Skip to main content

TRICARE: DOD Proposed Rules on TRICARE: Prohibited Financial Incentives

TPAs have inquired about a recent trend in cost-saving that employers are attempting to do--to give individuals eligible for Veterans benefits a financial incentive to decline the employee benefit plan and enlist in the TRICARE program. You will want to advise those clients that there are laws that directly prohibit financial incentives. TRICARE is the military health program. Information about TRICARE is available on the TRICARE Web site at www. tricare .mil. The March 28, 2008 Federal Register published proposed rules in which the U.S. Department of Defense (DOD) seeks to clarify the relationship between employer-sponsored group health plans and the TRICARE program. You will recall that the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law No. 109-364) took effect on January 1, 2008. These rules implement provisions in the statute specifically prohibiting group health plan sponsors from offering TRICARE-eligible employees a financial or other incentive not to enroll or to terminate enrollment in a group health plan. The statute and the proposed rules prohibit an employer or other entity, including a group health plan, from offering any financial or other incentive to a TRICARE beneficiary not to enroll or to terminate enrollment in a group health plan that is or would be primary to the TRICARE benefit. The ban on incentives is designed to prevent employers from shifting health costs to the Federal Government. The law applies to employers with 20 or more employees and includes state and local governments. It also applies to both insured and self-insured group health plans. Violations are subject to civil monetary penalties of up to $5,000. We have heard from some SPBA members that their clients are inquiring about this type of plan language because it is well known that employer-sponsored group health plan coverage always pays primary to TRICARE. It is important to counsel these plan sponsors that all group health plans must be designed to avoid incentives which the DOD considers impermissible and are in fact illegal. We strongly recommend that the TPA tell clients to seek the advice of an attorney when contemplating changing plan language to include this type of offer or incentive. Ban on Targeted Incentives and TRICARE Supplements The proposed rules say that a group health plan may not offer TRICARE beneficiaries an alternative to the group health plan unless the beneficiary has primary coverage, other than TRICARE, or the benefit is a valid Section 125 cafeteria plan offered to all employees, including those not eligible for TRICARE. The proposed rules will permit a group health plan sponsor to: -Offer a cash payment election or other bona fide fringe benefits through a cafeteria plan to all employees, including those also eligible for TRICARE. Additional plan requirements are permissible if they treat all employees the same and do not illegally take TRICARE eligibility into account. - Offer supplemental insurance through a cafeteria plan to all employees, as long as the supplement is not a TRICARE-exclusive supplemental plan. The proposed rules appear to say that an employer can not allow an employee to pay for a TRICARE supplement on a pre-tax basis, even if the supplement is a voluntary plan. However, the rules do not prohibit TRICARE supplements that are sold by insurers or beneficiary associations. Implications for Group Health Plan Sponsors TPAs will want to sit down with their client plan sponsors and review their plans to determine whether TRICARE-eligible employees and dependents are treated differently from other participants. You will also want to know whether changes are required to the plan based on the proposed rules. Comments on the proposed rules were due on May 27, 2008. The proposed rules would codify the May 2007 DOD Report to Congress. Public Law No. 109-364 can be accessed from http://thomas.loc.gov/bss/d109/d109laws.html.