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.
An employer-sponsored plan provides minimum value (“MV”) if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent. There are several methods outlined in the regulations for determining minimum value.
a) Minimum value calculator
The IRS and U.S. Department of Health and Human Services (HHS) have developed an “MV calculator,” which allows users to specify several plan design features.
If a plan uses the MV calculator and offers an “essential health benefit” outside of the parameters of the MV calculator, the plan may seek an actuary (who is a member of the American Academy of Actuaries) to determine the value of that benefit and adjust the result derived from the calculator to reflect that value.
b) Design-based safe harbor checklists
Another alternative allows the use of any safe harbor established by HHS and the IRS. We expect several different safe harbor checklists to be provided so that plans may fit their coverage to meet the minimum requirements.
The checklists would be used to make minimum value determinations for plans that cover all of the four core categories of benefits and services (physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services) and have specified cost-sharing amounts.
Each safe harbor checklist would describe the cost-sharing attributes of a plan (such as deductibles, co-payments, co-insurance, and maximum out-of-pocket costs) that apply to the four core categories of benefits and services.
A plan providing the four core categories would be treated as providing minimum value if its cost-sharing attributes are at least as generous as any one of the safe harbor checklist options.
c) Actuarial certification
Plans with “non-standard” features may seek certification by an actuary to determine minimum value. “Non-standard” features can include quantitative limits on any of the four categories of benefits, including, for example, a limit on the number of covered days in a hospital. This determination must be made by a member of the American Academy of Actuaries, using generally accepted actuarial principles and methodologies.
Coverage under an eligible employer-sponsored plan will be considered affordable for an employee if the employee’s required contribution to the annual premium for self-only coverage does not exceed 9.5 percent of the employee’s household income. An employer may use an employee’s W-2 income to determine the 9.5 percent.