that elect to establish a Basic 

Health Program (BHP), certain lowincome individuals (for example, those 

with household income between 133% 

and 200% of the Federal poverty level) 

who would otherwise qualify for a tax 

credit to obtain a qualified health plan 

through an Exchange will instead be 

enrolled in coverage through the BHP. 

Therefore, the Departments invite 

comments on how an employer might 

make wraparound coverage available to 

BHP enrollees. 

Second, the limited wraparound 

coverage must be specifically designed 

to provide benefits beyond those offered 

by the individual health insurance 

coverage. Specifically, the limited 

wraparound coverage must provide 

either benefits that are in addition to 

EHBs, or reimburse the cost of health 

care providers considered out-ofnetwork under the individual health 

insurance coverage, or both. The 

Departments invite comments on the 

types of benefits and provider 

arrangements that could be included in 

this coverage as well as their similarities 

to, or differences from, other types of 

excepted benefits described in the 

HIPAA regulations. The Departments 

also invite comments on whether the 

proposed standard should be modified 

to require that these wraparound 

coverage benefits be ‘‘substantial’’ or 

‘‘material’’ and, if so, how those terms 

should be defined. 

The limited wraparound coverage 

may, but is not required to, also provide 

benefits to reimburse for participants’ 

otherwise applicable cost sharing under 

the individual health insurance policy, 

but that cannot be its primary purpose. 

For the benefits to be considered 

specifically designed to wrap around 

the individual health insurance 

coverage, it must provide additional 

wraparound benefits as discussed in the 

immediately preceding paragraph; the 

coverage cannot provide benefits solely 

pursuant to a coordination-of-benefits 

provision that simply pays benefits 

whenever the individual health 

insurance policy does not cover all or 

part of a medical expense. 

The third condition requires the 

limited wraparound coverage to be 

otherwise not an integral part of a group 

health plan. That is, under the proposed 

regulations, the plan sponsor offering 

the limited wraparound coverage must 

sponsor another group health plan 

meeting minimum value (as defined 

under section 36B(c)(2)(C)(ii) of the 

Code) for the plan year, referred to as 

the ‘‘primary plan.’’ This primary plan 

must be affordable for a majority of the 

employees eligible for the primary plan. 

Only individuals eligible for this 

primary plan may be eligible for the 

limited wraparound coverage. The 

Departments seek input on this 

proposed standard, including whether 

the majority level is an appropriate level 

(or whether the primary plan should 

provide coverage that is affordable for a 

higher or lower percentage of 

employees), recognizing the goal of 

preventing plan sponsors from shifting 

participants from the employersponsored primary plan to the 

individual market with limited 

wraparound coverage. Assuming use of 

the 9.5% of income test set forth in 

section 36B(c)(2)(C)(i) of the Code as the 

basic definition of ‘‘affordable,’’ the 

Departments also request comments on 

how to implement that definition here— 

for example, whether the Departments 

should use a Form W–2 safe harbor 

based on employee wages like the one 

set forth in the proposed regulations 

under Code section 4980H. 

Under the fourth condition set forth 

in the proposed regulations, the limited 

wraparound coverage must be limited in 

amount. Specifically, the total cost of 

coverage under the limited wraparound 

coverage must not exceed 15 percent of 

the cost of coverage under the primary 

plan offered to employees eligible for 

the wraparound coverage.22 For this 

purpose, the cost of coverage includes 

both employer and employee 

contributions towards coverage and is 

determined in the same manner as that 

in which the applicable premium is 

calculated under a COBRA continuation 

provision.23 This is similar to the 

standard in the 2007 enforcement safe 

harbor for treating supplemental health 

insurance coverage as excepted benefits. 

Under the safe harbor, the cost of 

coverage under the supplemental 

policy, certificate, or contract of 

insurance must not exceed 15 percent of 


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24The Departments issued parallel guidance 

regarding supplemental health insurance coverage 

as excepted benefits under HIPAA and related 

legislation. 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/hipaa_08_01_508.pdf); 

and IRS Notice 2008–23 (available at http://

www.irs.gov/irb/2008-07_IRB/ar09.html). 

