Final regulations on employer-provided wraparound coverage under the Affordable Care Act were issued by the IRS and Departments of Health and Human Services and Labor.
Wraparound coverage is employer-sponsored coverage that may be offered to employees for whom the employer’s primary coverage is unaffordable and who obtain individual coverage through the federal or state marketplaces. Typically the employee is eligible for premium tax credits to offset the cost of the policy.
Because the marketplace plan may lower benefits, or use a different provider network, than the company-sponsored plan, employers may offer supplemental or “wraparound” coverage to make up the difference. The regulations specify these will be treated as “excepted benefits,” allowing employers to provide this coverage without causing the employee to lose eligibility for the premium tax credits.
Limited wraparound must be limited, the said, the IRS said, to the greater the maximum permitted annual salary reduction towards a health FSA, or 15% of the cost of coverage under the primary plan.