This article includes our new "NFP Observations" format, which combines compliance information with commentary and practical insights from our Benefits Compliance team.
In the evolving landscape of employee benefits, “point solution” programs have emerged as targeted offerings designed to address specific health and wellbeing needs that may not be fully covered by an employer’s primary group health plan. These solutions ‒ ranging from physical fitness programs to mental health counseling, chronic condition management, fertility services, or musculoskeletal care ‒ are offered by specialized vendors and marketed as enhancements to the overall welfare benefits package. Depending on the nature and scope of services provided, a point solution could be considered a group health plan under ERISA and, as such, subject to ERISA requirements as well as COBRA, HIPAA, the ACA, MHPAEA, and other employee benefit laws. Importantly, legal responsibility for compliance rests with the employer, not the vendor. Given the complexity and potential consequences of noncompliance, employers should assess both the services and the structure of the program to determine whether it triggers group health plan requirements.
Group Health Plan Status
With a wide variation in point solution program design, it’s often difficult to determine which group health plan laws – such as ERISA, COBRA, HIPAA, ACA, and MHPAEA – apply. Two key questions guide this analysis:
- Does the program provide “medical care” (as defined under ERISA); and
- If so, does it qualify as an “excepted benefit” that is exempt from certain group health plan mandates?
Programs that provide medical care are generally treated as group health plans, triggering compliance obligations under ERISA and related federal laws. However, if the medical benefits are not significant and the program does not coordinate with any other group health plan and imposes no employee premiums or cost-sharing, it may fall within the employee assistance program (EAP) exception and qualify as an excepted benefit. A program that qualifies as an excepted benefit is exempt from many group health plan mandates, including those related to the ACA, HIPAA portability and nondiscrimination, MHPAEA, and certain CAA 2021 disclosure requirements like RxDC reporting and prohibited gag clause attestations. The lack of clear regulatory guidance on what constitutes “medical care” or how to measure whether such care is “significant” leaves these determinations open to varying interpretations. Because the applicable standards are not always clearly defined, determining whether a program qualifies as an excepted benefit may require careful examination.
Does the program provide medical care?
Regulations broadly define medical care to include "amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” If the program gives individuals access to trained clinicians who diagnose or treat a specific condition, it provides medical care and is generally subject to group health plan laws. In contrast, programs that promote general health and wellbeing by offering exercise guidance, behavioral coaching, or educational resources without individualized clinical support are less likely to be considered medical care. Note that fixed indemnity coverage, which pays a set amount based on a particular event (e.g., hospital admission or diagnosis of a specific condition or injury) regardless of actual medical expenses, is not considered medical care. Long-term care programs also fall outside the scope of medical care.
Sometimes whether medical care is being provided is unclear and, ultimately, the analysis depends on the degree of clinician involvement and individualization. Some might reasonably classify a program as providing medical care when clinicians accept self-reported diagnoses but then offer tailored recommendations, given the level of involvement and individualization. If, on the other hand, no clinician diagnoses or delivers treatment recommendations beyond general guidance for the self-reported condition, the program is arguably not providing medical care.
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Another way to frame the analysis is to ask: Would the program’s recommendations be broadly helpful to anyone with the particular condition? If the program is instead diagnosing or otherwise providing advice specifically tailored to an individual, it’s more likely to be considered medical care. Example 1 (Unlikely to Be Considered Medical Care): A program accessed through a mobile phone app asks John to input a specific condition, and John verifies that he has Type 2 diabetes. In response, the program gives John general coaching services about diet, exercise, and sleep habits that may reduce the risk of progression of the disease. This type of coaching is generally not sufficient to constitute medical care. Although the program provides information on a disease, prevention, and coaching (even sometimes by a physical therapist or licensed diabetes specialist) and it relates to a condition that John knows or believes he has, it would be unlikely to be considered medical care because it is not an individualized treatment regimen, prescription, or diagnosis from the clinician. Example 2 (Likely to Be Considered Medical Care): Through a program’s call-in center referral service, a registered nurse asks Jane questions regarding her symptoms and confirms a diagnosis of influenza. This would generally fall within the scope of medical care. |
Many point solution benefit programs are marketed as providing individualized services for specific medical conditions, which can make it difficult to argue that they do not provide medical care. While some programs avoid explicitly using medical terms like “diagnosis” or “treatment,” they may still provide individualized clinical services in practice. When the determination is unclear, employers should consult legal counsel before concluding that a program does not involve the provision of medical care.
Is medical care provided through an EAP that qualifies as an excepted benefit?
Certain point solution programs that provide medical care may nonetheless be considered to fall within the EAP excepted benefit rule and not be subject to the ACA, HIPAA portability rules, HIPAA nondiscrimination rules, MHPAEA, and certain CAA 2021 disclosure requirements like RxDC reporting and prohibited gag clause attestations.
