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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.






Contact Info

The Wagner Law Group


  Integrity | Excellence


Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418


San Francisco Office

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104







April 10, 2015


 Health and Welfare Law Alert




Agencies Issue Final Regulations on Limited Wraparound Coverage





DOL, HHS and IRS have issued final regulations defining when limited wraparound coverage qualifies as an excepted benefit for purposes of HIPAA and the Affordable Care Act ("ACA"). The final rules balance competing interests by allowing employers to offer certain wraparound coverage as an excepted benefit, while limiting the circumstances under which this exception is applicable.


Background.  The ACA requires employers with 50 or more employees to offer affordable, minimum-value health coverage to their full-time employees or pay an excise tax. This rule is commonly referred to as the employer mandate. The employer mandate does not apply to employees who average less than 30 hours per week, or to temporary or seasonal employees. Thus, many of these non-full time employees purchase health coverage through an Exchange where premium tax credits are available to lower-income individuals to help make coverage affordable.


Coverage available through an Exchange, however, is often less comprehensive than the employer's group health coverage. Thus, employers that do not provide affordable primary health coverage to these excluded employees sometimes provide them with low-cost wraparound coverage that fills in some of the gaps in the Exchange coverage. However, the ACA provides that an individual who receives group health coverage from an employer generally is not eligible for a premium tax credit. This rule even applies to coverage that is limited in scope, such as wraparound coverage.


The ACA carves out an exception to this rule for a class of benefits called excepted benefits. (Excepted benefits are exempt from numerous requirements that generally apply to group health plans, including much of HIPAA and the ACA's insurance market reforms.) Thus, a lower-income individual who receives only excepted benefits from an employer remains eligible for premium tax credits when the individual purchases coverage through an Exchange.


Final Regulations.  Under the final regulations, limited wraparound coverage is an excepted benefit if the following requirements are met: 

  • The coverage is specifically designed to wrap around eligible individual health insurance or multi-state plan ("MSP") coverage and provides "meaningful benefits" beyond coverage for cost-sharing.
  • The coverage costs no more than the greater of the maximum annual contribution amount for health FSAs ($2,550 in 2015) or 15% of the cost of coverage of the primary plan. However, any covered individual cannot also be enrolled in a health FSA.
  • The coverage does not impose a pre-existing condition exclusion, discriminate based on a health factor or discriminate in favor of highly compensated individuals.
  • The sponsor of the coverage complies with HHS reporting requirements that will be established in later guidance. 

Limited wraparound coverage offered in conjunction with eligible individual health insurance must also meet the following three standards regarding plan eligibility: 

  • The employer must offer its full-time employees coverage that provides minimum value, is reasonably expected to be affordable, and is "substantially similar" to coverage that the employer would need to avoid the excise tax imposed under the ACA's employer mandate.
  • Eligibility for the wraparound coverage must be limited to non-full time employees or retirees, and their dependents.
  • Employees eligible for the wraparound coverage must also be offered other group health plan coverage that is not composed entirely of excepted benefits, in addition to the wraparound coverage. 

Limited wraparound coverage offered in conjunction with MSP coverage must also meet the following four standards regarding plan eligibility: 

  • The coverage must be reviewed and approved by the Office of Personnel Management to provide coverage in conjunction with coverage under a MSP.
  • The employer must have offered coverage in plan years beginning in either 2013 or 2014 that is similar to coverage that the employer would need to have offered its full-time employees to avoid the employer mandate liability under ACA.
  • In the plan year that began in 2013 or 2014, the employer must have offered coverage to a substantial portion of full-time employees that provided minimum value and was affordable.
  • The employer's annual contributions to both primary and limited wraparound coverage must be substantially the same as the employer's total contributions for coverage offered to full-time employees in 2013 or 2014. 

The final regulations authorize excepted benefits status for wraparound coverage that satisfies these requirements for a limited time under a pilot program. This pilot program requires that the wraparound coverage first be offered to employees no earlier than January 1, 2016 and no later than December 31, 2018. The program ends on the later of three years from when the wraparound coverage was first offered or the date on which the last collective bargaining agreement relating to the plan ends after the wraparound coverage is first offered.


NOTE: These final rules for wraparound coverage should not be confused with the entirely separate rules regarding wrap plan documents under ERISA.


The final regulations are available at: https://www.federalregister.gov/articles/2015/03/18/2015-06066/amendments-to-excepted-benefits






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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.