Federal Register, Volume 81 Issue 210 (Monday, October 31, 2016)
[Federal Register Volume 81, Number 210 (Monday, October 31, 2016)]
[Rules and Regulations]
[Pages 75316-75327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26162]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9791]
RIN 1545-BN44
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB75
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 146, 147, and 148
[CMS-9932-F]
RIN 0938-AS93
Excepted Benefits; Lifetime and Annual Limits; and Short-Term,
Limited-Duration Insurance
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: Final rules.
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SUMMARY: This document contains final regulations regarding the
definition of short-term, limited-duration insurance for purposes of
the exclusion from the definition of individual health insurance
coverage, and standards for travel insurance and supplemental health
insurance coverage to be considered excepted benefits. This document
also amends a reference in the final regulations relating to the
prohibition on lifetime and annual dollar limits.
DATES:
Effective date. These final regulations are effective on December
30, 2016.
Applicability date. These final regulations apply to group health
plans and health insurance issuers beginning on the first day of the
first plan year (or, in the individual market, the first day of the
first policy year) beginning on or after January 1, 2017.
FOR FURTHER INFORMATION CONTACT: Elizabeth Schumacher or Matthew Litton
of the Department of Labor, at 202-693-8335, Karen Levin, Internal
Revenue Service, Department of the Treasury, at (202) 317-5500, David
Mlawsky or Cam Clemmons, 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 Employee Benefits Security
Administration (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 the Department of Health and Human Services
(HHS) on private health insurance for consumers can be found on the
Centers for Medicare & Medicaid Services (CMS) 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
rules 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 Paul
Wellstone and Pete Domenici Mental Health Parity and Addiction Equity
Act
[[Page 75317]]
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
Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act of 2010 (Affordable Care Act).\8\
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\1\ Public Law 104-204, 110 Stat. 2944 (September 26, 1996).
\2\ Public Law 110-343, 122 Stat. 3881 (October 3, 2008).
\3\ Public Law 104-204, 110 Stat. 2935 (September 26, 1996).
\4\ Public Law 105-277, 112 Stat. 2681-436 (October 21, 1998).
\5\ Public Law 110-233, 122 Stat. 881 (May 21, 2008).
\6\ Public Law 111-3, 123 Stat. 65 (February 4, 2009).
\7\ Public Law 110-381, 122 Stat. 4081 (October 9, 2008).
\8\ The Patient Protection and Affordable Care Act, Public Law
111-148, was enacted on March 23, 2010, and the Health Care and
Education Reconciliation Act of 2010, Public Law 111-152, was
enacted on March 30, 2010. (These statutes are collectively known as
the ``Affordable Care Act''.)
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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. For this purpose, the term ``group health plan'' includes both
insured and self-insured group health plans.\9\ The Affordable Care Act
added section 715(a)(1) of ERISA and section 9815(a)(1) of the Code to
incorporate the provisions of part A of title XXVII of the PHS Act
(generally, sections 2701 through 2728 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.
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\9\ The 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'' as
used in other provisions of title I of the Affordable Care Act does
not include self-insured group health plans.
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II. Overview of the Final Regulations
On June 10, 2016, the Departments of Labor, Health and Human
Services and the Treasury (the Departments \10\) issued proposed
regulations with respect to expatriate health plans, expatriate health
plan issuers, and qualified expatriates; requirements for travel
insurance, similar supplemental coverage, and hospital indemnity or
other fixed indemnity insurance to be excepted benefits; the
prohibition on lifetime and annual limits; and short-term, limited-
duration insurance.\11\ After consideration of comments on the proposed
regulations, the Departments are publishing final regulations regarding
short-term, limited duration insurance, travel insurance, similar
supplemental coverage, and lifetime and annual limits. The Departments
intend to address hospital indemnity or other fixed indemnity insurance
and expatriate health plans in future rulemaking, taking into account
comments received on these issues.\12\
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\10\ Note, however, that in sections under headings listing only
two of the three Departments, the term ``Departments'' generally
refers only to the two Departments listed in the heading.
\11\ 81 FR 38019 (June 10, 2016).
\12\ The preamble to the proposed regulations also invited
public comment on insurance coverage of specified diseases or
illnesses as excepted benefits. While not addressed in this
rulemaking, the Departments may address this issue in future
regulations or guidance.
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On July 20, 2015, the Internal Revenue Service published Notice
2015-43, 2015-29 IRB 73, to provide interim guidance with respect to
the treatment of expatriate health plans, expatriate health plan
issuers, and employers in their capacity as plan sponsors of expatriate
health plans, as defined in the Expatriate Health Coverage
Clarification Act of 2014 (EHCCA).\13\ The interim guidance in Notice
2015-43 generally allows a taxpayer to apply the requirements of the
EHCCA using a reasonable good faith interpretation of the EHCCA until
further guidance is issued, except as otherwise specifically provided
with respect to the health insurance providers fee under section 9010
of the Affordable Care Act. Notice 2015-29 provided interim guidance
pertaining to the fee under section 9010 for calendar years 2014 and
2015, and Notice 2016-14 provided guidance pertaining to the fee for
calendar year 2016. Additionally, the preamble to the Departments'
proposed regulations provides that issuers, employers, administrators,
and individuals are permitted to rely on the proposed regulations
pending the applicability date of final regulations in the Federal
Register.\14\ Until final regulations are issued and effective, this
reliance rule as well as the interim guidance in Notice 2015-43 remain
in effect.
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\13\ Division M of the Consolidated and Further Continuing
Appropriations Act, 2015, Public Law 113-235.
\14\ 81 FR 38019, 38033 (June 10, 2016).
