Legal Alert: Agencies Clarify How Certain Fertility Benefits May be Treated as Excepted Benefits

This alert is of interest to all employers that offer fertility benefits or may be interested in offering fertility benefits in the future. 

The Department of Labor, Department of Health and Human Services, and the Internal Revenue Service (IRS) (collectively, the “Agencies”) recently released FAQs about Implementation of the Affordable Care Act Part 72, which clarifies the existing categories of excepted benefits employers can use to offer fertility benefits, including independent, noncoordinated excepted benefits and limited excepted benefits. These actions were a response to an executive order released by President Trump earlier this year seeking policy recommendations to protect in vitro fertilization (IVF) access and to reduce out-of-pocket and health plan costs for IVF treatment.

The Agencies also announced that they intend to propose notice and comment rulemaking to provide additional ways that certain fertility benefits may be offered as a limited excepted benefit if certain conditions are met and are considering whether to modify the standards under which supplemental health insurance coverage provided by a group health plan, including a supplemental benefit for fertility coverage, will be considered to satisfy the conditions for being an excepted benefit.

Background 

Excepted benefits may provide health care coverage but are exempt from the ACA’s market reforms, including the prohibition on lifetime and annual dollar limits and the preexisting conditions exclusions, as well as certain HIPAA requirements, such as special enrollment rights. 

Excepted benefits generally fall into four categories:

1. Benefits that are non-health benefits, which include automobile insurance, workers’ compensation, and similar benefits;
2. Limited excepted benefits, including, among other benefits, limited scope dental or vision insurance and certain HRAs;
3. Independent, noncoordinated excepted benefits
4. Supplemental excepted benefits, such as supplemental Medicare coverage

The Agencies’ FAQs and this Alert focus on the second and third type of excepted benefits, limited excepted benefits and independent, noncoordinated excepted benefits.

Limited excepted benefits are excepted if they are provided under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of a group health plan. Under current regulations, limited excepted benefits include HRAs and certain other account-based group health plans are recognized as limited excepted benefits if they satisfy all of the following conditions:

1. Otherwise not an integral part of the plan. Other group health plan coverage that is not limited to excepted benefits and that is not an HRA or other account-based group health plan is made available by the same plan sponsor for the plan year to the participant.
2. Benefits are limited in amount. Amounts newly made available for each plan year under the HRA or other account-based group health plan do not exceed $2,150 for plan years beginning in 2025 (adjusted for inflation).
3. Prohibition on reimbursement of certain health insurance premiums. The HRA or other account-based group health plan must not reimburse premiums for individual health insurance coverage, group health plan coverage (other than COBRA continuation coverage or other continuation coverage), or Medicare Part A, B, C, or D, except that the HRA or other account-based group health plan may reimburse premiums for such coverage that consists solely of excepted benefits.
4. Uniform availability. The HRA or other account-based group health plan is made available under the same terms to all similarly situated individuals, regardless of any health factor. 

Independent, noncoordinated excepted benefits include coverage only for a specified disease or illness (such as cancer-only policies), and hospital indemnity or other fixed indemnity insurance. To qualify as an independent, noncoordinated excepted benefit, all of the following conditions must be 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.

3. The benefits are paid with respect to an event without regard to whether benefits are provided with respect to such event under any group health plan maintained by the same plan sponsor or, with respect to individual coverage, under any health insurance coverage maintained by the same health insurance issuer.

Agency Fertility Benefit FAQs

The FAQs clarify that a fertility HRA that meets all of the elements for a limited excepted benefit will be treated as an excepted benefit and will not be subject to the ACA market reforms. 

Further, the FAQs clarify that if an employer offers a fertility specified disease benefit for employees that is an insured benefit (i.e., not a fertility HRA), the benefit will be considered an independent, noncoordinated excepted benefit, even if the participant is not also enrolled in the employer’s major medical coverage, as long as the benefit is provided under a separate policy, certificate, or contract of insurance and there is no coordination between the provision of the benefits under the excepted benefit coverage and any exclusion of benefits under the employer’s major medical plan or another group health plan sponsored by the employer. All other elements for independent, noncoordinated excepted benefits must also be met, including the requirement that fertility benefit coverage be paid without regard to whether benefits are provided with respect to the same event under any group health plan maintained by the same plan sponsor.  Note that employees covered by an excepted HRA that offers fertility benefits are not eligible to establish or contribute to an HSA unless the HRA is post-deductible; however, an insured benefit that is an independent, noncoordinated excepted benefit does not disrupt HSA eligibility.

Finally, the FAQs clarify that fertility-based services that merely provide coaching or navigator services to assist individuals or couples in understanding their fertility options will be treated as excepted benefit Employee Assistance Program (“EAP”) benefit. Note, if the benefit provides more than coaching or navigation services, such as medical care, and/or if it is coordinated with benefits under another group health plan, the employee is required to pay any premium or other contribution or cost sharing, then it will not qualify as an EAP and will not be an excepted benefit. 

Next Steps for Employers

While the FAQs merely clarify current potential pathways for fertility benefits to be more accessible to employees, the Agencies are looking at more ways to coordinate with existing benefits offered by employers, such as non-excepted benefit HRAs.  As of now, if an employer offers an HRA that does not meet the requirements for an excepted benefit HRA, the HRA will not qualify as an excepted benefit and would have to integrate with the employer’s major medical coverage (or major medical coverage offered by another employer) to meet the ACAs market reforms. Further, because an HRA is not insurance, a traditional fertility HRA would not qualify as an independent, noncoordinated excepted benefit.

In addition, if an employer offers an EAP with more than fertility counseling or navigator benefits, then it should work with counsel to evaluate the EAP to ensure it is an excepted benefit.

Until the Agencies determine whether they can take more action to make fertility benefits accessible to employees without meeting the ACA’s strict market reforms, employers that offer traditional HRA benefits will not be able to take advantage of this guidance.

About the Author. This alert was prepared for Alera Group by Barrow Lent LLP, a national law firm with recognized experts on ERISA and the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.