Health Insurance Reform – What Does It Mean for Dental and Vision Plans? | TEXAS HEALTH INSURANCE

Health Insurance Reform – What Does It Mean for Dental and Vision Plans?

May 26, 2011
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Vision and dental coverage is often an integral part of your client’s group health benefits package for employees and dependents. For many, there is still some confusion about how the Patient Protection and Affordable Care Act (PPACA) impacts vision and dental plans, both in terms of how they are offered and when plans are exempt from the new health care reform law.

When does PPACA reform apply to dental and vision plans?

Both the provisions in PPACA and Health Insurance Portability and Accountability Act (HIPAA) view limited scope benefits plans, such as dental and vision offerings, as either an integral part of the overall health benefit plan or as an “exception”.

  • Included. If the limited benefit plan is included in a bundle of health insurance benefits and the employee does not have the ability to opt out of the coverage, the dental and vision benefits will be subject to the same terms and conditions as the overall health insurance benefits, including PPACA reform requirements.
  • Excluded. If the limited scope benefit plan is offered on a stand-alone basis or is separated from the overall health insurance benefit package, the dental and vision plans (the separate limited benefit benefits) can be treated differently and do not need to comply with many of changes that have been or will be required due to the passage of PPACA.

What is the statutory test that decides whether the dental and vision plans are included in the definition “medical care” and are “exempted”?

PPACA employs the definitions that already were in existence in HIPAA1, which defines “medical care” very broadly and contains an exception for limited benefit plans. HIPAA regulations were issued on December 13, 2006 and further defined “limited scope benefit plans”2 as benefits that are substantially for treatment of the mouth, and “limited scope vision benefits” as benefits primarily for treatment of the eye. If benefits meet the definition of limited scope dental or vision benefits, they may not be subject to HIPAA or PPACA if they either are:

i)  Provided under a separate policy, certificate, or contract of insurance; or
ii) Not an “integral part” of a group health plan.

Are there any official “FAQs” that the federal government has published addressing this issue?

Yes, the concept of an “excepted” limited scope benefit plan is further illuminated by an FAQ3 that the Department Of Labor published on its website, which reads:

Q6: What if my dental (or vision) benefits are structured as excepted benefits under HIPAA? Does that exemption except my dental (or vision) plan from the Affordable Care Act’s market reforms?

Yes. If benefits constitute excepted benefits under HIPAA, the requirements of PPACA’s market reforms do not apply. Under HIPAA, dental (and vision) benefits generally constitute excepted benefits if they:

  • Are offered under a separate policy, certificate, or contract of insurance; or
  • Are not an integral part of the plan. For dental (or vision) benefits to be considered not an integral part of the plan (whether insured or self-insured), participants must have a right not to receive the coverage and, if they do elect to receive the coverage, must pay an additional premium.

Accordingly, if a plan provides its dental (or vision) benefits pursuant to a separate election by a participant and the plan charges even a nominal employee contribution towards the coverage, the dental (or vision) benefits would constitute excepted benefits, and the market reform provisions would not apply to that coverage.4 Same as the

Does it matter if the limited plan is offered pursuant to a fully insured or self-insured arrangement?

Not really. The over-all criteria described in this legislative alert appear to apply to both fully funded and self-funded health arrangements. Here are some illustrative examples:

  • If the limited benefit plan is insured or self-insured under the same policy as the health insurance benefit, in most cases PPACA applies.
  • If the health benefit plan is insured and the dental and/or vision benefits are under separate insurance policies, and if an employee may opt out of the limited benefit plan coverage(s), the limited benefit plan likely would be eligible as an exception and would not be subject to the health insurance reform provisions of the PPACA.
  • If the health care benefit is self-funded, employees must be able to choose the comprehensive plan and the limited benefit plan separately, and pay a different premium for the different levels of coverage for the limited plan to be exempt.
  • If one plan is “fully insured” under one policy and the other plan is “self-funded” under another policy, in most cases that would directly support the fact that the plans are “separate” policies with different cost sharing arrangements and election options.

What are some of the PPACA provisions that will apply to dental and vision plans?