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While the term "Employee Assistance Program" (EAP) is commonly used in the employer-sponsored benefits space to describe programs offering services such as counseling, referrals for financial wellness, job mobility, or other support related to general wellbeing, it also serves as a term of art under group health plan excepted benefit rules, where specific criteria determine whether an EAP is exempt from certain regulatory requirements. |
Specifically, EAPs qualify as excepted benefits if they satisfy the following six conditions:
- The program does not provide significant benefits in the nature of medical care, taking into account the amount, scope, and duration of covered services.
- The program does not coordinate with benefits under another group health plan.
- Participants are not required to exhaust benefits under the program before being eligible for benefits under another plan.
- Participation in the program is not dependent on participation in another group health plan.
- No employee premiums or contributions are charged for the program (i.e., the program must be fully employer-paid).
- There is no cost-sharing under the program.
While most of these conditions are straightforward, the first condition – whether the program provides “significant benefits” – is open to multiple interpretations. Unfortunately, the EAP rules do not specifically define medical care that would be considered significant. Instead, the departments’ regulations broadly instruct employers to take into account “the amount, scope and duration of covered services” and provide two comparative examples. First, a program that provides disease management services (such as laboratory testing, counseling, and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant medical care benefits. Alternatively, a program that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential, or intensive outpatient care) without requiring prior authorization or review for medical necessity does not provide significant medical care benefits.
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In the proposed EAP rules, the departments initially solicited comments regarding a limit on the number of counseling sessions that could still be considered insignificant, suggesting 10 visits. Ultimately, the final EAP rules did not include any such measure. Some experts believe that the lack of a clear numerical limit means a more liberal interpretation is permitted. However, the departments cautioned against broad interpretations of the EAP exception that would shift coverage typically received under an employer’s major medical plan to a separate plan exempt from ACA and MHPAEA protections. |
In the absence of a bright-line rule, and because specific benefit designs vary widely, when the determination isn’t clear as to a particular point solution program, employers should review the program with their legal counsel before relying on EAP excepted benefit status. Further, it is critical to remember that the EAP exception only applies for purposes of compliance with the ACA, MHPAEA, HIPAA nondiscrimination, HIPAA portability, and certain CAA 2021 disclosure requirements; ERISA, COBRA, and HIPAA privacy and security rules still apply to a point solution that provides medical care, even if that medical care is considered insignificant.
Risks of Noncompliance
While there is no specific penalty attached to point solution programs, a failure to correctly identify whether a program includes medical care can result in substantial liability and penalties under the applicable group health plan laws. For example, a failure to offer COBRA on an eligible point solution program could subject an employer to a lawsuit by COBRA qualified beneficiaries or a DOL investigation and penalties.
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COBRA compliance failures are particularly high risk because they directly relate to a program participant’s right to continue care. For example, if a participant who was receiving ongoing mental health counseling services through a point solution program terminates coverage in the middle of treatment without any other coverage in place, they may be highly motivated to assert coverage continuation rights under COBRA, making a participant lawsuit or DOL complaint more likely. |
In addition, if a group does not correctly identify a point solution program that provides medical care and fails to timely meet the applicable ERISA Form 5500 filing requirements, the plan sponsor could be subject to penalties of up to $2,739 per day (adjusted annually by the DOL). As a result, it is critical for employers to carefully review their point solution programs and take every step to ensure they are meeting all applicable group health plan compliance requirements.
Compliance Strategy
It is often difficult to argue that a health or wellbeing point solution program does not provide medical care. The more cautious approach is to assume the program provides medical care and is therefore subject to group health plan mandates under ERISA, COBRA, HIPAA, and – if that medical care is significant – the ACA, MHPAEA, and the CAA 2021.
Many of these requirements are difficult to satisfy under a separate plan. For example, if a point solution program that provides significant medical care is structured as a stand-alone group health plan, it would violate several provisions of the ACA, including the requirement to cover preventive services without cost-sharing and the prohibition on annual dollar limits for essential health benefits. The easiest way to achieve compliance is to integrate the point solution program with the employer’s major medical plan via the plan documents. The point solution thereby becomes a benefit under an existing medical plan and can satisfy the applicable group health plan mandates along with the existing medical plan’s compliance practices.
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COBRA compliance for point solutions can pose particular administrative challenges. Many point solution vendors encourage employers to offer their program to all employees, not just those enrolled in the major medical plan. However, this type of broader eligibility class creates an entirely new group of COBRA qualified beneficiaries. The easier approach is to limit point solution program benefits to employees enrolled in the major medical plan. Regardless, employers must work closely with their COBRA administrator to ensure that COBRA compliance is handled appropriately. For further information, see the NFP publication COBRA: A Guide for Employers. |
Final Thoughts
While point solution programs can provide numerous advantages as a supplement to group health plan offerings, employers must remain mindful of the numerous compliance mandates related to these benefits, particularly under ERISA, COBRA, HIPAA, the ACA, MHPAEA, and the CAA 2021. Depending on the specific program design, the application of these laws is not always clear-cut, in which case it may be necessary to review with legal counsel. For further information on point solution programs, including the potential impact on HSA eligibility and benefit taxation, please ask your broker or consultant for a copy of the NFP publication Point Solution Programs: A Guide for Employers.