HHS and Treasury issued guidance today (Notice 2014-69) confirming that employer group health plans that purport to provide minimum value (MV) but that do not provide “substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in this notice as Non-Hospital/Non-Physician Services Plans) do not provide the minimum value intended by the minimum value requirement.” (emphasis added)
Various articles published in the past two weeks have indicated that regulators intended to issue guidance to this effect soon. (E.g., see “Administration Signals Doubts about Calculator Permitting Plans without Hospital Benefits” by Jay Hancock, Oct. 10-16-14, at http://kaiserhealthnews.org/news/administration-signals-doubts-about-calculator-permitting-plans-without-hospital-benefits/ .) The guidance issued today also states that HHS and Treasury Departments intend to issue proposed regulations soon.
Today’s guidance does not address or prohibit “minimum essential coverage” (MEC) plans offered by employers. MEC plans are often referred to as “skinny MEC” plans if they do not provide at least minimum value (MV). “Skinny MEC” plans are different from “skinny” MV plans that purport to provide minimum value (most have received MV ratings of 60.1% – 63% using the government’s on-line MV calculator), but that do not cover hospitalization or physicians’ services. A large employer that offers “minimum essential coverage” to at least 70% of its full-time employees in 2015 will not be subect to the 4980H(a) penalty (sometimes referred to as the “sledgehammer” penalty). However, if the MEC plan does not meet either the 60% minimum value requirement or one of the affordability safe harbors, the employer will be subject to the 4980H(b) penalty (sometimes called the “tackhammer” penalty) for any full-time employee who buys coverage in the Exchange and receives a premium tax credit.
The Bottom Line under Notice 2014-69:
Employer group health plans that purport to provide minimum value (MV) but that do not provide substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in the notice as Non-Hospital/Non-Physician Services Plans) do not provide the minimum value intended by the minimum value requirement. (Page 1 of the Notice, bottom)
Ramifications for Employers:
Employers who offer Non-Hospital/Non-Physician Services Plans will not be subject to the 4980H penalties (employer mandate penalties) during the 2015 plan year IF:
1- Prior to November 4, 2014, the employer entered into a binding written commitment to adopt such a plan, OR
2- Prior to November 4, 2014, the employer has begun enrolling employees in such a plan; and
3- The employer did so based on its reliance that the plan met minimum value (i.e., at least 60% actuarial value) when tested using the HHS on-line MV Calculator (available at http://cciio.cms.gov/resources/regulations/index.html ) or a safe harbor established by the HHS and the IRS; and
4- The plan year begins no later than March 1, 2015.
Ramifications for Employees:
Employees who are offered only a Non-Hospital/Non-Physician Services Plan are still eligible for a premium tax credit (under IRC section 36B) to buy health insurance in the Exchange/Marketplace, if they would otherwise be eligible for the tax credit. Such employees will not be required to treat a Non-Hospital/Non-Physician Services Plan as providing minimum value for purposes of determining eligibility for a premium tax credit, regardless of whether the plan is a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan. (Notice 2014-69. Top of page 2)
Employer Duty to Inform Employees (page 4 of the Notice)
“An employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) to an employee:
1- Must not state or imply in any disclosure that the offer of coverage under the Non-Hospital/ Non-Physician Services Plan precludes an employee from obtaining a premium tax credit, if otherwise eligible, and
2- Must timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services Plan would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit.”
“However, an employer that also offers an employee another plan that is not a Non-Hospital/Non/-Physician Services Plan and that is affordable and provides MV is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.” (underlining added)
Under the proposed regulations that HHS and Treasury will issue, “an employer will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value.” (underlining added) Thus, promoters of these purported MV plans will not be able to obtain actuarial certifications indicating that this plan design meets MV requirements.