Vision, Dental, and Long-Term-Care Benefits Qualify as Limited Excepted Benefits Under New IRS Rules

Dental, vision, and long-term-care benefits will qualify as excepted benefits under final regulations issued jointly by the IRS, the Labor Department, and the Department of Health and Human Services (T.D. 9697). Excepted benefits are not subject to certain health reform requirements enacted as part of the Health Insurance Portability and Accountability Act (HIPAA), P.L. 104-191, and the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148. The final regulations do not address the issue of “wraparound” coverage, but the IRS said it intends to issue such guidance in the future.

HIPAA introduced certain health coverage portability and nondiscrimination provisions. PPACA reorganized and amended those provisions. Four categories of benefits were excepted from these provisions:

• Benefits that are not health coverage, such as workers’ compensation;
• Limited excepted benefits, such as limited-scope dental or vision benefits;
• Noncoordinated excepted benefits, including coverage for a specific disease and fixed indemnity insurance; and
• Coverage that is supplemental to Medicare, the Civilian Health and Medical Program of the Department of Veterans Affairs, or to Tricare, or is similar supplemental coverage.

The final regulations deal with the second category: limited excepted benefits. The final regulations eliminate the requirement that participants pay an additional premium or contribution for limited-scope vision, dental, or long-term-care benefits to qualify as benefits that are not an integral part of the plan (and therefore qualify as excepted benefits). They also set forth the criteria under which employee-assistance programs constitute excepted benefits.

Proposed regulations issued in 2013 would also have allowed plan sponsors in limited circumstances to offer, as excepted benefits, coverage that wraps around certain individual health insurance coverage. The final regulations do not adopt this proposal. The IRS said it received extensive comments on the topic, and it intends to publish final regulations in the future that will address limited wraparound coverage, taking the comments into account.

The final regulations apply to group health plans and group health insurance issuers for plan years beginning on or after Jan. 1, 2015.