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How minimal can PPACA-required coverage be?

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Employers that hate new taxes might have an easier time adapting to the Patient Protection and Affordable Care Act (PPACA) than they expect.

The PPACA “shared responsibility” and “minimum essential coverage” provisions appear to create a big loophole for employers that simply want to minimize new PPACA taxes for themselves and their employees, not offer rich health benefits.

Mark Holloway, a compliance specialist at Lockton Companies, wrote about the loophole recently in a new commentary responding to recent releases of proposed PPACA regulations and U.S. Department of Health and Human Services (HHS) implementation guidance.

If PPACA works as drafters expect, it will require non-grandfathered individual and small group plans to cover a standard “essential health benefits” (EHB) package that meets predetermined benefits levels and holds cost-sharing to specified limits. 

Only the benefits level and out-of-pocket maximum rules will apply to large insured group plans. The EHB rules will not apply to large insured group plans.

PPACA will require self-insured plans to cover a package of basic preventive services without imposing deductibles, co-payments or other out-of-pocket spending requirements on the plan enrollees. But PPACA exempts self-insured plans from most other new coverage requirements.

Starting in 2014, PPACA coverage mandate provisions will require many individuals who are classified as having access to affordable health coverage at work to either have health coverage or else pay a new penalty tax that will be imposed on the uninsured.

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To avoid paying a new PPACA tax on employers that fail to offer employees access to a minimum level of health coverage, an employer will have to offer a plan the meets PPACA minimum actuarial value and affordability requirements, Holloway said.

But, to avoid paying the new PPACA uninsured penalty tax, an individual worker simply needs some kind of minimum essential coverage from the employer, not necessarily coverage through the plan that meets the PPACA minimum actuarial value standards, Holloway said.

“Precisely how good must this minimum essential coverage be?” Holloway asked. “It appears any employer-based health care plan more robust than a dental or vision plan, or health flexible spending account, amounts to ‘minimum essential coverage.’”

Federal guidance indicates that the definition of minimum essential coverage will exclude disability insurance, long-term care insurance, hospital indemnity insurance, cancer insurance and access to on-site clinics, but it does look as if the required minimum essential coverage could be “very skinny,” very inexpensive medical insurance, Holloway said.

An employer could offer one plan that would meet the PPACA minimum actuarial value requirements for one rate, and then offer a skinny, possibly cheaper minimum essential coverage plan alongside the minimum actuarial value plan, Holloway said.

CORRECTION: An earlier version of this article described the HHS approach is taking to large group plans incorrectly. HHS is only limiting the out-of-pocket maximums the plans can use, not the deductibles.

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