Applying Health Reform to Dental
Smart first steps
Employer-sponsored dental and vision benefits generally are subject to the market reforms enacted as part of the Patient Protection and Affordable Care Act (PPACA) unless they are “excepted benefits.”
Dental and vision benefits are generally considered excepted benefits if they:
- Are offered under a separate policy, certificate, or contract of insurance; or
- Are not an “integral part” of the employer’s health plan.
Dental or vision benefits (whether insured or self-insured) are not an integral part of an employer’s health plan if:
- Participants have a right to not receive the dental or vision coverage; and
- Participants who elect dental or vision coverage must pay an additional premium for such coverage.
What about self-insured dental or vision benefits?
The “integral part” analysis is especially important for self-insured plans. The key is making sure there is a separate election and a separate employee premium associated with the dental or vision benefit.
- A self-insured dental benefit that automatically covers all group health plan participants is not an excepted benefit even if a separate premium is attributed to that benefit.
- A self-insured vision benefit eligible employees must specifically elect and pay for with a dedicated premium is an excepted benefit.
Effective date: The exemption from the PPACA’s market reforms for dental or vision benefits that are “excepted benefits” is effective when the relevant market reforms become effective – i.e., plan years beginning on or after September 23, 2010 and plan years beginning on or after January 1, 2014.
The exemption for dental or vision benefits that are excepted benefits applies regardless of whether vision or dental benefits, or the employer’s other group health benefits, are grandfathered health plans.
What are the PPACA’s “market reforms”?
The PPACA market reforms that will not apply to dental and vision benefits that are excepted benefits include:
- 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
Examples of provisions that are not among the PPACA market reforms include automatic enrollment, mandatory reporting of the cost of employer-sponsored health coverage on Forms W-2, and the 40% high-value excise tax. However, specific exceptions for standalone dental or vision benefits are available in the case of the W-2 reporting requirement and the 40% high-value excise tax.
Key Implication: Administration
Employers offering dental or vision benefits that are not excepted benefits will need to ensure those benefits conform to the PPACA’s market reform provisions, or take steps to establish those benefits as excepted benefits going forward.
Key implication: Cost
Dental and vision benefits often include annual or lifetime dollar limits. If an employer’s dental or health benefits are not excepted benefits then, among other things, any lifetime limits will have to be eliminated for plan years beginning on or after September 23, 2010, and any annual limits will have to be eliminated for plan years beginning on or after January 1, 2014 (and may need to be increased before then). Eliminating (or increasing) these annual or lifetime limits will make these benefits more expensive.
Key implication: Communications
Employers offering dental or vision benefits that are excepted benefits may need to explain to employees why the PPACA’s market reforms – such as the requirement to cover employees’ children until age 26 – do not apply to those benefits.
Smart First Steps for Employers to Consider
Plan design: Analyze any dental or vision benefits offered to determine if they are excepted health benefits. If they are not, either take steps to establish them as excepted health benefits or to bring them into compliance with the PPACA’s market reforms as they become effective. If dental or vision benefits are excepted benefits consider updating them to incorporate some of the PPACA’s market reforms – such as the requirement to cover employees’ children until age 26 – in order to simplify administration and avoid employee confusion about dependent eligibility for health benefits.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.