25Section 2716 of the PHS Act (as incorporated 

into ERISA and the Code) generally applies to 

insured coverage and section 105(h) of the Code 

and its implementing regulations generally apply to 

self-insured coverage. 

26The mental health parity provisions are 

included in PHS Act section 2726, ERISA section 

712, and Code section 9812. 

27See 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/Regulationsand-Guidance/Downloads/cms-hra-notice-9-16- 

2013.pdf). 

28Other 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 

the cost of primary coverage.24 The 

Departments solicit comment on the 

level of this threshold, as well as other 

possible thresholds that could be used 

to ensure that the benefit is limited in 

amount, such as whether other 

thresholds used in the context of health 

FSAs or health savings accounts (HSAs) 

would be easier to administer or more 

appropriate. 

The fifth and final condition for the 

limited wraparound coverage to qualify 

as excepted benefits relates to 

nondiscrimination. The limited 

wraparound coverage must not 

differentiate among individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 2705 of the PHS Act (as 

incorporated into ERISA section 715 

and Code section 9815) and its 

implementing regulations. This 

condition is similar to the standard in 

the 2007 enforcement safe harbor 

treating supplemental health insurance 

coverage as excepted benefits. In 

addition to the cost standard mentioned 

above, the safe harbor requires that such 

coverage be similar to Medicare 

Supplemental Coverage in that it must 

not differentiate among individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual). 

In addition, to satisfy the fifth 

condition, the limited wraparound 

coverage must not impose any 

preexisting condition exclusion, 

consistent with the requirements of 

section 2704 of the PHS Act (as 

incorporated into ERISA section 715 

and Code section 9815) and its 

implementing regulations. Finally, both 

the primary coverage and the limited 

wraparound coverage must not 

discriminate in favor of highly 

compensated individuals, consistent 

with the provisions of section 2716 of 

the PHS Act (also incorporated by 

reference into ERISA section 715 and 

Code section 9815) and section 105(h) of 

the Code, and its implementing 

regulations at 26 CFR 1.105–11 as 

applicable.25 These limitations are 

intended to ensure the coverage is 

available regardless of health status and 

to prevent employers from shifting 

employees with high medical costs to an 

Exchange. Conditioning excepted 

benefit status on meeting standards 

consistent with the compensation-based 

nondiscrimination rules, in combination 

with the requirement that the primary 

plan be affordable for a majority of the 

employees eligible for it, helps ensure 

that employers will not be able to use 

wraparound coverage to send excessive 

numbers of low wage workers to the 

Exchanges. Comments are invited as to 

whether additional nondiscrimination 

standards are needed to prevent such 

cost-shifting and abuse. 

C. Employee Assistance Programs 

Employee assistance programs (EAPs) 

are typically programs offered by 

employers that can provide a wideranging set of benefits to address 

circumstances that might otherwise 

adversely affect employees’ work and 

health. Benefits may include short-term 

substance use disorder or mental health 

counseling or referral services, 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. To the extent an EAP provides 

benefits for medical care, it would 

generally be considered group health 

plan coverage, which would generally 

be subject to the HIPAA and Affordable 

Care Act market reform requirements, 

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 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, may prohibit the employee 

from obtaining a premium tax credit 

under section 36B of the Code if the 

EAP is treated as minimum essential 

coverage under section 5000A of the 

Code. 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.26

The Departments issued guidance on 

September 13, 2013, which stated the 

Departments’ intent to amend the 

excepted benefits regulations with 

respect to EAPs.27 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 

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.’’ 

These proposed regulations set forth 

criteria for an EAP to qualify as 

excepted benefits beginning in 2015. 

Under these 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 invite comments on 

how to define ‘‘significant.’’ For 

example, the Departments request 

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.28


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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. 

The second criterion for an EAP to 

constitute excepted benefits is that its 

benefits cannot be coordinated with 

benefits under another group health 

plan. The Departments propose three 

conditions to meet this standard. 