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A. Short-Term, Limited-Duration Insurance
Short-term, limited-duration insurance is a type of health
insurance coverage that is designed to fill temporary gaps in coverage
when an individual is transitioning from one plan or coverage to
another plan or coverage. Although short-term, limited-duration
insurance is not an excepted benefit, it is similarly exempt from PHS
Act requirements because it is not individual health insurance
coverage. Section 2791(b)(5) of the PHS Act provides that the term
``individual health insurance coverage'' means health insurance
coverage offered to individuals in the individual market, but does not
include short-term, limited-duration insurance. The PHS Act does not
define short-term, limited-duration insurance. Under current
regulations, short-term, limited-duration insurance means ``health
insurance coverage provided pursuant to a contract with an issuer that
has an expiration date specified in the contract (taking into account
any extensions that may be elected by the policyholder without the
issuer's consent) that is less than 12 months after the original
effective date of the contract.'' \15\
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\15\ 26 CFR 54.9801-2, 29 CFR 2590.701-2, 45 CFR 144.103.
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Before enactment of the Affordable Care Act, short-term, limited-
duration insurance was an important means for individuals to obtain
health coverage when transitioning from one job to another (and from
one group health plan to another) or when faced with other similar
situations. However, with guaranteed availability of coverage and
special enrollment period requirements in the individual health
insurance market under the Affordable Care Act, individuals can
purchase coverage with the protections of the Affordable Care Act to
fill in the gaps in coverage.
The Departments have become aware that short-term, limited-duration
insurance is being sold in situations other than those that the
exception from the definition of individual health insurance coverage
was initially intended to address.\16\ In some instances, individuals
are purchasing this coverage as their primary form of health coverage
and, contrary to the intent of the 12-month coverage limitation in the
current definition of short-term, limited-duration insurance, some
issuers are providing renewals of the coverage that extend the duration
beyond 12 months. Because short-term, limited-duration insurance is
exempt from certain consumer protections, the Departments are concerned
that these policies may have significant limitations, such as lifetime
and annual dollar limits on essential health benefits
[[Page 75318]]
(EHB) and pre-existing condition exclusions, and therefore may not
provide meaningful health coverage. Further, because these policies can
be medically underwritten based on health status, healthier individuals
may be targeted for this type of coverage, thus adversely impacting the
risk pool for Affordable Care Act-compliant coverage.
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\16\ See e.g., Mathews, Anna W. ``Sales of Short-Term Health
Policies Surge,'' The Wall Street Journal April 10, 2016, available
at http://www.wsj.com/articles/sales-of-short-term-health-policies-surge-1460328539.
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To address the issue of short-term, limited-duration insurance
being sold as a type of primary coverage, the Departments proposed
regulations to revise the definition of short-term, limited-duration
insurance so that the coverage must be less than three months in
duration, including any period for which the policy may be renewed. The
proposed regulations also included a requirement that a notice must be
prominently displayed in the contract and in any application materials
provided in connection with enrollment in such coverage with the
following language: THIS IS NOT QUALIFYING HEALTH COVERAGE (``MINIMUM
ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF
THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE MINIMUM ESSENTIAL COVERAGE,
YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR TAXES.
In addition to proposing to reduce the length of short-term,
limited-duration insurance to less than three months, the proposed
regulations modified the permitted coverage period to take into account
extensions made by the policyholder ``with or without the issuer's
consent.'' This modification was intended to address the Departments'
concern that some issuers are taking liberty with the current
definition of short-term, limited-duration insurance--either by
automatically renewing such policies or having a simplified
reapplication process with the result being that such coverage, which
does not contain the important protections of the Affordable Care Act,
lasts longer than 12 months and serves as an individual's primary
health coverage.
The Departments received a number of comments relating to the
treatment of short-term, limited-duration insurance. Several commenters
supported the proposed rules and the reasoning behind them, noting that
short-term, limited-duration insurance is not subject to the same
consumer protections as major medical coverage and can discriminate
based on health status by recruiting healthier consumers to the
exclusion of sicker consumers. These commenters suggested the proposed
rules would limit the number of consumers relying on short-term,
limited-duration insurance as their primary form of coverage and
improve the Affordable Care Act's single risk pool.
Some commenters requested that the Departments go further and
prohibit issuers from offering short-term, limited-duration insurance
to consumers who have previously purchased this type of coverage to
prevent consumers from stringing together coverage under policies
offered by the same or different issuers. However, in the Departments'
view, such a restriction is not warranted. The individual shared
responsibility provision of the Code,\17\ which generally requires
individuals to obtain minimum essential coverage in order to avoid an
additional payment with their taxes, provides sufficient incentive to
discourage consumers from purchasing multiple successive short-term,
limited-duration insurance policies. The added notice requirement
ensures that individuals purchasing such policies are aware of the
individual shared responsibility requirement and its potential
implications. Furthermore, such a prohibition would be difficult for
State regulators to enforce, since prior coverage of a consumer would
have to be tracked.
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\17\ See Code section 5000A.
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Other commenters expressed general opposition to the proposed rules
or requested that short-term, limited-duration insurance be allowed to
provide coverage for a longer period. Several commenters stated that
some individuals who lose their employer-sponsored coverage may not be
able to obtain COBRA continuation coverage \18\ and that a job search
can often take longer than three months. One commenter suggested
alignment of short-term, limited-duration insurance with the employer
waiting period rules by permitting a coverage period of up to four
months.\19\ Another commenter asked that issuers be allowed to renew
coverage beyond the three-month period in certain situations, such as
when an individual experiences a triggering event for a special
enrollment period.\20\ The Departments decline to adopt these
suggestions. Short-term, limited-duration insurance allows for coverage
to fill temporary coverage gaps when an individual transitions between
sources of primary coverage. As explained above, for longer gaps in
coverage, guaranteed availability of coverage and special enrollment
period requirements in the individual health insurance market under the
Affordable Care Act ensure that individuals can purchase individual
market coverage through or outside of the Exchange that is minimum
essential coverage and includes the consumer protections of the
Affordable Care Act. Further, limiting the coverage of short-term,
limited-duration insurance to less than three months is consistent with
the exemption from the individual shared responsibility provision for
gaps in coverage of less than three months (the short coverage gap
exemption).\21\ Under current law, an individual who is not enrolled in
minimum essential coverage (whether enrolled in short-term, limited-
duration coverage or otherwise) for a period of three months or more
generally cannot claim the short coverage gap exemption for any of
those months. The final regulations help ensure that individuals who
purchase a short-term, limited-duration insurance policy will be
eligible for the short coverage gap exemption (assuming other
requirements are met) during the temporary coverage period.
