The Obama administration says it will propose to let employers offer wraparound coverage to employees who purchase individual health insurance in the private market, including on the exchanges.

The move would allow some flexibility for employers, including small businesses, that want to “meet the unique needs of their workforces,” the Department of Labor said in a press statement.

The U.S. Departments of Labor, Health and Human Services, and Treasury are seeking public comment on proposed rules that would allow group health plan sponsors, in limited circumstances, to offer wraparound coverage to employees who are purchasing individual health insurance in the private market, including through the Health Insurance Marketplace.

Wraparound coverage allows employers to offer extra coverage that can wrap around the individual, essential health benefit, coverage that low-wage employees can get through the exchange, “essentially granting them benefits equivalent to those enjoyed by higher-wage employees,” says Timothy Jost, a lawyer and member of the Institute of Medicine, in a blog post about the proposed rules.

The proposed rules “attempt to describe the conditions under which wraparound benefits could be offered as an excepted benefit so that they would provide a real benefit to low-wage employees without disqualifying them from receiving primary individual coverage through the exchange or displacing those benefits,” he adds.

The proposed rules “would give employees who otherwise may not be able to get generous employer-based benefits access to high level benefits,” the agencies said.

It responds to suggestions made on a proposed rule last December from a wide range of stakeholders, including business groups supportive of the idea.

The rules propose two pilot programs for wraparound coverage. One pilot would allow wraparound benefits only for Multi-State Plans in the Health Insurance Marketplace and another would allow wraparound benefits for part-time workers who could otherwise qualify for a flexible savings arrangement who enroll in an individual market plan.

The public has 30 days to comment on the proposed rules following their Dec. 23 publication.

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