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. Moreover, 

participant eligibility for benefits under 

the EAP must not be dependent on 

participation in another group health 

plan. Lastly, benefits under the EAP 

must not be financed by another group 

health plan. 

The third criterion for an EAP to 

constitute excepted benefits is that no 

employee premiums or contributions be 

required to participate in the EAP. The 

fourth criterion is that there is no cost 

sharing under the EAP. 

These criteria are 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 otherwise being eligible for the 

premium tax credit for enrolling in 

coverage through an Exchange. The 

Departments request 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. 

D. Comment Solicitation, Applicability 

Date and Reliance 

The Departments invite comments on 

these proposed regulations generally, 

and on the specific issues identified in 

this preamble. 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 these 

proposed regulations to qualify as 

excepted benefits. 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 these proposed regulations, 

the final regulations or other guidance 

will not be effective prior to January 1, 

2015. 

III. Economic Impact and Paperwork 

Burden 

A. Summary—Department of Labor and 

Department of Health and Human 

Services 

As stated above, these proposed 

regulations would amend the definition 

of limited excepted benefits to: (1) 

Eliminate the requirement that 

participants in self-insured plans pay an 

additional contribution for limitedscope vision or dental benefits to qualify 

as benefits that are not an integral part 

of a plan (and therefore as excepted 

benefits); (2) allow plan sponsors in 

limited circumstances to offer 

wraparound coverage to individuals 

who, but for the unaffordability of the 

premium, would receive such benefits 

through their group health plan; and (3) 

set forth the criteria under which EAPs 

that do not provide significant benefits 

in the nature of medical care 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 proposed regulations to 

be limited because they do not require 

any action or impose any requirements 

on employers and plan sponsors. The 

proposed modifications to vision, 

dental, and EAP benefits are primarily 

clarifications. Additionally, the 

Departments expect that the take-up 

with respect to limited wraparound 

coverage will be limited for several 

reasons. The proposed rules are 

designed so that the wraparound 

coverage could not replace group 

coverage for employers who drop 

coverage or who otherwise do not offer 

minimum value coverage. Instead, the 

wraparound coverage would only be 

considered to be an excepted benefit if 

it is used to provide additional coverage 

to individuals and families enrolled in 

non-grandfathered individual health 

insurance coverage and for whom 

minimum value coverage under the 

employer’s group health plan is offered 

but is unaffordable. Moreover, the 

proposed rules aim to prevent plan 

sponsors from structuring wraparound 

coverage so that low-income workers 

receive fewer primary benefits than 

high-income workers. Lastly, the 

Departments note that provision of 

excepted benefits will not satisfy an 

applicable large employer’s 

responsibilities under section 4980H of 

the Code. 

One objective of the Affordable Care 

Act is to allow individuals with 

comprehensive health insurance plans 

to maintain their current level of 

benefits. The Departments recognize 

that many plan sponsors provide 

generous health benefits to their 

workers. Some employers offer EAPs or 

other additional benefits to their 

employees as part of a comprehensive 

set of benefits. Others are interested in 

newly offering wraparound coverage to 

employees who qualify for tax credits in 

an Exchange to provide them with 

coverage comparable to employees who 

enroll in a group health plan. These 

proposed regulations would clarify the 

circumstances under which plan 

sponsors can provide such limited 

wraparound coverage to make their 

employees’ coverage ‘‘whole.’’ 

Specifically, these proposed 

regulations would allow plan sponsors 

to provide coverage for limited vision, 

dental, wraparound, and EAP benefits 

consistent with the qualifications for 

excepted benefits. These proposed 

improvements would help employees 

by continuing to maintain their access 

to health coverage that new 

requirements could constrain. The 

Departments expect these proposed 

regulations to have some costs, but these 

costs could be limited because they 

would not require any action or impose 

any requirements on employers and 

plan sponsors; take-up may be low; and 

the proposed modifications to vision, 

dental, and EAP benefits are primarily 

clarifications. With respect to vision and 

dental benefits, the proposed 

regulations would allow self-insured 

plans to offer dental and vision benefits 

to employees without charging a 

nominal contribution. With respect to 

EAPs, the proposed regulations would 

clarify the extent to which such benefits 

constitute excepted benefits rather than 

primary coverage. 