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\18\ COBRA continuation coverage means coverage that satisfies
an applicable COBRA continuation provision. These provisions are
sections 601-608 of ERISA, section 4980B of the Code (other than
paragraph (f)(1) of such section 4980B insofar as it relates to
pediatric vaccines), or Title XXII of the PHS Act.
\19\ See 26 CFR 54.9815-2708; 29 CFR 2590.715-2708; 45 CFR
147.116.
\20\ See 26 CFR 54.9801-6; 29 CFR 2590.701-6; 45 CFR 146.117 and
147.104.
\21\ 26 CFR 1.5000A-3(j).
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After consideration of the comments and feedback received from
stakeholders, the Departments are finalizing the proposed regulations
without change.
The revised definition of short-term, limited-duration insurance
applies for policy years beginning on or after January 1, 2017. The
Departments recognize, however, that State regulators may have approved
short-term, limited-duration insurance products for sale in 2017 that
met the definition in effect prior to January 1, 2017. Accordingly, the
Department of Health and Human Services (HHS) will not take enforcement
action against an issuer with respect to the issuer's sale of a short-
term, limited-duration insurance product before April 1, 2017 on the
ground that the coverage period is three months or more, provided that
the coverage ends on or before December 31, 2017 and otherwise complies
with the definition of short-term, limited-duration insurance in effect
under the regulations.\22\ States may also elect not
[[Page 75319]]
to take enforcement actions against issuers with respect to such
coverage sold before April 1, 2017.
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\22\ This non-enforcement policy is limited to the requirement
that short-term, limited-duration insurance must be less than three
months. It does not relieve issuers of short-term, limited-duration
insurance of the notice requirement, which applies for policy years
beginning on or after January 1, 2017.
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B. Excepted Benefits
Sections 2722 and 2763 of the PHS Act, section 732 of ERISA, and
section 9831 of the Code provide that the respective requirements of
title XXVII of the PHS Act, part 7 of ERISA, and Chapter 100 of the
Code generally do not apply to the provision of certain types of
benefits, known as ``excepted benefits.'' Excepted benefits are
described in section 2791(c) of the PHS Act, section 733(c) of ERISA,
and section 9832(c) of the Code.
The parallel statutory provisions establish four categories of
excepted benefits. The first category, under section 2791(c)(1) of the
PHS Act, section 733(c)(1) of ERISA and section 9832(c)(1) of the Code,
includes benefits that are generally not health coverage (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 that 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 long-term 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.\23\ To be excepted under this second category, the
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.\24\
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\23\ 26 CFR 54.9831-1(c)(3)(v), 29 CFR 2590.732(c)(3)(v), 45 CFR
146.145(b)(3)(v).
\24\ PHS Act section 2722(c)(1), ERISA section 732(c)(1), Code
section 9831(c)(1).
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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 under section 2722(c)(2) of the PHS Act, section 732(c)(2)
of ERISA, and section 9831(c)(2) of the Code 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.
The fourth category, under section 2791(c)(4) of the PHS Act,
section 733(c)(4) of ERISA, and section 9832(c)(4) of the Code, is
supplemental excepted benefits. These benefits are excepted only if
they are provided under a separate policy, certificate, or contract of
insurance and are Medicare supplemental health insurance (also known as
Medigap), TRICARE supplemental programs, or ``similar supplemental
coverage provided to coverage under a group health plan.'' The phrase
``similar supplemental coverage provided to coverage under a group
health plan'' is not defined in the statute or regulations. However,
the Departments issued regulations clarifying that one requirement to
be similar supplemental coverage is that the coverage ``must be
specifically designed to fill gaps in primary coverage, such as
coinsurance or deductibles.'' \25\
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\25\ 26 CFR 54.9831-1(c)(5)(i)(C), 29 CFR 2590.732(c)(5)(i)(C),
and 45 CFR 146.145(b)(5)(i)(C).
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In 2007 and 2008, the Departments issued guidance on the
circumstances under which supplemental health insurance would be
considered excepted benefits under section 2791(c)(4) of the PHS Act
(and the parallel provisions of ERISA and the Code).\26\ The guidance
identifies several factors the Departments will apply when evaluating
whether supplemental health insurance will be considered to be
``similar supplemental coverage provided to coverage under a group
health plan.'' The guidance provides a safe harbor that supplemental
health insurance will be considered an excepted benefit if it is
provided through a policy, certificate, or contract of insurance
separate from the primary coverage under the plan and meets all of the
following requirements: (1) The supplemental policy, certificate, or
contract of insurance is issued by an entity that does not provide the
primary coverage under the plan; (2) the supplemental policy,
certificate, or contract of insurance is specifically designed to fill
gaps in primary coverage, such as coinsurance or deductibles, but does
not become secondary or supplemental only under a coordination of
benefits provision; (3) the cost of the supplemental coverage is 15
percent or less of the cost of primary coverage (determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision); and (4) the supplemental coverage sold in the
group health insurance market does not differentiate among individuals
in eligibility, benefits, or premiums based upon any health factor of
the individual (or any dependents of the individual).
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\26\ See EBSA Field Assistance Bulletin No. 2007-04 (available
at http://www.dol.gov/ebsa/regs/fab2007-4.html); 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).
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On February 13, 2015, the Departments issued Affordable Care Act
Implementation FAQs Part XXIII, providing additional guidance on the
circumstances under which health insurance coverage that supplements
group health plan coverage may be considered supplemental excepted
benefits.\27\ The FAQ states that the Departments intend to propose
regulations clarifying the circumstances under which supplemental
insurance products that do not fill in cost-sharing gaps under the
primary plan are considered to be specifically designed to fill gaps in
primary coverage. Specifically, the FAQ provides that health insurance
coverage that supplements group health coverage by providing coverage
of additional categories of benefits (as opposed to filling in cost-
sharing gaps under the primary plan) would be considered to be designed
to ``fill in the gaps'' of the primary coverage only if the benefits
covered by the supplemental insurance product are not EHB, as defined
under section 1302(b) of the Affordable Care Act, in the State in which
the product is being marketed. The FAQ further states that, until
regulations are issued and effective, the Departments will not take
enforcement action against an issuer of group or individual market
coverage that otherwise meets the conditions to be supplemental
excepted benefits that does not fill cost-sharing gaps in the group
health plan and only provides coverage of additional categories of
benefits that are not
[[Page 75320]]
covered by the group health plan and are not EHB in the applicable
State. States were encouraged to exercise similar enforcement
discretion.
