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