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The Center for Consumer Information & Insurance Oversight

 

Self-Funded, Non-Federal Governmental Plans

The Affordable Care Act has given Americans new rights and benefits, by helping more children get health coverage, ending lifetime and most annual limits on care, allowing young adults under 26 to stay on their parents' health insurance, and giving patients access to recommended preventive services without cost.

The information in this section will be of interest to state and local governmental employers that provide self-funded group health plan coverage to their employees, administrators of those group health plans, and employees and dependents who are enrolled, or may enroll, in those plans.

The Public Health Service Act (PHS Act) section 2791(d)(8)(C) defines the term “Non-Federal governmental plan” as a governmental plan that is not a Federal governmental plan. Some examples of non-Federal governmental plans are plans that are sponsored by states, counties, school districts, and municipalities. Under 45 CFR 146.145(a), a “group health plan means an employee welfare benefit plan to the extent that the plan provides medical care (including items and services paid for as medical care) to employees (including both current and former employees) or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise.” Non-Federal governmental plans can operate as self-funded plans, purchase a fully insured group insurance product, or consist of a mixture of self-funded and fully insured options.

Non-Federal governmental plans are not regulated the same way as insurance companies or private employer health plans. The statutory framework for enforcement of non-Federal governmental plans was established in Part A of title XXVII of the PHS Act with the enactment of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Patient Protection and Affordable Care Act, enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010, enacted on March 30, 2010, (collectively known as the “Affordable Care Act”)(ACA) reorganized, amended, and added to the provisions of Part A of title XXVII of the PHS Act.  Accordingly, non-Federal governmental plans are subject to the provisions of Part A of title XXVII of the PHS Act, including any changes made by the ACA.

The provisions of title XXVII of the PHS Act that apply to group health plans that are non-Federal governmental plans are enforced by the Centers for Medicare & Medicaid Services (CMS) under PHS Act section 2723(b)(1)(B) using the procedures described in §150.301 et seq. Pursuant to this authority, CMS may investigate and implement corrective action or impose civil monetary penalties for any non-Federal governmental plan that fails to comply with applicable PHS Act requirements.

For a list of provisions that are applicable to non-Federal governmental plans – both grandfathered and non-grandfathered – please see the checklists available at the “Other Resources” link on this page.

Prior to enactment of the Affordable Care Act, sponsors of self-funded, non-Federal governmental plans were permitted to elect to exempt those plans from, or “opt out of,” certain provisions of the Public Health Service (PHS) Act. This election was authorized under section 2721(b)(2) of the PHS Act, which is now designated as section 2722(a)(2) of the PHS Act (42 USC § 300gg-21(a)(2)).

The Affordable Care Act made a number of changes, with the result that sponsors of self-funded, non-Federal governmental plans can no longer opt out of as many requirements of Title XXVII.

Although self-funded, non-Federal governmental plans may still opt out of certain provisions of the PHS Act, they are not exempt from other requirements of the law including the restrictions on annual limits and other provisions of the Patient’s Bill of Rights.

For questions and concerns regarding non-Federal governmental plans, please e-mail NonFed@cms.hhs.gov.

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