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\27\ Frequently Asked Questions about Affordable Care Act
Implementation (Part XXIII), available at http://www.dol.gov/ebsa/pdf/faq-AffordableCareAct23.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Supplmental-FAQ_2-13-15-final.pdf.
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1. Similar Supplemental Coverage
The proposed regulations incorporated guidance from the Affordable
Care Act Implementation FAQs Part XXIII addressing supplemental health
insurance products that provide categories of benefits in addition to
those in the primary coverage. Under the proposed regulations, if group
or individual supplemental health insurance covers items and services
not included in the primary coverage (referred to as providing
``additional categories of benefits''), the coverage will be considered
to be designed ``to fill gaps in primary coverage,'' for purposes of
being supplemental excepted benefits if none of the benefits provided
by the supplemental policy are an EHB, as defined under section 1302(b)
of the Affordable Care Act, in the State in which the coverage is
issued.\28\ Thus, if any benefit provided by the supplemental policy is
either included in the primary coverage or is an EHB in the State where
the coverage is issued, the insurance coverage would not be
supplemental excepted benefits under the proposed regulations.
Furthermore, supplemental health insurance products that both fill in
cost sharing in the primary coverage, such as coinsurance or
deductibles, and cover additional categories of benefits that are not
EHB, would be considered supplemental excepted benefits under the
proposed regulations provided all other criteria are met.
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\28\ For this purpose, a supplemental plan would determine what
benefits are EHB based on the EHB-benchmark plan applicable in the
State, along with any additional benefits that are considered EHB
consistent with 45 CFR 155.170(a)(2).
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The Departments received several comments in support of the
proposed regulations. One commenter expressed support but requested
that the Departments provide additional examples in the regulations.
Another commenter requested clarification regarding the application of
the standards for similar supplemental coverage that provides benefits
outside of the United States, noting that no State's EHB rules require
coverage for services outside of the United States. If any benefit
provided by the supplemental policy is a type of service that is an EHB
in the State where the coverage is issued, the coverage would not be
supplemental excepted benefits under the final regulations, even if the
supplemental coverage was limited to covering the benefit in a location
or setting where it would not be covered as an EHB.
After consideration of the comments, the Departments are finalizing
the proposed regulations on similar supplemental coverage without
substantive change. For purposes of consistency and clarity, HHS is
also including a cross reference in the individual market excepted
benefits regulations at 45 CFR 148.220 to reflect the standard for
similar supplemental coverage under the group market regulations at 45
CFR 146.145(b)(5)(i)(C). The Departments may provide additional
guidance on similar supplemental coverage that meets the criteria to be
excepted benefits in the future.
2. Travel Insurance
The Departments are aware that certain travel insurance products
may include limited health benefits. However, these products typically
are not designed as major medical coverage. Instead, the risks being
insured relate primarily to: (1) The interruption or cancellation of a
trip; (2) the loss of baggage or personal effects; (3) damages to
accommodations or rental vehicles; or (4) sickness, accident,
disability, or death occurring during travel, with any health benefits
usually incidental to other coverage.
Section 2791(c)(1)(H) of the PHS Act, section 733(c)(1)(H) of
ERISA, and section 9832(c)(1)(H) of the Code provide that the
Departments may, in regulations, designate as excepted benefits
``benefits for medical care [that] are secondary or incidental to other
insurance benefits.'' Pursuant to this authority, and to clarify which
types of travel-related insurance products are excepted benefits under
the PHS Act, ERISA, and the Code, the Departments' proposed regulations
identified travel insurance as an excepted benefit under the first
category of excepted benefits and proposed a definition of travel
insurance consistent with the definition of travel insurance under
final regulations issued by the Treasury Department and the IRS for the
health insurance providers fee imposed by section 9010 of the
Affordable Care Act,\29\ which uses a modified version of the National
Association of Insurance Commissioners definition of travel insurance.
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\29\ 26 CFR 57.2(h)(4).
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The proposed regulations defined the term ``travel insurance'' as
insurance coverage for personal risks incident to planned travel, which
may include, but are not limited to, interruption or cancellation of a
trip or event, loss of baggage or personal effects, damages to
accommodations or rental vehicles, and sickness, accident, disability,
or death occurring during travel, provided that the health benefits are
not offered on a stand-alone basis and are incidental to other
coverage. For this purpose, travel insurance does not include major
medical plans that provide comprehensive medical protection for
travelers with trips lasting six months or longer, including, for
example, those working overseas as an expatriate or military personnel
being deployed.
The Departments received a number of comments in favor of the
treatment of travel insurance as an excepted benefit, as well as the
proposed definition of travel insurance. Several comments expressed
support for the proposed definition's consistency with regulations
governing the health insurance providers fee. One commenter requested
clarification that the requirement that health benefits are incidental
to other coverage be determined based solely on coverage under the
travel insurance policy, without regard to other coverage provided by
an employer or plan sponsor; the Departments agree that this is
correct. The Departments are finalizing without change the proposed
regulations defining travel insurance and treating such coverage as an
excepted benefit.
C. Definition of EHB for Purposes of the Prohibition on Lifetime and
Annual Limits
Section 2711 of the PHS Act, as added by the Affordable Care Act,
generally prohibits group health plans and health insurance issuers
offering group or individual health insurance coverage from imposing
lifetime and annual dollar limits on EHB, as defined under section
1302(b) of the Affordable Care Act. These prohibitions apply to both
grandfathered and non-grandfathered health plans, except the annual
limits prohibition does not apply to grandfathered individual health
insurance coverage.
