Federal agencies have released draft regulations that could give birth to a major new type of supplemental health insurance product — “limited wraparound coverage.”
The proposed regulations would let insurers sell employer-sponsored plans designed to beef up benefits for workers who get their coverage from the Patient Protection and Affordable Care Act (PPACA) public exchange system.
An employer could use a wraparound plan to make sure that workers who used public exchange qualified health plan (QHP) individual or family coverage could get access to benefits comparable to the benefits offered by the employer’s own group health plan.
PPACA is set to require large employers to offer affordable coverage with a minimum value to full-time employees, but the law will not really require employers to offer that coverage to all employees. At first, regulators would only require employers to offer coverage to 70 percent of employees. Employers would not have to offer any “minimum essential coverage” to part-time employees.
Three federal agencies — the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA), and the U.S. Department of Health and Human Services (HHS) — want to create a pilot program that would let insurers and employers try selling exchange QHP supplement products.
While pilot program rules were in effect, an employer that offered group health coverage to most full-time workers could offer wraparound coverage to part-time workers who were using exchange QHP coverage but were also eligible for other group coverage.
The agencies also want to set up a similar program for workers getting coverage through the PPACA Multi-State Plan (MSP) program.
The agencies say the wraparound would have to provide meaningful extra benefits. The issuer could not use medical underwriting. The employer could require the employee to help pay for the coverage, but the total cost per employee would have to be lower than the maximum annual contribution for a health flexible spending arrangement (FSA), or $2,500 today.
The agencies said they want to keep employers from using the products in place of major medical coverage or interfering with workers’ ability to use the public exchange system.
The agencies are preparing to publish the proposed regulations in the Federal Register Tuesday. Comments will be due 30 days after the official Federal Register publication date.