With respect to wraparound coverage, 

the proposed regulations would allow 

plan sponsors to offer limited 

wraparound coverage to employees in 

certain limited circumstances. This 

proposal is not intended to replace 

group coverage for employers who drop 

coverage or who do not otherwise offer 

it, and offering the wraparound coverage 

will not satisfy an applicable large 

employer’s responsibilities under 

section 4980H of the Code. Instead, the 

proposal is intended for plan sponsors 

whose goal is to provide health benefits 


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to employees eligible for coverage 

through an Exchange that is, in total, 

comparable to the benefits offered 

through the sponsor’s minimum value 

group health plan. As such, the targets 

of the proposed regulation are plan 

sponsors who otherwise would provide 

the full range of health benefits to 

qualifying enrollees. The wraparound 

coverage may only be offered to 

individuals eligible for the primary plan 

coverage the plan sponsor offers; and 

that primary coverage must provide 

minimum value and must be affordable 

for a majority of employees who are 

eligible for the primary plan coverage. 

Plan designs will be limited by 

nondiscrimination rules aimed at 

preventing plan sponsors from 

discriminating in favor of highly 

compensated employees or offering 

different benefits for workers along 

other dimensions such as health status 

(i.e., discriminating against those with 

high medical costs). 

The proposal provides additional 

flexibility for sponsors and does not 

impose additional costs on sponsors. 

The Federal budget impact of the 

proposal also depends on assumptions 

about the choices made by employers 

and workers. As with other group health 

coverage, employer contributions to the 

limited wraparound coverage would be 

excluded from employee income for tax 

purposes. The budget implications of 

adding limited wraparound coverage as 

a form of excepted benefits depend on 

the number of employers that elect this 

option and the number of employees 

that in turn receive it. As previously 

described, this proposal targets a narrow 

group of plan sponsors: those that offer 

minimum value coverage that is 

affordable for a majority of employees. 

The Departments seek input on this 

standard, including whether the 

majority level is an appropriate level (or 

whether the primary plan should 

provide coverage that is affordable for a 

larger or smaller fraction of employees), 

recognizing the goal of preventing plan 

sponsors from shifting employees from 

the primary plan to the individual 

market with limited wraparound 

coverage, and on the cost implications 

of different definitions. The cost of this 

proposal is difficult to quantify, as it is 

unclear how many plan sponsors will be 

eligible to offer and how many 

employees will elect the wraparound 

coverage. It is important to note that the 

cost of the proposed limited 

wraparound coverage can be reduced by 

limiting its availability. This could be 

accomplished by modifying the 

‘‘majority’’ standard so that a greater 

proportion of employees would have to 

be offered a primary plan that is 

affordable. The majority level was 

proposed to help minimize the 

implications for the primary plan’s risk 

pool by preventing a large number of 

low-wage workers from leaving the 

primary plan for Exchange coverage. 

The Departments invite input on this 

level, and on other standards that would 

achieve these goals. 

Another factor in assessing the 

proposal’s cost is that the decision to 

offer the wraparound coverage is 

optional. There is greater administrative 

complexity associated with the 

wraparound coverage than primary 

coverage and, given a choice, some plan 

sponsors may choose to increase the 

affordability of their primary coverage 

rather than offer limited wraparound 

coverage. Some plan sponsors may not 

have that choice: the employers may not 

be in a financial position to make their 

primary health plans affordable, let 

alone contribute to wraparound 

coverage. Employers may also continue 

to allow employees to simply obtain 

Exchange coverage with no additional 

wraparound benefit, and these 

employers would continue to pay any 

shared responsibility payments as 

applicable, resulting in no additional 

Federal costs. 