Under the Affordable Care Act, self-insured group health plans,
large group market health plans, and grandfathered health plans are not
required to offer EHB, but they generally cannot place lifetime or
annual dollar limits on services they cover that are considered EHB. On
November 18, 2015, the Departments issued final regulations
implementing section 2711 of the PHS Act.\30\ The final regulations
provide that, for plan years (in the individual
[[Page 75321]]
market, policy years) beginning on or after January 1, 2017, a plan or
issuer that is not required to provide EHB must define EHB, for
purposes of the prohibition on lifetime and annual dollar limits, in a
manner consistent with any of the 51 EHB base-benchmark plans
applicable in a State or the District of Columbia, or one of the three
Federal Employees Health Benefits Program (FEHBP) EHB base-benchmark
plans, as specified under 45 CFR 156.100.\31\
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\30\ 80 FR 72192.
\31\ 26 CFR 54.9815-2711(c), 29 CFR 2590.715-2711(c), 45 CFR
147.126(c).
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The final regulations under section 2711 of the PHS Act include a
reference to selecting a ``base-benchmark'' plan, as specified under 45
CFR 156.100, for purposes of determining which benefits cannot be
subject to lifetime or annual dollar limits. The base-benchmark plan
selected by a State or applied by default under 45 CFR 156.100,
however, may not reflect the complete definition of EHB in the
applicable State. For that reason, the Departments are amending the
regulations at 26 CFR 54.9815-2711(c), 29 CFR 2590.715-2711(c), and 45
CFR 147.126(c) to refer to the provisions that capture the complete
definition of EHB in a State.
Specifically, in these final regulations, the Departments replace
the phrase ``in a manner consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3) or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100'' in each of the
regulations with the following: ``in a manner that is consistent with
(1) one of the EHB-benchmark plans applicable in a State under 45 CFR
156.110, and includes coverage of any additional required benefits that
are considered EHB consistent with 45 CFR 155.170(a)(2); or (2) one of
the three Federal Employees Health Benefit Program (FEHBP) plan options
as defined by 45 CFR 156.100(a)(3), supplemented, as necessary, to meet
the standards in 45 CFR 156.110.'' This change reflects the possibility
that base-benchmark plans, including the FEHBP plan options, could
require supplementation under 45 CFR 156.110, and ensures the inclusion
of State-required benefit mandates enacted on or before December 31,
2011 in accordance with 45 CFR 155.170, which when coupled with a
State's EHB-benchmark plan, establish the definition of EHB in that
State under regulations implementing section 1302(b) of the Affordable
Care Act.\32\
---------------------------------------------------------------------------
\32\ In the HHS Notice of Benefit and Payment Parameters for
2016 published February 27, 2015 (80 FR 10750), HHS instructed
States to select a new base-benchmark plan to take effect beginning
with plan or policy years beginning in 2017. The new final EHB base-
benchmark plans selected as a result of this process are publicly
available at downloads.cms.gov/cciio/Final%20List%20of%20BMPs_15_10_21.pdf. Additional information about
the new base-benchmark plans, including plan documents and summaries
of benefits, is available at www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. The definition of EHB in each of the 50 states
and the District of Columbia is based on the base-benchmark plan,
and takes into account any additions to the base-benchmark plan,
such as supplementation under 45 CFR 156.110, and State-required
benefit mandates in accordance with 45 CFR 155.170.
---------------------------------------------------------------------------
Some commenters requested clarification that self-insured group
health plans, large group market health plans and grandfathered plans
are not required to include as covered benefits any specific items and
services covered by the State-EHB benchmark plan, including any
additional State-required benefits considered EHB under 45 CFR
155.170(a)(2). The requirement in section 2707(a) of the PHS Act to
provide the EHB package required under section 1302(a) of the
Affordable Care Act applies only to non-grandfathered health insurance
coverage in the individual and small group markets. Self-insured group
health plans, large group market health plans and grandfathered health
plans are not required to include coverage of EHB, but cannot place
lifetime or annual dollar limits on any EHB covered by these plans.\33\
These plans are permitted to impose limits other than dollar limits on
EHB, as long as they comply with other applicable statutory provisions.
In addition, these plans can continue to impose annual and lifetime
dollar limits on benefits that do not fall within the definition of
EHB.
---------------------------------------------------------------------------
\33\ The annual limits prohibition does not apply to
grandfathered individual market coverage.
---------------------------------------------------------------------------
One commenter urged the Departments to eliminate the option for
large group market health plans to define EHB based on one of the three
largest nationally available FEHBP benchmark plan options to ensure
consistency with the definition of EHB in the individual and small
group markets. However, these FEHBP plan options \34\ are unique among
benchmark plans in that they are available nationally, and thus can
more appropriately be utilized to determine what benefits would be
categorized as EHB for those employers that provide health coverage to
employees throughout the United States and are not situated only in a
single State. The Departments are finalizing the proposed clarification
to the lifetime and annual limit regulations without change.
---------------------------------------------------------------------------
\34\ The three largest nationally available FEHBP plan options
are available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Top3ListFinal-5-19-2015.pdf.
---------------------------------------------------------------------------
D. Applicability Date
These final regulations are applicable for plan years (or, in the
individual market, policy years) beginning on or after January 1, 2017.
The HHS final regulations specify the applicability dates in the group
market regulations at 45 CFR 146.125 and in the individual market
regulations at 45 CFR 148.102.
III. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
These final regulations specify the conditions for similar
supplemental coverage products that are designed to fill gaps in
primary coverage by providing coverage of additional categories of
benefits (as opposed to filling in gaps in cost sharing) to constitute
supplemental excepted benefits, and clarify that certain travel-related
insurance products that provide only incidental health benefits
constitute excepted benefits.
These final regulations also revise the definition of short-term,
limited-duration insurance so that the coverage (including renewals)
has to be less than three months in total duration (as opposed to the
current definition of less than 12 months in duration), and provide
that a notice must be prominently displayed in the contract and in any
application materials provided in connection with enrollment in the
coverage indicating that such coverage is not minimum essential
coverage.