If the dental and vision plans are covered, most of PPACA’s normal requirements will apply, including:

  • No annual and lifetime dollar limits on benefits
  • Employees’ children remain eligible until age 26
  • Mandatory coverage of preventive services with no cost sharing
  • Mandatory external review of adverse claims decisions
  • No preexisting condition exclusions
  • No waiting periods exceeding 90 days

If the limited benefit plan is not excluded, the lifetime benefits that limited scope benefit plans often have must be deleted. Consequently, this will likely increase the cost of the limited benefit plan to the employer.

Can limited scope benefit plans be offered on a stand-alone basis though a state exchange?

Yes, under section 1311 of PPACA, there does appear to be an exception to allow a stand-alone “dental” benefit plan to be offered within a state exchange. In addition, “pediatric dental benefits” will likely be included as part of the “minimum essential benefits” requirements for qualified health plans.5

However, the ability to offer other limited scope benefit plans is still being sorted out. The National Association of Specialty Health Organizations (NASHO) is asking regulators to think about vision plans, behavioral health plans, and other types of specialty plans as the federal and state governments move forward with the exchanges. “One of our main concerns is, with the exception of dental, no other specialty health organizations were listed in the [reform] bill to be a part of the exchanges. Vision was in there, but it was taken out as one of the last amendments,” says Julian Roberts, Executive Director of the National Association of Specialty Health Organizations.6

In relation to specialty benefits, what happens after January 1, 2014 when all qualified health plans must offer the essential benefit package through the exchange?

Regarding dental coverage, the National Association of Dental Plans, makes the following observations:

By January 1, 2014, all health insurance issuers offering health insurance coverage in the Individual or small group market (with the exception of grandfathered plans) must ensure that the coverage includes the essential health benefits package, including pediatric dental benefits.

Outside of the new health insurance exchanges: Although stand?alone dental plans are specifically exempt from the requirement to offer all essential benefits, for health plans to be recognized as meeting the essential benefits package in the individual and small group market, they must offer pediatric dental benefits.

Inside of the new health insurance exchanges: By 2014, states are to establish health insurance exchanges to provide access to affordable health insurance options for individuals and small employers. (By 2017, states can allow large employers to obtain coverage through an exchange.) Plans must include all essential benefits to be offered in the exchange. However, stand?alone dental plans are allowed to offer the required pediatric dental benefits. If a stand?alone dental plan offering required pediatric dental benefits is available in an exchange, a health plan without these benefits that offers all other essential benefits can be treated as a qualified health plan to offer coverage in the exchange.7

As referenced in the prior Q&A, the impact of other specialty benefits still needs to be sorted out.

What can brokers do for their clients?

Brokers can do a number of things to help their clients sort out the applicability of limited scope benefit or plan offerings. In cases where a dental or vision plan is or will be exempted, brokers should encourage employers to communicate in writing to the enrollees in the limited scope benefit plan and explain that it is an exempted benefit plan and that the health insurance reform provisions of the PPACA provisions do not apply to the limited benefit plan(s). Brokers should also provide some insights on the advantages (e.g., ease of administration) and disadvantages (e.g., likely higher cost) of combining specially benefits in the comprehensive policy.

In some cases, brokers may need to provide advice based upon the specifics of each case. The regulations do not provide a definitive answer in each situation as to whether a limited benefit offering is included or exempted under PPACA. However, you can begin by forwarding applicable part of this legislative alert to your clients. In cases that are more difficult, HHS or a PPACA benefit consultant should be contacted for guidance.

With some care and planning, your clients can protect their limited benefit plans from any of the potential negative effects of health insurance reforms in PPACA. BenefitMall will keep you updated on any additional changes to the “specialty health” requirements in the coming months.

(ii) OFFERING OF STAND-ALONE DENTAL BENEFITS.–Each Exchange within a State shall allow an issuer of a plan that only provides limited scope dental benefits meeting the requirements of section 9832(c)(2)(A) of the Internal Revenue Code of 1986 to offer the plan through the Exchange (either separately or in conjunction with a qualified health plan) if the plan provides pediatric offer the plan through the Exchange (either separately or in conjunction with a qualified health plan) if the plan provides pediatric dental benefits meeting the requirements of section 1302(b)(1)(J)).

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