On May 10, the Departments of the Treasury, Labor, and Health and Human Services (the Departments) issued the Proposed Rules on Excepted Fertility Benefits, which would establish a new category of limited excepted benefits for certain fertility benefits (the Proposed Rule). The Departments issued the Proposed Rule in response to the February 2025 Executive Order (EO 14216), “Expanding Access to In Vitro Fertilization.” See our prior alert here.
The Proposed Rule is proposed to be effective for plan years beginning on or after January 1, 2027. Comments are due 60 days after the Proposed Rule is published in the Federal Register.
Under the Proposed Rule, there are four main requirements for fertility benefits to be an excepted benefit:
Insured or Not an Integral Part of Group Health Plan
The fertility benefits must be: (1) provided under a separate policy, certificate, or contract of insurance; or (2) otherwise not an integral part of a group health plan. Under the first test, only insured coverage may qualify, but both insured and self-insured coverage may qualify under the second test.
Under the second test, fertility benefits are not an integral part of a group health plan if:
- other group health plan coverage is made available by the same plan sponsor for the plan year to the participants and eligible beneficiaries who are offered the fertility benefits;
- such individuals may decline such other group health plan coverage; and
- such other group health plan coverage is not limited to excepted benefits, an HRA, or another account-based group health plan.
GROOM INSIGHT: The preamble states that it is not the intent of the Proposed Rule to prevent an individual from having overlapping coverage for fertility benefits under both a major medical plan and the fertility excepted benefit. Thus, an employee could be covered by a major medical plan that provides fertility benefits and the fertility excepted benefit, as long as the benefits are not coordinated (for example, under a typical coordination of benefits provision or other type of offset).
Limited Benefits
The coverage must be limited to benefits substantially all of which are: (1) for the diagnosis, mitigation, or treatment of infertility or infertility-related reproductive health conditions; and (2) provided by medical professionals authorized to practice under applicable law.
GROOM INSIGHT: The preamble states that these benefits include medically appropriate items or services targeted to address underlying infertility-related reproductive health conditions and indicates that “fertility benefits” is limited to medical reasons. However, neither the preamble nor the Proposed Rule specifically state that. Given how common non-medical fertility benefits are, this may limit the number of employers that adopt the new excepted benefit. Additionally, the Proposed Rule is silent as to whether surrogacy-related expenses may be covered. While it seems that certain expenses may be permitted (e.g., the expenses related to the employee’s infertility condition), absent clarifying guidance it appears likely that many surrogacy-related expenses will be excluded.
Lifetime Dollar Limit
The total lifetime benefit per participant, together with their eligible beneficiaries, must not exceed $120,000 (indexed by medical inflation).
GROOM INSIGHT: This means that the plan or issuer may not provide further coverage or additional fertility benefits once the cumulative amount of plan payments for the current and previous plan years equals $120,000 (as indexed). This benefit limitation appears to apply on a plan-by-plan basis such that an individual would start back at $0 if he/she were to enroll in another employer’s excepted benefit fertility plan.
Written Notice
The plan or issuer must provide written notice to participants and beneficiaries of the fertility benefit coverage. The notice must (1) be written in a manner calculated to be understood by the average plan participant; and (2) include a description of the coverage. The description of coverage must include: (1) a summary of benefits and limitations of the coverage; (2) the lifetime dollar limit established by the plan or issuer that complies with the lifetime dollar limit above; (3) how to identify and utilize a network provider, if applicable; and (4) how to submit a claim for reimbursement, including whether the benefit utilizes the same claims procedure as for the plan sponsor’s other group health plans.
The plan or issuer must provide the notice:
- No later than the first date on which the participant or beneficiary is eligible to enroll in coverage;
- Annually thereafter; and
- Upon request of the participant or beneficiary.
If a single notice is provided to a participant and beneficiaries at the participant’s last known address, the requirement to provide the notice to the participant and beneficiaries is generally satisfied. However, if a beneficiary’s last known address is different than the participant’s last known address, a separate notice is required to be provided to the beneficiary at the beneficiary’s last known address.
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