Finally, the regulations amend the definition of ``essential health
benefits'' for purposes of the prohibition on lifetime and annual
dollar limits with respect to group health plans and health insurance
issuers that are not required to provide essential health benefits,
including self-insured group health plans, large group market health
plans, and grandfathered health plans.
The Departments are publishing these final regulations to implement
the protections intended by the Congress in the most economically
efficient manner possible. The Departments have examined the effects of
this rule as required by Executive Order 13563 (76 FR 3821, January 21,
2011), Executive Order 12866 (58 FR 51735, September 1993, Regulatory
Planning and Review), the Regulatory Flexibility Act (September 19,
1980, Pub. L. 96-354), the Unfunded Mandates Reform Act of
[[Page 75322]]
1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the
Congressional Review Act (5 U.S.C. 804(2)).
B. Executive Orders 12866 and 13563--Department of Labor and Department
of Health and Human Services
Executive Order 12866 (58 FR 51735) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a final
rule--(1) having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
A regulatory impact analysis must be prepared for rules with
economically significant effects (for example, $100 million or more in
any 1 year), and a ``significant'' regulatory action is subject to
review by the Office of Management and Budget. The Departments have
determined that this regulatory action is not likely to have economic
impacts of $100 million or more in any one year, and is not significant
within the meaning of Executive Order 12866. However, the Departments
are nonetheless providing a discussion of the benefits and costs that
might stem from these final regulations in the Summary of Impacts
section below.
1. Need for Regulatory Action
These final regulations clarify the conditions for similar
supplemental coverage and travel insurance to be recognized as excepted
benefits. These clarifications are necessary to provide health
insurance issuers offering supplemental coverage and travel insurance
products with a clearer understanding of the Federal standards that
apply to these types of coverage. These final regulations also amend
the definition of short-term, limited-duration insurance for purposes
of the exclusion from the definition of individual health insurance
coverage and impose a new notice requirement in response to reports
that short-term, limited-duration insurance coverage is being sold to
individuals as primary coverage.
2. Summary of Impacts
The final regulations outline the conditions for travel insurance
and similar supplemental health insurance coverage to be considered
excepted benefits, and revise the definition of short-term, limited-
duration insurance.
The Departments received comments suggesting that the majority of
travel insurance policies are issued for trips of short duration, with
the average policy length being approximately three months, and these
policies generally provide limited medical coverage and property and
casualty coverage to protect against risks related to travel. The
Departments believe that the designation of certain travel insurance
products (as defined by the regulations) as excepted benefits is
consistent with prevailing industry practices, and therefore, will not
result in significant cost to issuers of these products or consumers
who purchase them.
Short-term, limited-duration policies represent a very small
fraction of the health insurance market, though their use is
increasing. In 2015, total premiums earned for short-term, limited-
duration insurance was approximately $160 million for approximately
1,517,000 member months and with approximately 148,000 covered lives at
the end of the year,\35\ while in 2013, total premiums were
approximately $98 million for 1,031,000 member months with
approximately 80,400 covered lives at the end of the year.\36\
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\35\ National Association of Insurance Commissioners, 2015
Accident and Health Policy Experience Report, 2016, available at
http://naic.org/prod_serv/AHP-LR-16.pdf.
\36\ National Association of Insurance Commissioners, 2013
Accident and Health Policy Experience Report, 2014, available at
http://naic.org/prod_serv/AHP-LR-14.pdf.
---------------------------------------------------------------------------
The Departments received comments indicating that a large majority
of the short-term, limited-duration insurance plans are sold as
transitional coverage, particularly for individuals seeking to cover
periods of unemployment or gaps between employer-sponsored coverage,
and typically provide coverage for less than three months. Therefore,
the Departments believe that the final regulations will have no effect
on the majority of consumers who purchase such coverage and issuers of
those policies. The small fraction of consumers who purchase such
policies for longer periods and who may have to transition to
individual market coverage will benefit from the protections afforded
by the Affordable Care Act, such as no preexisting condition
exclusions, essential health benefits without annual or lifetime dollar
limits, and guaranteed renewability. While some of these consumers may
experience an increase in costs due to higher premiums compared with
short-term, limited-duration coverage, they will also avoid potential
tax liability by having minimum essential coverage. Some consumers may
also be eligible for premium tax credits and cost-sharing reductions
for coverage offered through the Exchanges. Finally, inclusion of these
individuals, often relatively healthier individuals, in the individual
market will help strengthen the individual market's single risk pool.
The notice requirement will help ensure that consumers do not
inadvertently purchase these products expecting them to be minimum
essential coverage. Further, the Departments believe that any costs
incurred by issuers of short-term, limited-duration insurance to
include the required notice in application or enrollment materials will
be negligible since the Departments have provided the exact text for
the notice.
As a result, the Departments have concluded that the impacts of
these final regulations are not economically significant.
C. Paperwork Reduction Act--Department of Health and Human Services
The final regulations provide that to be considered short-term,
limited-duration insurance for policy years beginning on or after
January 1, 2017, a notice must be prominently displayed in the contract
and in any application materials, stating that the coverage is not
minimum essential coverage and that failure to have minimum essential
coverage may result in an additional tax payment. The Departments have
provided the exact text for these notice requirements and the language
will not need to be customized. The burden associated with these
notices is not subject to the Paperwork Reduction Act
[[Page 75323]]
of 1995 in accordance with 5 CFR 1320.3(c)(2) because they do not
contain a ``collection of information'' as defined in 44 U.S.C.
3502(3).
D. Regulatory Flexibility Act
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.
The RFA generally defines a ``small entity'' as (1) a proprietary
firm meeting the size standards of the Small Business Administration
(13 CFR 121.201); (2) a nonprofit organization that is not dominant in
its field; or (3) a small government jurisdiction with a population of
less than 50,000. (States and individuals are not included in the
definition of ``small entity.'') The Departments use as their measure
of significant economic impact on a substantial number of small
entities a change in revenues of more than 3 to 5 percent.
