That new federal notice about ultra-skinny health plans — officially dubbed “non-hospitalization/non-physician services plans – has agents and brokers flooding their favorite benefits compliance specialists with questions.
Lockton has been trying to deal with the wave of queries it’s getting about the non-hospital plan guidance, given in Internal Revenue Service (IRS) Notice 2014-69, by publishing an explanation of the notice by Edward Fensholt.
Fensholt, a lawyer, has worked to explain what the notice means for sellers and users of non-hospital plans: Plans that take advantage of problems with an actuarial value calculator the U.S. Department of Health and Human Services (HHS) developed.
The Patient Protection and Affordable Care Act (PPACA) now requires individuals to have a minimum level of coverage to escape PPACA individual mandate penalties.
A large employer must provide minimum essential coverage (MEC) with minimum value to 70 percent of its full-time employees in 2015, and 95 percent after 2016, or else face the possibility of having to pay penalties if employees succeed at getting subsidized coverage through the PPACA public exchange system.
An employer may pay a penalty of $2,000 per year for each full-time worker if any full-time worker who is not offered MEC gets an explain plan subsidy.
The employer may pay a penalty of $3,000 for each worker who was not offered coverage that meets PPACA minimum value standards and then qualifies for a public exchange plan subsidy.
A plan is supposed to cover 60 percent of the cost of the actuarial value of a standard essential health benefits package, but the HHS calculator was faulty. It let some plans that failed to offer inpatient hospitalization benefits meet the 60 percent of actuarial value standards.
The IRS and HHS now say in the new notice that they will establish regulations that will classify a non-hospital plan, or a non-physician services plan, as a plan that fails to provide minimum value for purposes of complying with the PPACA employer mandate.
What does that notice really mean? Read on.
1. The notice might be complicated, but it wasn’t a surprise.
Fensholt says many expected the ruling. One problem is a provision in the notice that will require even employers with the grand-fathered non-hospital plans set up before the Nov. 4 notice publication date to tell workers that the plans don’t supply minimum-value coverage.
2. The employees will probably get good news.
For employees, the change means that they will be able to qualify for exchange plan subsidies, even if their employers offer than non-hospital plans, Fensholt says.
Image: Exchange application forms. (AP photo/J. David Ake)
3. Employers that set up non-hospital plans by Nov. 3 may still get some concrete benefits.
For employers, with the grandfathered plans, the notice means that they may get a modest, short-term reduction in benefits costs. The employers may end up paying the penalty of $3,000 per employee who qualifies for exchange coverage because of a lack of access to minimum-value coverage, but they apparently won’t have to pay the $2,000-per-full-time penalty that they would have to pay if they failed to provide any MEC at all, Fensholt says.
Fensholt notes that some staffing firms have already agreed in contracts to provide health coverage that meets minimum-value standards. Those staffing firms may have to beef up their coverage if they were counting on being able to offer a non-hospital plan, Fensholt says.