A: Excepted benefits are employee benefits that are exempt from certain Affordable Care Act (ACA) and HIPAA requirements. These benefits are designed to supplement traditional group health plan coverage, giving employers greater flexibility in plan design while helping employees manage out-of-pocket healthcare costs and financial risk.
Excepted benefits are not intended to replace comprehensive medical coverage but can complement a major medical plan by providing employees targeted financial protection for specific health care events or expenses.
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Excepted Benefits |
Non-Excepted Benefits |
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Considered supplemental coverage |
Provides comprehensive health care coverage |
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Benefits are limited in scope |
Covers a broad range of medical services |
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Fixed-cash benefits are traditionally paid directly to the participant |
Payment for health care services is traditionally paid directly to the provider |
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Plans are exempt from certain ACA and HIPAA mandates if structured properly |
Payment for health care services is traditionally paid directly to the provider |
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Covered benefits can be subject to taxes if not designed properly |
Covered benefits are generally tax free |
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Examples include accident, critical illness and hospital indemnity plans |
Examples include employer-sponsored PPO, HDHP and HMO medical plans |
Common examples of excepted benefits include
- stand-alone dental and vision plans,
- accident insurance,
- critical illness coverage,
- hospital indemnity insurance,
- fixed indemnity plans,
- certain Employee Assistance Programs (EAPs), and
- long-term care benefits.
Not all supplemental health benefits qualify as excepted benefits. For example, a health reimbursement arrangement (HRA) integrated with a health plan is not an excepted benefit. However, if participation in the HRA does not require enrollment in group health plan, it is an excepted benefit if all other plan elements comply with the ACA/HIPAA excepted‑benefit HRA rules.
Employers should carefully review plan structure, eligibility requirements and funding arrangements to ensure compliance with applicable ACA and HIPAA rules before implementation.