The Departments expect the impact of these final regulations to be
limited because the provisions are generally consistent with current
industry practices and impact only a small fraction of the health
insurance market. Therefore, the Departments certify that the final
regulations will not have a significant impact on a substantial number
of small entities. In addition, section 1102(b) of the Social Security
Act requires agencies to prepare a regulatory impact analysis if a rule
may have a significant economic impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. These final regulations
will not affect small rural hospitals. Therefore, the Departments have
determined that these final regulations will not have a significant
impact on the operations of a substantial number of small rural
hospitals.
E. Special Analysis--Department of the Treasury
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. For applicability of RFA, see paragraph D of this section
III.
Pursuant to section 7805(f) of the Code, these regulations have
been submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business.
F. 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 final
regulations 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 $146 million adjusted for
inflation since 1995.
G. 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, these final regulations have federalism
implications because they would have direct effects on the States, the
relationship between the national government and the States, or on the
distribution of power and responsibilities among various levels of
government. Under these final regulations, health insurance issuers
offering short-term, limited-duration insurance, travel insurance and
similar supplemental coverage will be required to follow the minimum
Federal standards to not be subject to the market reform provisions
under the PHS Act, ERISA and the Code. However, in the Departments'
view, the federalism implications of these final regulations are
substantially mitigated because, with respect to health insurance
issuers, the Departments expect that the majority of States will enact
laws or take other appropriate action resulting in their meeting or
exceeding the Federal standards.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating an employee benefit plan
as an insurance or investment company or bank, the preemption
provisions of section 731 of ERISA and section 2724 of the PHS Act
(implemented in 29 CFR 2590.731(a) and 45 CFR 146.143(a) and
148.210(b)) apply so that the requirements in title XXVII of the PHS
Act (including those added by the Affordable Care Act) are not to be
construed to supersede any provision of State law which establishes,
implements, or continues in effect any standard or requirement solely
relating to health insurance issuers in connection with individual or
group health insurance coverage except to the extent that such standard
or requirement prevents the application of a Federal requirement. The
conference report accompanying HIPAA indicates that this is intended to
be the ``narrowest'' preemption of State laws (See House Conf. Rep. No.
104-736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the market
reform requirements that are the subject of this rulemaking.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the Federal
law.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in efforts to consult with and work
cooperatively with affected States, including consulting with, and
attending conferences of, the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments will act in a
similar fashion in enforcing the market reform provisions of the
Affordable Care Act.
Throughout the process of developing these final regulations, to
the extent
[[Page 75324]]
feasible within the applicable preemption provisions, the Departments
have attempted to balance the States' interests in regulating health
insurance issuers, and Congress' intent to provide uniform minimum
protections to consumers in every State. By doing so, it is the
Departments' view that they have complied with the requirements of
Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to this final rule, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached final rules in a
meaningful and timely manner.
H. Congressional Review Act
These final 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 will be transmitted to the Congress and
to the Comptroller General for review in accordance with such
provisions.
I. Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings notices, and other guidance
cited in this document are published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and are available from the Superintendent of
Documents, U.S. Government Printing Office, Washington, DC 20402, or by
visiting the IRS Web site at http://www.irs.gov.
IV. Statutory Authority
The Department of the Treasury regulations are adopted pursuant to
the authority contained in sections 7805 and 9833 of the Code.
The Department of Labor regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1135 and 1191c; and Secretary of
Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human Services regulations are 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, 300gg-
91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Pension and excise taxes.
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 Parts 144, 146 and 147
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 148
Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: October 25, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 25th day of October 2016.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: October 24, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: October 25, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
Accordingly, 26 CFR part 54 is amended as follows:
PART 54--PENSION AND EXCISE TAXES
0
Par. 1. The authority citation for part 54 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 54.9801-2 is amended by revising the definition of
``short-term, limited-duration insurance'', and adding a definition of
``travel insurance'' in alphabetical order. The revision and addition
read as follows:
Sec. 54.9801-2 Definitions.
* * * * *
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with enrollment in such coverage in at
least 14 point type the following: ``THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
0
Par. 3. Section 54.9815-2711 is amended by revising paragraph (c) to
read as follows:
Sec. 54.9815-2711 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefits Program
(FEHBP) plan options as defined by 45 CFR 156.100(a)(3), supplemented,
as necessary, to meet the standards in 45 CFR 156.110.
* * * * *
0
Par. 4. Section 54.9831-1 is amended:
[[Page 75325]]
0
a. In paragraph (b)(1) by removing the reference ``54.9812-1T'' and
adding in its place the reference ``54.9812-1, 54.9815-1251 through
54.9815-2719A,'' and in paragraph (c)(1) by removing the reference
``54.9811-1T, 54.9812-1T'' and adding in its place the phrase
``54.9811-1, 54.9812-1, 54.9815-1251 through 54.9815-2719A'';
0
b. In paragraph (c)(2)(vii) by removing ``and'' at the end;
0
c. In paragraph (c)(2)(viii) by removing the period and adding ``;
and'' at the end;
0
d. Adding paragraph (c)(2)(ix); and
0
e. Revising paragraph (c)(5)(i)(C).
The revisions and additions are as follows:
Sec. 54.9831-1 Special rules relating to group health plans.
* * * * *
(c) * * *
(2) * * *
(ix) Travel insurance, within the meaning of Sec. 54.9801-2.
* * * * *
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits (as defined under section 1302(b) of the
Patient Protection and Affordable Care Act) in the State where the
coverage is issued, or the coverage is designed to both fill such gaps
in cost sharing under, and cover such benefits not covered by, the
primary coverage. Similar supplemental coverage does not include
coverage that becomes secondary or supplemental only under a
coordination-of-benefits provision.
* * * * *
0
Par. 5. Section 54.9833-1 is amended by adding a sentence at the end to
read as follows:
Sec. 54.9833-1 Effective dates.
* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 54.9801-2 and
paragraph (c)(5)(i)(C) of Sec. 54.9831-1 apply for plan years
beginning on or after January 1, 2017.