The Departments seek comment on 

the effects of the proposal. Specifically, 

the Departments request detailed data 

that would inform the following 

questions: How many employers offer 

coverage that provides minimum value 

and is affordable for a majority of the 

employees who are eligible for 

coverage? What is the total number of 

individuals who are eligible for primary 

plan coverage that provides minimum 

value and is affordable for a majority of 

eligible employees, but would not find 

it affordable? To what extent would this 

proposed rule cause employers to drop 

health insurance coverage or avoid 

newly offering it, and what is the dollar 

value associated with such dropped 

coverage? To what extent would wraparound coverage be offered more widely 

as a result of this rule, and what is the 

average dollar value associated with 

such coverage? To what extent would 

premiums for relatively generous health 

coverage change in the presence and in 

the absence of this rule? 

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 proposed 

rules 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.). The 

Departments therefore request 

comments on the appropriateness of the 

size standard used in evaluating the 

impact of this proposed rule on small 

entities. 

Because the proposed rules would 

impose no additional costs on 

employers or plans, the Departments 

believe that it would 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 the proposed rules, if 

promulgated, would not have a 


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significant economic impact on a 

substantial number of small entities. 

D. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury it has been determined that 

this notice of proposed rulemaking is 

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 

proposed regulations, and, because 

these proposed 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, this notice of proposed 

rulemaking has 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 proposed rules 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 

proposed 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 

ERISA. Accordingly, the Departments 

will affirmatively engage in outreach 

with officials of State and political 

subdivisions regarding the proposed 

rules and seek their input on the 

proposed rules and any federalism 

implications that they believe may be 

presented by it. 

G. Congressional Review Act 

These proposed 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, if 

finalized, 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 proposed to be adopted 

pursuant to the authority contained in 

sections 7805 and 9833 of the Code. 

The Department of Labor regulations 

are proposed to be 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 proposed to be 

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, 300gg91, 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. 

Signed this 11th day of December, 2013. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: November 22, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: December 3, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Department of The Treasury 

Internal Revenue Service 

Accordingly, 26 CFR Part 54 is 

proposed to be amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ 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 also issued under 26 

U.S.C. 9833; * * * 

■ Paragraph 2. Section 54.9831–1 is 

amended by revising paragraphs (c)(3)(i) 

and (c)(3)(ii), and adding paragraphs 

(c)(3)(vi) and (c)(3)(vii), to read as 

follows: 

§ 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 that wraparound 

individual health insurance coverage 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vi) of 

this section, and benefits provided 

under an employee assistance program 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vii) of 

this section. 

(ii) Not an integral part of a group 

health plan. For purposes of this 

paragraph (c)(3), benefits are not an 


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integral part of a group health plan 

(whether the benefits are provided 

through the same plan or a separate 

plan) only if participants have the right 

to elect not to receive coverage for the 

benefits. 

* * * * * 

(vi) Limited wraparound coverage. 

Limited benefits that wraparound 

benefits provided through individual 

health insurance coverage are excepted 

benefits if all of the following 

requirements are satisfied— 

(A) Wraps around certain individual 

health insurance coverage. The 

individual health insurance coverage is 

not a grandfathered health plan (as 

described in section 1251 of the 

Affordable Care Act) and does not 

consist solely of excepted benefits (as 

defined in paragraph (c) of this section). 

(B) Covers benefits or providers not 

covered by individual health insurance 

coverage. The wraparound coverage is 

specifically designed to wrap around 

the individual health insurance 

coverage described in paragraph 

(c)(3)(vi)(A) of this section, as follows: 

(1) The wraparound coverage must 

provide coverage of benefits that are not 

essential health benefits, or reimburse 

the cost of health care providers that are 

considered out-of-network under the 

individual health insurance coverage, or 

both. The wraparound coverage may 

also provide benefits for participants’ 

otherwise applicable cost sharing under 

the individual health insurance policy. 

(2) The wraparound coverage must 

not provide benefits only under a 

coordination-of-benefits provision. 

