Minimum value

If the Patient Protection and Affordable Care Act (PPACA) is your life, chances are you’ve already memorized the rules for applying the PPACA group health plan minimum value rules guidelines.

If you’re a supplemental benefits specialist, or a disability specialist, or someone else who’s been able to glide around PPACA details, this may be the time when you start to have to learn the details.

The minimum value rules and related rules will start to take effect Jan. 1, 2014. In theory, the government could begin imposing penalties on non-compliant employers soon after that.

Today, benefits managers and human resources managers are already talking about the minimum value requirements with agents, brokers, plan administrators and consultants. It’s hard to know whether the requirements will have major indirect effects on producers outside the medical insurance market, but one indirect effect is already clear: Those producers need to be able to say something more sophisticated about the topic than “Time will tell,” or “It’s all very complicated, isn’t it?”

Joshua Sutin and Jillie Gordon, benefits lawyers, have tried to help our readers by providing this summary of a four-hour minimum value seminar they offer for their clients.

The minimum value requirement is part of the new PPACA “employer shared responsibility” rules — also known as the “play or pay” rules.

Beginning in 2014, an applicable large employer (an employer with 50 full-time equivalent employees or more) must provide eligible employer-sponsored coverage to substantially all (95 percent) of its full-time employees — those who average 30 hours per week or more — and their dependents.

Otherwise, the employer will risk being hit with the first penalty (the “no coverage” penalty).

The penalty will be $2,000 x (the total of full-time employees – 30) per year, with the penalty payments to be assessed monthly. An eligible employer-sponsored plan will provide basic group health coverage, or “minimum essential coverage.”

We don’t have an exact definition yet on what minimum essential coverage is, but we know it has to be something more than a HIPAA “excepted benefit,” such as a flexible spending account, limited dental plan or limited indemnity plan.

The employer penalty is only triggered if a full-time employee goes to the new PPACA health insurance exchange, applies for coverage there, and is eligible for a subsidy.

An employee will not be eligible for a subsidy if the employer offers the employee coverage under the employer’s plan that is both affordable and meets the minimum value test, discussed below.

Even though an applicable large employer offers minimum essential coverage under an eligible employer-sponsored plan to substantially all full-time employees and dependents, an applicable large-employer member may still be liable for the second penalty, or what we refer to as the “inadequate coverage” penalty.

This is because full-time employees may still qualify for a subsidy if the plan fails the minimum value or affordability requirements. The inadequate coverage penalty is $3,000 per year (assessed monthly), but only for each employee that actually goes to the exchange and receives a subsidy.