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Department of Labor
amends 29 CFR part 2590 as set forth below:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
6. The authority citation for part 2590 is revised to read as follows:
Authority: 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), Pub. L. 104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Division M, Pub. L. 113-235, 128 Stat. 2130; Secretary of Labor's
Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
0
7. Section 2590.701-2 is amended by revising the definition of ``short-
term, limited-duration insurance'', and adding a definition of ``travel
insurance'' in alphabetical order. The addition and revision read as
follows:
Sec. 2590.701-2 Definitions.
* * * * *
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with enrollment in such coverage in at
least 14 point type the following: ``THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
0
8. Section 2590.715-2711 is amended by revising paragraph (c) to read
as follows:
Sec. 2590.715-2711 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefits Program
(FEHBP) plan options as defined by 45 CFR 156.100(a)(3), supplemented,
as necessary, to meet the standards in 45 CFR 156.110.
* * * * *
0
9. Section 2590.732 is amended by adding paragraph (c)(2)(ix) and
revising paragraph (c)(5)(i)(C) to read as follows:
Sec. 2590.732 Special rules relating to group health plans.
* * * * *
(c) * * *
(2) * * *
(ix) Travel insurance, within the meaning of Sec. 2590.701-2.
* * * * *
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in
[[Page 75326]]
the primary coverage, such as coinsurance or deductibles, or the
coverage is designed to provide benefits for items and services not
covered by the primary coverage and that are not essential health
benefits (as defined under section 1302(b) of the Patient Protection
and Affordable Care Act) in the State where the coverage is issued, or
the coverage is designed to both fill such gaps in cost sharing under,
and cover such benefits not covered by, the primary coverage. Similar
supplemental coverage does not include coverage that becomes secondary
or supplemental only under a coordination-of-benefits provision.
* * * * *
0
10. Section 2590.736 is amended by adding a sentence at the end to read
as follows:
Sec. 2590.736 Applicability dates.
* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 2590.701-2 and
paragraph (c)(5)(i)(C) of Sec. 2590.732 apply for plan years beginning
on or after January 1, 2017.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Chapter 1
For the reasons stated in the preamble, the Department of Health
and Human Services amends 45 CFR parts 144, 146, 147, and 148 as set
forth below:
PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
0
11. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
12. Section 144.103 is amended by revising the definition of ``short-
term, limited-duration insurance'' and adding a definition of ``travel
insurance'' in alphabetical order. The revision and addition read as
follows:
Sec. 144.103 Definitions.
* * * * *
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract (taking into
account any extensions that may be elected by the policyholder with or
without the issuer's consent) that is less than 3 months after the
original effective date of the contract; and
(2) Displays prominently in the contract and in any application
materials provided in connection with enrollment in such coverage in at
least 14 point type the following: ``THIS IS NOT QUALIFYING HEALTH
COVERAGE (``MINIMUM ESSENTIAL COVERAGE'') THAT SATISFIES THE HEALTH
COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON'T HAVE
MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR
TAXES.''
* * * * *
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone
basis and are incidental to other coverage. For this purpose, the term
travel insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
* * * * *
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
13. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the Public Health Service Act (42 U.S.C. 300gg-1 through
300gg-5, 300gg-11 through 300gg-23, 300gg-91, and 300gg-92.
0
14. Section 146.125 is amended by adding a sentence at the end to read
as follows:
Sec. 146.125 Applicability dates.
* * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 144.103 of this
subchapter and paragraph (c)(5)(i)(C) of Sec. 146.145 apply for policy
years and plan years beginning on or after January 1, 2017.
0
15. Section 146.145 is amended by adding paragraph (b)(2)(ix) and
revising paragraph (b)(5)(i)(C) to read as follows:
Sec. 146.145 Special rules relating to group health plans.
* * * * *
(b) * * *
(2) * * *
(ix) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
* * * * *
(5) * * *
(i) * * *
(C) Similar supplemental coverage provided to coverage under a
group health plan. To be similar supplemental coverage, the coverage
must be specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill
gaps in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits (as defined under section 1302(b) of the
Patient Protection and Affordable Care Act) in the State where the
coverage is issued, or the coverage is designed to both fill such gaps
in cost sharing under, and cover such benefits not covered by, the
primary coverage. Similar supplemental coverage does not include
coverage that becomes secondary or supplemental only under a
coordination-of-benefits provision.
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
16. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
17. Section 147.126 is amended by revising paragraph (c) to read as
follows:
Sec. 147.126 No lifetime or annual limits.
* * * * *
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner that is consistent with--
(1) One of the EHB-benchmark plans applicable in a State under 45
CFR 156.110, and includes coverage of any additional required benefits
that are considered essential health benefits consistent with 45 CFR
155.170(a)(2); or
(2) One of the three Federal Employees Health Benefits Program
[[Page 75327]]
(FEHBP) plan options as defined by 45 CFR 156.100(a)(3), supplemented,
as necessary, to meet the standards in 45 CFR 156.110.
* * * * *
PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET
0
18. The authority citation for part 148 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the
Public Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92), as amended.
0
19. Section 148.102 is amended by adding a sentence at the end of
paragraph (b) to read as follows:
Sec. 148.102 Scope, applicability, and effective dates.
(b) * * * Notwithstanding the previous sentence, the definition of
``short-term, limited-duration insurance'' in Sec. 144.103 of this
subchapter and paragraph (b)(7) of Sec. 148.220 apply for policy years
beginning on or after January 1, 2017.
0
20. Section 148.220 is amended by adding paragraph (a)(9) and revising
paragraph (b)(7) to read as follows:
Sec. 148.220 Excepted benefits.
* * * * *
(a) * * *
(9) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
(b) * * *
(7) Similar supplemental coverage provided to coverage under a
group health plan (as described in Sec. 146.145(b)(5)(i)(C) of this
subchapter).
[FR Doc. 2016-26162 Filed 10-28-16; 8:45 am]
BILLING CODE 4830-01-P; 4120-01-P; 4510-29-P