(C) Otherwise not an integral part of 

the plan. The plan sponsor with respect 

to the wraparound coverage must 

sponsor another group health plan 

meeting minimum value (as defined 

under section 36B(c)(2)(C)(ii)) and that 

is affordable for a majority of the 

employees eligible for that group health 

plan (‘‘primary plan’’). Only individuals 

eligible for this primary plan may be 

eligible for the wraparound coverage. 

(D) Limited in amount. The total cost 

of coverage under the wraparound 

coverage must not exceed 15 percent of 

the cost of coverage under the primary 

plan (as described in paragraph 

(c)(3)(vi)(C) of this section). For this 

purpose, the cost of coverage includes 

both employer and employee 

contributions towards coverage and is 

determined in the same manner as the 

applicable premium is calculated under 

a COBRA continuation provision. 

(E) Nondiscrimination. The following 

conditions must be satisfied: 

(1) The wraparound coverage must 

not differentiate among individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 2705 of the PHS Act (as 

incorporated into section 9815) and 

§ 54.9802–1. 

(2) The wraparound coverage must 

not impose any preexisting condition 

exclusion, consistent with the 

requirements of section 2704 of the PHS 

Act (as incorporated into section 9815). 

(3) To the extent the primary coverage 

is insured, the primary coverage must 

not be discriminatory under section 

2716 the PHS Act (as incorporated into 

section 9815). To the extent the primary 

coverage is self-insured, the primary 

coverage must not be discriminatory 

under section 105(h) and § 1.105–11. 

(4) To the extent the wraparound 

coverage is insured, the wraparound 

coverage must not be discriminatory 

under section 2716 the PHS Act (as 

incorporated into section 9815) and to 

the extent the wraparound coverage is 

self-insured, the wraparound coverage 

must not be discriminatory under 

section 105(h) and § 1.105–11. 

(vii) Employee assistance programs. 

Benefits provided under employee 

assistance programs are excepted if they 

satisfy all of the following 

requirements— 

(A) The program does not provide 

significant benefits in the nature of 

medical care. 

(B) The benefits under the employee 

assistance program cannot be 

coordinated with benefits under another 

group health plan, as follows: 

(1) Participants in the other group 

health plan must not be required to 

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; 

(2) Participant eligibility for benefits 

under the employee assistance program 

must not be dependent on participation 

in another group health plan; and 

(3) Benefits under the employee 

assistance program must not be financed 

by another group health plan. 

(C) No employee premiums or 

contributions may be required as a 

condition of participation in the 

employee assistance program. 

(D) There is no cost sharing under the 

employee assistance program. 

* * * * * 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons set forth above, 29 

CFR part 2590 is proposed to be 

amended as follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for part 2590 

continues to read as follows: 

Authority: Secs. 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). 

■ 2. Section 2590.732 is amended by 

revising paragraphs (c)(3)(i) and 

(c)(3)(ii), and adding paragraphs 

(c)(3)(vi) and (c)(3)(vii), to read as 

follows: 

§ 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 that wraparound 

individual health insurance coverage 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vi) of 

this section, and benefits provided 

under an employee assistance program 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vii) 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 or a separate 

plan) only if participants have the right 

to elect not to receive coverage for the 

benefits. 

* * * * * 

(vi) Limited wraparound coverage. 

Limited benefits that wraparound 

benefits provided through individual 


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Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 77641 

health insurance coverage are excepted 

benefits if all of the following 

requirements are satisfied— 

(A) Wraps around certain individual 

health insurance coverage. The 

individual health insurance coverage is 

not a grandfathered health plan (as 

described in section 1251 of the 

Affordable Care Act and § 2590.715– 

1251 of this part) and does not consist 

solely of excepted benefits (as defined 

in paragraph (c) of this section). 

