Applicability of Federal Requirements to Selected Health Coverage Arrangements: An Overview
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November 13, 2019
Applicability of Federal Requirements to Selected Health
Coverage Arrangements: An Overview
Introduction
Table 1. Applicability of Federal Health Insurance
A majority of individuals in the United States have private
Requirements to Selected Arrangements
health insurance coverage. In general, health plans sold in
the private health insurance market (i.e., individual
Health Coverage
Applicability of Federal Health
coverage, small- and large-group coverage, and self-insured
Arrangement
Insurance Requirements
plans) must comply with applicable federal and state health
Exempted Health Coverage Arrangements
insurance requirements.
Group Health Plans
Covering Fewer Than
The federal requirements are codified in Title XXVII of the
Two Current Employees Exempt from complying with all
Public Health Service Act (PHSA), Part 7 of the Employee
Excepted Benefits
requirements
Retirement Income Security Act of 1974 (ERISA), and
Short-Term, Limited-
Chapter 100 of the Internal Revenue Code (IRC). They
Duration Insurance
relate to how coverage is offered and issued, the benefits it
Student Health Insurance Exempt from complying with some
must cover, and how it is priced, among other issues. Such
Coverage
or all requirements
requirements include the prohibition of preexisting
Self-Insured, Nonfederal
condition exclusions and requirements to cover certain
Governmental Plans
Exempt from complying with some
benefits, such as maternity care.
Grandfathered Plans
requirements
Transitional Plans
However, not all private health coverage arrangements
Noncompliant Health Coverage Arrangements
comply with federal health insurance requirements. This
Health Care Sharing
Does not necessarily comply with
includes exempted health coverage arrangements and
Ministries
federal health insurance
noncompliant health coverage arrangements, as discussed
Farm Bureau Coverage
requirements
below. This document provides an overview of such
Source: CRS analysis of federal statute and regulations.
arrangements.
Notes: This table is adapted from Table 1 in CRS Report R46003,
This document is adapted from the CRS Report R46003,
Applicability of Federal Requirements to Selected Health Coverage
Applicability of Federal Requirements to Selected Health
Arrangements. See that table for more detail and citations.
Coverage Arrangements. See the report for further
description of each arrangement, explanation of each
Exempted Health Coverage
arrangement’s current status and history with respect to
Arrangements
complying with federal health insurance requirements, and
Most of the arrangements identified in Table 1 are exempt
relevant statutory and regulatory citations. The report also
from compliance with some or all federal health insurance
includes information about whether and how the
requirements. The exemptions are described in federal
arrangements are subject to state regulatory authority and
statute, regulations, or guidance.
provides enrollment estimates (where available).
Group Health Plans Covering Fewer Than Two
Applicability of Federal Health Insurance Current Employees
Requirements to Selected Arrangements Both fully insured and self-insured group health plans
Some health coverage arrangements that consumers may
covering fewer than two current employees are exempt
purchase from private health insurers or other private
from all federal health insurance requirements. This
organizations do not comply with some or all federal health
includes retiree-only plans, provided they cover fewer than
insurance requirements. The arrangements listed in Table 1
two current employees. The exemption was established in
can be divided into two broad categories, as termed for
the Health Insurance Portability and Accountability Act
purposes of this document:
(HIPAA; P.L. 104-191), which was enacted in 1996.
Exempted Health Coverage Arrangements: Those
Excepted Benefits
that meet a federal definition of health insurance but are
In general, health plans in their provision of excepted
exempt from compliance with some or all applicable
benefits are exempt from all federal health insurance
federal health insurance requirements.
requirements (when specified conditions are met). A
diverse collection of insurance benefits can be considered
Noncompliant Health Coverage Arrangements:
excepted benefits, including auto liability insurance,
Those that the federal government has not explicitly
limited-scope dental and vision benefits, specific disease
exempted from compliance with federal health
coverage, and supplemental Medicare plans (i.e., Medigap
insurance requirements and that do not necessarily
comply with those requirements.
https://crsreports.congress.gov
Applicability of Federal Requirements to Selected Health Coverage Arrangements: An Overview
plans). The exemption for excepted benefits was established
applicable), access to coverage, benefits, and cost sharing
under HIPAA.
(e.g., changes in coinsurance requirements).
