Patient Protection and Affordable Care Act (PPACA) benefits standards will be different for plans at large employers than they are for individual policies and plans at small employers.
The Internal Revenue Service (IRS) talks about what the standards for large employers might look like in a new set of draft regulations, “Minimum Value of Eligible Employer-Sponsored Plans and Other Rules Regarding the Health Insurance Premium Tax Credit” (RIN 1545-BL43).
Employers with more than 50 employees — or 100 employees in some states — will have a lot more freedom than smaller employers when they’re designing their health plans. But, if large employers simply want to offer a plan that they know will help them avoid paying the new PPACA penalties on employers that fail to provide health benefits with a “minimum value,” they could base their plans on one of several “safe harbor” designs that the IRS will develop, the IRS said in a preamble to the draft regulations.
In the proposed regulations, the IRS also talks about value calculation rules that could affect employers’ health reimbursement arrangement (HRA), health savings account (HSA) and wellness programs.
The draft regulations are set to appear in the Federal Register Friday. Comments will be due 60 days after the official publication date.
PPACA is supposed to create a new tax credit, to help low-income workers who have no group health coverage pay health insurance premiums.
Workers will be able to get the tax credit — which is described in Section 36B of the Internal Revenue Code (IRC) — if they have no group health coverage or low-value group health coverage. Workers will not be able to qualify for the tax credit if they have access to what the government classifies as affordable group health coverage that meets the PPACA minimum-value standard.
In some cases, workers who have group health benefits may still try to apply for the premium assistance tax credit.
If the worker turns out to have access only to low-value group health benefits, the worker will qualify for the tax credit, and the employer may have to pay a penalty. If the worker turns out to have access to minimum-value health benefits, the employer will avoid having to pay the penalty.
IRC Section 36B(c)(2)(C)(ii) states that an employer plan that meets the minimum-value standard must cover at least 60 percent of the “total allowed costs.”
PPACA also has created a standardized “essential health benefits” (EHB) package. The package is supposed to include the benefits that a normal good small-group health plan covers, along with some extras required by Congress, such as dental benefits and eye benefits for children.
The U.S. Department of Health and Human Services (HHS) has said that it will assume that “total allowed costs” means the cost of covering the standard EHB package for the type of people who would be in a typical self-insured employer health plan.
But, in theory, as long as a large employer’s plan covers 60 percent of the value of the overall cost of the EHB package, the plan need not actually cover all of the kinds of care included in the EHB package to meet the minimum-value standard, the IRS said.
But what should the large employer’s plan really cover?
The IRS has come up with three sample plan designs that large employers could use to meet the minimum-value standard:
- A plan with a $3,500 integrated medical and drug deductible, 80 percent plan cost-sharing, and a $6,000 maximum out-of-pocket limit for employee cost-sharing.
- A plan with a $4,500 integrated medical and drug deductible, 70 percent plan cost-sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to a health savings account (HSA).
- A plan with a $3,500 medical deductible, $0 drug deductible, 60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit, and drug co-pays of $10/$20/$50 for the first, second and third prescription drug tiers, with 75 percent coinsurance for specialty drugs.
To qualify for safe-habor treatment, the plans would have to cover the services that the IRS and HHS have included in a minimum-value calculator that the IRS and HHS have posted on the Web, the IRS said.