EAPs Not Covered By ACA Umbrella
At least through the end of the year, many employee-assistance programs are now considered exempt from regulations under the Affordable Care Act, thanks to a set of proposed rules set forth by three federal agencies. Experts say the move should free employers to continue offering an important add-on benefit.
By Kecia Bal
Late last year, the U.S. Departments of Labor, Health and Human Services, and Treasury proposed rules that would adjust regulations under the Health Insurance Portability and Accountability Act of 1996 regarding excepted benefits to include employee assistance programs. The proposed rules also provide added options for employees and employers in connection with the Affordable Care Act.
The proposal makes some programs "excepted benefits" under the federal measures, essentially freeing up employers to offer them without worrying about tax implications for employees or compliance violations.
"Employers, carriers and consultants were concerned that, if EAPs were not accepted that, No. 1, it might have to fall under the same rules and market reforms as many other plans," says Lawrence Hartley, a principal at OakBridge Advisors Inc. in Newport Beach, Calif. "Also, they didn't want it to affect an employee's ability to receive premium assistance when they went on public exchanges."
The rules would make employee assistance programs excepted if they conform to four criteria:
1. The program cannot provide significant benefits in the nature of medical care
2. The benefits under an EAP cannot be coordinated with benefits under another group health plan.
3. No employee premiums or contributions can be required to participate in the EAP.
4. There can be no cost sharing under the EAP.
Hartley says the second definition -- the concept of employee-assistance plans as a gatekeeper to medical benefits -- is especially important to note.
"There are three more details related to that," Hartley says. "No. 1, participants in the separate group health plan must not be required to exhaust benefits under the EAP before that individual is eligible for benefits under the group, so you don't have to use one before the other."
The second condition for this standard, he says, is that participants eligible for benefits under the EAP must not be dependent on participation in another group health plan.
"Every employee has to be offered the same [benefits]," he says.
The third detail, according to Hartley, is that the EAP must not be financed by another group health plan.
"The basic idea," he says, "is you need to keep [EAPs and health plans] separate, and not contingent upon one another."
Employers immediately can consider an EAP to constitute excepted benefits as long as it does not provide "significant benefits in the nature of medical care or treatment" through at least 2014, until rulemaking is finalized, according to a technical release from the Department of Labor. The departments are inviting comments until Feb. 24, and will consider them as part of the process for developing a final rule.
The question for many will be what constitutes significant medical benefits, says Sarah Millar, vice chair of the employee benefits and executive compensation practice group at Drinker Biddle & Reath in Chicago.
"We still don't know what that means," she says. "Historically, there are various rulings from the Department of Labor that describe when an EAP is a group health plan. The conventional wisdom has developed that it boils down to how many counseling sessions are provided and whether the EAP provider has licensed counselors and therapists on staff or whether they just have a call center with people trained for certain types of issues who then make referrals out. So, depending on how involved the EAP is in terms of providing benefits in the nature of counseling, that will at some point push you into group health plan status.
"The departments haven't taken an issue yet on where that dividing line is," she says, adding that employers need to be wary of any contingencies between EAPs and health plans.
"I have seen plan designs where benefits under the major medical plan for a type of condition don't kick in until somebody has first contacted the EAP provider," Millar says. "Typically, that's with mental health and substance abuse issues. That design has fallen away a little in light of medical health parody regulations. This 'EAP as gatekeeper' is something that will prohibit that."
For most programs, experts say the key will be examining the definition of significant medical benefits.
"I think the challenge will be looking at your current EAP design and trying to determine whether they are significant medical benefits," she says. "For the coming year, a good faith reasonable interpretation is what employers are left with until we get additional guidance."
Steve Wojcik, public policy vice president at the Washington-based National Business Group on Health, says the move should free employers to continue to offer an important add-on benefit.
"I think it makes it easier for employers whose employees are getting subsidies on the exchange to still help employees out without having to worry about disqualifying them from their subsidies," he says. "I would say, for most employers, it's not going to be a major change or difference. It just clarifies things -- similar to what they did in health-savings account regulations -- to make it clear that, as long as an EAP isn't providing significant healthcare treatment benefits, it's not going to be posing a problem and not subject to ACA requirements.
"As with HSAs," Wojcik says, "as long as an EAP isn't designed to channel health benefits and treatment outside of deductible, it should be fine."
The proposed rules also are meant to show employers that EAPs should not be used as a means to circumvent ACA requirements, he says.
"I think, at one point, there was some talk -- some consultants offering an innovative way to deal with regulations -- about expanding EAPs," he says. "I think this kind of says you can't do that."