Short-Term, Limited-Duration Insurance
Transitional Plans
Short-term, limited-duration insurance (STLDI) is coverage
The Centers for Medicare & Medicaid Services (CMS)
sold in the individual market that must have a specified
issued guidance in November 2013 that established
expiration date that is less than 12 months after the original
transitional plans (or grandmothered plans). Pursuant to
effective date of the contract and that cannot last longer
the guidance, state insurance commissioners could choose
than 36 months, taking into account renewals or extensions.
whether to enforce compliance with specified ACA
Additionally, the contract and application materials for the
requirements that were to go into effect in 2014 in their
coverage must display a notice as specified in federal
individual and small-group markets. If they chose not to,
regulations indicating that the coverage does not have to
CMS also would not enforce compliance and issuers could
comply with federal requirements.
renew coverage for enrollees that was effectively exempt
from complying with some federal health insurance
STLDI is exempt from complying with all federal health
insurance requirements. STLDI’s exemption status is based
requirements established under the ACA.
on STLDI’s exclusion from the definition of individual
Subsequent guidance has extended the availability of
health insurance coverage when the term was defined
transitional plans; currently, states may allow transitional
under HIPAA. Its maximum duration has been changed
plans to continue through 2020.
twice via rulemaking, most recently in 2018.
Noncompliant Health Coverage
Student Health Insurance Coverage
Arrangements
Student health insurance coverage is individual health
Certain arrangements do not necessarily comply with
insurance coverage that meets specified conditions and that
federal health insurance requirements.
may be provided only to students enrolled in an institution
of higher education and their dependents.
Health Care Sharing Ministries
A health care sharing ministry (HCSM) is a faith-based
Fully insured student health insurance coverage is exempt
organization that shares resources for medical needs among
from complying with some federal health insurance
its members. In general, HCSM members are expected to
requirements. The Department of Health and Human
follow a set of religious or ethical beliefs and contribute a
Services (HHS) established the exemption in response to
payment regularly (e.g., monthly) to cover the medical
Section 1560(c) of the Patient Protection and Affordability
expenses of other members. The contributions are
Act (ACA; P.L. 111-148, as amended), which provides that
distributed, either through the HCSM or via a member-to-
nothing in Title I of the ACA should be construed to
member match, to members who need funds for health care
prohibit institutions of higher education from offering
costs.
student health insurance plans. HHS also stated that it lacks
authority to regulate self-insured student health plans.
HCSMs maintain that they are not providing insurance.
However, the federal government does not appear to have
Self-Insured, Nonfederal Governmental Plans
defined HCSMs for regulatory or exemption purposes.
A nonfederal governmental plan is a governmental group
HCSMs do not necessarily comply with federal health
health plan that is not sponsored by the federal government.
insurance requirements.
Entities that may sponsor nonfederal governmental plans
include states, counties, school districts, and municipalities.
Farm Bureau Coverage
The American Farm Bureau Federation is a national
If a sponsor of a nonfederal governmental plan offers a self-
organization that was established in 1919 to advocate for
insured plan, the sponsor may elect to exempt the plan from
the financial and political interests of farmers, ranchers, and
specified federal requirements. The exemption was
others associated with agriculture. There are local farm
established under HIPAA and modified under the ACA.
bureau offices in all 50 states and in Puerto Rico (but not in
Grandfathered Plans
the District of Columbia). Membership in a local farm
The ACA provided that group health plans and health
bureau is open to anyone who pays the membership fee.
insurance coverage in which at least one individual was
Each state farm bureau provides member benefits, which
enrolled as of enactment of the ACA (March 23, 2010)
can include offering health coverage to its members.
could be grandfathered. For as long as a plan maintains its
As of the date of this document, three states—Iowa,
grandfathered status, it is exempt from specified federal
Kansas, and Tennessee—have enacted laws that allow the
health insurance requirements established under the ACA.
state’s farm bureau to sponsor health benefits coverage that
For example, a grandfathered plan offered in the individual
is not defined by the state as insurance and is not subject to
market is exempt from certain specified ACA requirements
the state’s insurance laws, if specified requirements are met.
with which a non-grandfathered plan offered in the
Additionally, farm bureau coverage in these three states
individual market must comply. Any type of plan could be
does not necessarily comply with any federal health
grandfathered.
insurance requirements. However, the federal government
To maintain grandfathered status, a plan must continue to
does not appear to have defined such coverage for
meet specified conditions and avoid making specified
regulatory or exemption purposes.
changes regarding employer contributions (where
Vanessa C. Forsberg, Analyst in Health Care Financing
https://crsreports.congress.gov
Applicability of Federal Requirements to Selected Health Coverage Arrangements: An Overview
IF11359
Ryan J. Rosso, Analyst in Health Care Financing
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11359 · VERSION 1 · NEW
November 13, 2019
Applicability of Federal Requirements to Selected Health
Coverage Arrangements: An Overview
Introduction
Table 1. Applicability of Federal Health Insurance
A majority of individuals in the United States have private
Requirements to Selected Arrangements
health insurance coverage. In general, health plans sold in
the private health insurance market (i.e., individual
Health Coverage
Applicability of Federal Health
coverage, small- and large-group coverage, and self-insured
Arrangement
Insurance Requirements
plans) must comply with applicable federal and state health
Exempted Health Coverage Arrangements
insurance requirements.
