New Federal Guidance Expands Fertility Benefits Options for Employers Through Excepted Benefits

What are Excepted Benefits?

Excepted benefits are types of coverage that are exempt from many compliance requirements applicable to group health plans under ERISA, the Internal Revenue Code, and Public Health Services Act. This makes them a flexible, cost-effective benefit offering for employers looking to enhance their benefits package without additional regulatory complexity. Excepted benefits fall into four categories.

The Four Categories of Excepted Benefits:

1. Coverage that is Not Health Coverage: Always Excepted

This category includes coverage like auto, liability, workers’ compensation, and disability income insurance. These benefits always qualify as excepted regardless of their structure.

2. Limited Excepted Benefit

Limited excepted benefits includes standalone dental and vision plans, long-term care, certain health reimbursement arrangements (HRAs), health flexible spending arrangements (FSAs), and employee assistance programs (EAPs). Employers must provide these benefits under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of the group health plan.

3. Independent, Noncoordinated Excepted Benefits

This category covers policies like cancer-only or hospital indemnity insurance. In other words, the coverage does not coordinate with group health plans.

4. Supplemental Excepted Benefits

Employers can offer these benefits if they provide them under a separate policy, certificate, or insurance contract. Examples include Medigap, Tricare/CHAMPVA supplements, or similar supplemental coverage that supplements coverage under a group health plan. These plans are designed to fill gaps in primary coverage.

How the FAQs and Executive Order Impacts Excepted Benefits

The new guidance creates three distinct pathways for employers to offer fertility benefits as excepted benefits. Here's what employers need to know about each option.

Option 1: Fertility as an “Excepted Benefit”

The new guidance allows an insured policy to offer fertility coverage as a stand-alone program under the independent, noncoordinated excepted benefit category, similar to the worksite coverages like accident, critical illness, and hospitalization insurance we know today.

To meet this category, the excepted benefit must meet several requirements. Among other things, employers must provide it under a separate policy, certificate, or contract of insurance. In other words, a fertility coverage policy must take the form of an actual insurance policy.

Important Considerations for Employers:

Currently, most fertility vendors do not operate as insurance companies and do not file their offerings as “insurance” per state insurance laws. While fertility vendors might start to offer policies, the usual carriers who offer worksite plans will more likely begin to offer a new policy.

However, fertility policies may take some time to come to market, pending state insurance approvals. Carriers may also try to fold fertility into other types of policies (like critical illness) to mitigate adverse selection risks. Without some risk mitigation, these policies will likely remain unaffordable to those employees who want them.

Can Self-Funded Health Plans Offer Fertility as an "Excepted Benefit"?

The guidance is clear that this approach cannot be done on a self-funded basis. Employers must offer an independent noncoordinated benefit as a fully insured arrangement. However, the Departments intend to undertake further rulemaking to provide additional ways employers may offer certain fertility benefits as a type of limited excepted benefit.

An individual who enrolls in fertility coverage through an independent noncoordinated excepted benefit will not impact their ability to contribute to an HSA. Benefits under such a plan are paid out regardless of any coverage that may be available through the insured’s primary medical plan.

Option 2: Fertility through a Limited HRA Program

The government has recognized Excepted Benefit HRAs as limited excepted benefits since 2019. Under the new guidance, employers can use these HRAs to provide fertility coverage that qualifies as an excepted benefit.

Compliance Requirements for Excepted Benefit HRAs:

Additionally, employers must offer these HRAs uniformly, regardless of health factors. Employers cannot use them to reimburse employees for health care premiums. The separate policy or certificate requirement means employers must clearly distinguish the HRA from their group health plan.

Despite the coverage limitations, Excepted Benefit HRAs can provide meaningful support for fertility-related expenses like diagnostic testing, consultations, medications, or as a supplement to other coverage options.

Option 3: Fertility Coaching and Navigation in an EAP

The new guidance clarifies that EAPs can cover fertility coaching and navigation services without any risk of losing their excepted benefit status. This creates an accessible entry point for employers who want to support employees' fertility journeys without offering comprehensive medical coverage.

What Fertility Coaching and Navigation Can Include:

• Educational resources about fertility and family planning options
• Guidance on understanding fertility benefits and coverage
• Provider network navigation and referrals
• Support for understanding treatment options and costs
• Emotional support and counseling related to fertility challenges

Comparing Fertility Benefit Options for Employers:

By understanding your options under the excepted benefit framework, you can make strategic decisions that enhance your benefits package while managing regulatory and cost considerations effectively.

What's Next for Fertility Benefits?

The Departments plan to issue proposed rules to expand the definition of limited excepted benefits to include more fertility-related services. This could open the door for broader coverage options without triggering ACA compliance burdens.

Key Areas to Watch Include:

• Expanded limited excepted benefit definitions that could allow more comprehensive fertility services
• Self-funded fertility benefit options that may become available through future regulatory changes
• State insurance department approvals for new fertility insurance products
• Carrier innovations in fertility benefit design and risk management
• Integration strategies that combine multiple excepted benefit approaches

The landscape of fertility coverage is evolving rapidly, creating new opportunities for employers to support employees through meaningful, compliant benefit offerings. OneDigital will continue to monitor the latest from the Departments as we await these proposed regulations.

Contact a OneDigital team member today to help you evaluate which excepted benefit approach best fits your organization's goals, budget, and employee needs.