(B) Covers benefits or providers not 

covered by individual health insurance 

coverage. The wraparound coverage is 

specifically designed to wrap around 

the individual health insurance 

coverage described in paragraph 

(c)(3)(vi)(A) of this section, as follows: 

(1) The wraparound coverage must 

provide coverage of benefits that are not 

essential health benefits, or reimburse 

the cost of health care providers that are 

considered out-of-network under the 

individual health insurance coverage, or 

both. The wraparound coverage may 

also provide benefits for participants’ 

otherwise applicable cost sharing under 

the individual health insurance policy. 

(2) The wraparound coverage must 

not provide benefits only under a 

coordination-of-benefits provision. 

(C) Otherwise not an integral part of 

the plan. The plan sponsor with respect 

to the wraparound coverage must 

sponsor another group health plan 

meeting minimum value (as defined 

under section 36B(c)(2)(C)(ii) of the 

Code) and that is affordable for a 

majority of the employees eligible for 

that group health plan (‘‘primary plan’’). 

Only individuals eligible for this 

primary plan may be eligible for the 

wraparound coverage. 

(D) Limited in amount. The total cost 

of coverage under the wraparound 

coverage must not exceed 15 percent of 

the cost of coverage under the primary 

plan (as described in paragraph 

(c)(3)(vi)(C) of this section). For this 

purpose, the cost of coverage includes 

both employer and employee 

contributions towards coverage and is 

determined in the same manner as the 

applicable premium is calculated under 

a COBRA continuation provision. 

(E) Nondiscrimination. The following 

conditions must be satisfied: 

(1) The wraparound coverage must 

not differentiate among individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 2705 of the PHS Act (as 

incorporated into ERISA section 715) 

and § 2590.715–2705. 

(2) The wraparound coverage must 

not impose any preexisting condition 

exclusion, consistent with the 

requirements of section 2704 of the PHS 

Act (as incorporated into ERISA section 

715) and § 2590.715–2704. 

(3) To the extent the primary coverage 

is insured, the primary coverage must 

not be discriminatory under section 

2716 the PHS Act (as incorporated into 

ERISA section 715). To the extent the 

primary coverage is self-insured, the 

primary coverage must not be 

discriminatory under section 105(h) of 

the Code and 26 CFR 1.105–11. 

(4) To the extent the wraparound 

coverage is insured, the wraparound 

coverage must not be discriminatory 

under section 2716 the PHS Act (as 

incorporated into ERISA section 715). 

To the extent the wraparound coverage 

is self-insured, the wraparound coverage 

must not be discriminatory under 

section 105(h) of the Code and 26 CFR 

1.105–11. 

(vii) Employee assistance programs. 

Benefits provided under employee 

assistance programs are excepted if they 

satisfy all of the following 

requirements— 

(A) The program does not provide 

significant benefits in the nature of 

medical care. 

(B) The benefits under the employee 

assistance program cannot be 

coordinated with benefits under another 

group health plan, as follows: 

(1) Participants in the other group 

health plan must not be required to 

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; 

(2) Participant eligibility for benefits 

under the employee assistance program 

must not be dependent on participation 

in another group health plan; and 

(3) Benefits under the employee 

assistance program must not be financed 

by another group health plan. 

(C) No employee premiums or 

contributions may be 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 set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR part 146 as set forth below: 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 1. 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). 

■ 2. Section 146.145 is amended by 

revising paragraphs (c)(3)(i) and 

(c)(3)(ii), and adding paragraphs 

(c)(3)(vi) and (c)(3)(vii), to read as 

follows: 

§ 146.145 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 that wraparound 

individual health insurance coverage 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vi) of 

this section, and benefits provided 

under an employee assistance program 

are excepted benefits if they satisfy the 

requirements of paragraph (c)(3)(vii) 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 or a separate 

plan) only if participants have the right 

to elect not to receive coverage for the 

benefits. 

* * * * * 

(vi) Limited wraparound coverage. 