Group Health Plans
Covering Fewer Than
The federal requirements are codified in Title XXVII of the
Two Current Employees Exempt from complying with all
Public Health Service Act (PHSA), Part 7 of the Employee
Excepted Benefits
requirements
Retirement Income Security Act of 1974 (ERISA), and
Short-Term, Limited-
Chapter 100 of the Internal Revenue Code (IRC). They
Duration Insurance
relate to how coverage is offered and issued, the benefits it
Student Health Insurance Exempt from complying with some
must cover, and how it is priced, among other issues. Such
Coverage
or all requirements
requirements include the prohibition of preexisting
Self-Insured, Nonfederal
condition exclusions and requirements to cover certain
Governmental Plans
Exempt from complying with some
benefits, such as maternity care.
Grandfathered Plans
requirements
Transitional Plans
However, not all private health coverage arrangements
Noncompliant Health Coverage Arrangements
comply with federal health insurance requirements. This
Health Care Sharing
Does not necessarily comply with
includes exempted health coverage arrangements and
Ministries
federal health insurance
noncompliant health coverage arrangements, as discussed
Farm Bureau Coverage
requirements
below. This document provides an overview of such
Source: CRS analysis of federal statute and regulations.
arrangements.
Notes: This table is adapted from Table 1 in CRS Report R46003,
This document is adapted from the CRS Report R46003,
Applicability of Federal Requirements to Selected Health Coverage
Applicability of Federal Requirements to Selected Health
Arrangements. See that table for more detail and citations.
Coverage Arrangements. See the report for further
description of each arrangement, explanation of each
Exempted Health Coverage
arrangement’s current status and history with respect to
Arrangements
complying with federal health insurance requirements, and
Most of the arrangements identified in Table 1 are exempt
relevant statutory and regulatory citations. The report also
from compliance with some or all federal health insurance
includes information about whether and how the
requirements. The exemptions are described in federal
arrangements are subject to state regulatory authority and
statute, regulations, or guidance.
provides enrollment estimates (where available).
Group Health Plans Covering Fewer Than Two
Applicability of Federal Health Insurance Current Employees
Requirements to Selected Arrangements Both fully insured and self-insured group health plans
Some health coverage arrangements that consumers may
covering fewer than two current employees are exempt
purchase from private health insurers or other private
from all federal health insurance requirements. This
organizations do not comply with some or all federal health
includes retiree-only plans, provided they cover fewer than
insurance requirements. The arrangements listed in Table 1
two current employees. The exemption was established in
can be divided into two broad categories, as termed for
the Health Insurance Portability and Accountability Act
purposes of this document:
(HIPAA; P.L. 104-191), which was enacted in 1996.
Exempted Health Coverage Arrangements: Those
Excepted Benefits
that meet a federal definition of health insurance but are
In general, health plans in their provision of excepted
exempt from compliance with some or all applicable
benefits are exempt from all federal health insurance
federal health insurance requirements.
requirements (when specified conditions are met). A
diverse collection of insurance benefits can be considered
Noncompliant Health Coverage Arrangements:
excepted benefits, including auto liability insurance,
Those that the federal government has not explicitly
limited-scope dental and vision benefits, specific disease
exempted from compliance with federal health
coverage, and supplemental Medicare plans (i.e., Medigap
insurance requirements and that do not necessarily
comply with those requirements.
https://crsreports.congress.gov
Applicability of Federal Requirements to Selected Health Coverage Arrangements: An Overview
plans). The exemption for excepted benefits was established
applicable), access to coverage, benefits, and cost sharing
under HIPAA.
(e.g., changes in coinsurance requirements).
