What are “excepted benefits” for purposes of the Affordable Care Act (ACA) minimum essential coverage?November 14, 2016
Alan T. Huberman, CPA, MST
The ACA created Code Sec. 5000A whereby individuals must now have minimum essential health insurance coverage, qualify for a health coverage exemption or make an individual shared responsibility payment. Minimum essential coverage includes most government-sponsored health care programs, such as Medicaid, Medicare and TRICARE. Eligible employer-sponsored plans, individual market plans, including plans obtained through the ACA Heath Insurance Marketplace, and grandfathered plans provide minimum essential coverage.
The ACA also provided that certain types of coverage are not treated as minimum essential coverage. These benefits are known as “excepted benefits.”
Excepted benefits are not subject to requirements of the ACA that apply to group health plans and health insurance plans, such as the restrictions on annual and lifetime limits or the requirement that health coverage cover preventive services without cost sharing. Employers cannot satisfy the employer mandate by providing excepted benefits only; neither can an individual covered only by excepted benefits comply with the individual shared responsibility requirement.
There are a number of types of excepted benefits for ACA purposes. They include (although not an exhaustive list):
- Coverage only for accident (including accidental death and dismemberment)
- Disability income insurance
- Liability insurance, including general liability insurance and automobile liability insurance
- Coverage issued as a supplement to liability insurance
- Workers' compensation or similar insurance
- Automobile medical payment insurance
- Credit-only insurance (for example, mortgage insurance)
- Coverage for on-site medical clinics
Additionally, the ACA created a number of health insurance market reforms. These reforms impose new minimum requirements related to coverage, premiums, benefits, cost sharing, and consumer protections. Generally, health plans must comply with the market reforms. The market reforms generally affect insurance offered to groups and individuals. The market reforms generally do not apply to excepted benefits.
After passage of the ACA, questions arose as to whether Employee Assistance Programs (EAPs) were excepted benefits. EAPs are programs offered by employers, which frequently provide a wide-ranging set of benefits. 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. The IRS has issued guidance, explaining that generally EAPs are excepted benefits.
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