Limited benefits that wraparound 

benefits provided through individual 

health insurance coverage are excepted 

benefits if all of the following 

requirements are satisfied— 

(A) Wraps around certain individual 

health insurance coverage. The 

individual health insurance coverage is 

not a grandfathered health plan (as 

described in section 1251 of the 

Affordable Care Act and § 147.140 of 

this subchapter) and does not consist 

solely of excepted benefits (as defined 

in paragraph (c) of this section). 


sroberts on DSK5SPTVN1PROD with PROPOSALS
77642 Federal Register / Vol. 78, No. 247 / Tuesday, December 24, 2013 / Proposed Rules 

(B) Covers benefits or providers not 

covered by individual health insurance 

coverage. The wraparound coverage is 

specifically designed to wrap around 

the individual health insurance 

coverage described in paragraph 

(c)(3)(vi)(A) of this section, as follows: 

(1) The wraparound coverage must 

provide coverage of benefits that are not 

essential health benefits, or reimburse 

the cost of health care providers that are 

considered out-of-network under the 

individual health insurance coverage, or 

both. The wraparound coverage may 

also provide benefits for participants’ 

otherwise applicable cost sharing under 

the individual health insurance policy. 

(2) The wraparound coverage must 

not provide benefits only under a 

coordination-of-benefits provision. 

(C) Otherwise not an integral part of 

the plan. The plan sponsor with respect 

to the wraparound coverage must 

sponsor another group health plan 

meeting minimum value (as defined 

under section 36B(c)(2)(C)(ii) of the 

Code) and that is affordable for a 

majority of the employees eligible for 

that group health plan (‘‘primary plan’’). 

Only individuals eligible for this 

primary plan may be eligible for the 

wraparound coverage. 

(D) Limited in amount. The total cost 

of coverage under the wraparound 

coverage must not exceed 15 percent of 

the cost of coverage under the primary 

plan (as described in paragraph 

(c)(3)(vi)(C) of this section). For this 

purpose, the cost of coverage includes 

both employer and employee 

contributions towards coverage and is 

determined in the same manner as the 

applicable premium is calculated under 

a COBRA continuation provision. 

(E) Nondiscrimination. The following 

conditions must be satisfied: 

(1) The wraparound coverage must 

not differentiate among individuals in 

eligibility, benefits, or premiums based 

on any health factor of an individual (or 

any dependent of the individual), 

consistent with the requirements of 

section 2705 of the PHS Act and 

§ 147.110 of this subchapter. 

(2) The wraparound coverage must 

not impose any preexisting condition 

exclusion, consistent with the 

requirements of section 2704 of the PHS 

Act and § 147.108 of this subchapter. 

(3) To the extent the primary coverage 

is insured, the primary coverage must 

not be discriminatory under section 

2716 the PHS Act. To the extent the 

primary coverage is self-insured, the 

primary coverage must not be 

discriminatory under section 105(h) of 

the Code and 26 CFR 1.105–11. 

(4) To the extent the wraparound 

coverage is insured, the wraparound 

coverage must not be discriminatory 

under section 2716 the PHS Act. To the 

extent the wraparound coverage is selfinsured, the wraparound coverage must 

not be discriminatory under section 

105(h) of the Code and 26 CFR 1.105– 

11. 

(vii) Employee assistance programs. 

Benefits provided under employee 

assistance programs are excepted if they 

satisfy all of the following 

requirements— 

(A) The program does not provide 

significant benefits in the nature of 

medical care. 

(B) The benefits under the employee 

assistance program cannot be 

coordinated with benefits under another 

group health plan, as follows: 

(1) Participants in the other group 

health plan must not be required to 

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; 

(2) Participant eligibility for benefits 

under the employee assistance program 

must not be dependent on participation 

in another group health plan; and 

(3) Benefits under the employee 

assistance program must not be financed 

by another group health plan. 

(C) No employee premiums or 

contributions may be required as a 

condition of participation in the 

employee assistance program. 

(D) There is no cost sharing under the 

employee assistance program. 

* * * * * 

[FR Doc. 2013–30553 Filed 12–20–13; 11:15 am] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P 


sroberts on DSK5SPTVN1PROD with PROPOSALS