Short-Term, Limited-Duration Insurance
Transitional Plans
Short-term, limited-duration insurance (STLDI) is coverage
The Centers for Medicare & Medicaid Services (CMS)
sold in the individual market that must have a specified
issued guidance in November 2013 that established
expiration date that is less than 12 months after the original
transitional plans (or grandmothered plans). Pursuant to
effective date of the contract and that cannot last longer
the guidance, state insurance commissioners could choose
than 36 months, taking into account renewals or extensions.
whether to enforce compliance with specified ACA
Additionally, the contract and application materials for the
requirements that were to go into effect in 2014 in their
coverage must display a notice as specified in federal
individual and small-group markets. If they chose not to,
regulations indicating that the coverage does not have to
CMS also would not enforce compliance and issuers could
comply with federal requirements.
renew coverage for enrollees that was effectively exempt
from complying with some federal health insurance
STLDI is exempt from complying with all federal health
insurance requirements. STLDI’s exemption status is based
requirements established under the ACA.
on STLDI’s exclusion from the definition of individual
Subsequent guidance has extended the availability of
health insurance coverage when the term was defined
transitional plans; currently, states may allow transitional
under HIPAA. Its maximum duration has been changed
plans to continue through 2020.
twice via rulemaking, most recently in 2018.
Noncompliant Health Coverage
Student Health Insurance Coverage
Arrangements
Student health insurance coverage is individual health
Certain arrangements do not necessarily comply with
insurance coverage that meets specified conditions and that
federal health insurance requirements.
may be provided only to students enrolled in an institution
of higher education and their dependents.
Health Care Sharing Ministries
A health care sharing ministry (HCSM) is a faith-based
Fully insured student health insurance coverage is exempt
organization that shares resources for medical needs among
from complying with some federal health insurance
its members. In general, HCSM members are expected to
requirements. The Department of Health and Human
follow a set of religious or ethical beliefs and contribute a
Services (HHS) established the exemption in response to
payment regularly (e.g., monthly) to cover the medical
Section 1560(c) of the Patient Protection and Affordability
expenses of other members. The contributions are
Act (ACA; P.L. 111-148, as amended), which provides that
distributed, either through the HCSM or via a member-to-
nothing in Title I of the ACA should be construed to
member match, to members who need funds for health care
prohibit institutions of higher education from offering
costs.
student health insurance plans. HHS also stated that it lacks
authority to regulate self-insured student health plans.
HCSMs maintain that they are not providing insurance.
However, the federal government does not appear to have
Self-Insured, Nonfederal Governmental Plans
defined HCSMs for regulatory or exemption purposes.
A nonfederal governmental plan is a governmental group
HCSMs do not necessarily comply with federal health
health plan that is not sponsored by the federal government.
insurance requirements.
Entities that may sponsor nonfederal governmental plans
include states, counties, school districts, and municipalities.
Farm Bureau Coverage
The American Farm Bureau Federation is a national
If a sponsor of a nonfederal governmental plan offers a self-
organization that was established in 1919 to advocate for
insured plan, the sponsor may elect to exempt the plan from
the financial and political interests of farmers, ranchers, and
specified federal requirements. The exemption was
others associated with agriculture. There are local farm
established under HIPAA and modified under the ACA.
bureau offices in all 50 states and in Puerto Rico (but not in
Grandfathered Plans
the District of Columbia). Membership in a local farm
The ACA provided that group health plans and health
bureau is open to anyone who pays the membership fee.
insurance coverage in which at least one individual was
Each state farm bureau provides member benefits, which
enrolled as of enactment of the ACA (March 23, 2010)
can include offering health coverage to its members.
could be grandfathered. For as long as a plan maintains its
As of the date of this document, three states—Iowa,
grandfathered status, it is exempt from specified federal
Kansas, and Tennessee—have enacted laws that allow the
health insurance requirements established under the ACA.
state’s farm bureau to sponsor health benefits coverage that
For example, a grandfathered plan offered in the individual
is not defined by the state as insurance and is not subject to
market is exempt from certain specified ACA requirements
the state’s insurance laws, if specified requirements are met.
with which a non-grandfathered plan offered in the
Additionally, farm bureau coverage in these three states
individual market must comply. Any type of plan could be
does not necessarily comply with any federal health
grandfathered.
insurance requirements. However, the federal government
To maintain grandfathered status, a plan must continue to
does not appear to have defined such coverage for
meet specified conditions and avoid making specified
regulatory or exemption purposes.
changes regarding employer contributions (where
Vanessa C. Forsberg, Analyst in Health Care Financing
https://crsreports.congress.gov
Applicability of Federal Requirements to Selected Health Coverage Arrangements: An Overview
IF11359
Ryan J. Rosso, Analyst in Health Care Financing
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11359 · VERSION 1 · NEW