QUESTION: We recall that the Affordable Care Act (ACA) requires insured group health plans to satisfy nondiscrimination rules similar to those that apply to self-insured plans under Code § 105(h) (the eligibility and benefit tests). What is the status of those rules? Are employers that sponsor insured plans required to comply with them, and if so, when?
ANSWER: Under the ACA, insured group health plans generally must satisfy the nondiscrimination rules of Code § 105(h)(2), including “rules similar to” those in Code § 105(h) regarding nondiscriminatory eligibility, nondiscriminatory benefits, and controlled groups. The Code § 105(h) rules pre-date the ACA, prohibit certain discrimination in favor of highly compensated individuals, and apply only to self-insured health plans. The ACA applied similar requirements to insured plans, other than those that provide only excepted benefits or qualify for grandfathered status.
Although insured group health plans initially were required to comply with the ACA nondiscrimination rules for plan years beginning on or after September 23, 2010, the IRS announced in Notice 2011-1 that compliance is not required until the agencies issue regulations or other guidance regarding how the rules apply to insured plans. To date, the agencies have not issued such regulations or guidance, so sanctions for failure to comply do not yet apply for insured plans. Note that the Code § 105(h) nondiscrimination rules continue to apply to self-insured health plans, including those that provide excepted benefits or are grandfathered. For example, the Code § 105(h) nondiscrimination rules continue to apply to health FSAs.
For more information, see EBIA’s Health Care Reform manual at Section XIII.B (“Nondiscrimination Requirements for Insured Group Health Plans”). See also EBIA’s Self-Insured Health Plans manual at Section XII (“Nondiscrimination Rules Under Code § 105(h)”), EBIA’s Cafeteria Plans manual at Section XXXI (“Health FSA Nondiscrimination Rules”), and EBIA’s Consumer-Driven Health Care manual at Section XXIII (“HRAs: Nondiscrimination”).
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