NO MINIMUM VALUE FOR ‘SKINNY’ PLANS

No Minimum Value for ‘Skinny’ Plans

On Nov. 4, 2014, the U.S. Department of Health and Human Services (HHS) and the Department of the Treasury announced their intent to promptly propose amendments to regulations directing that a plan will not provide minimum value if it excludes substantial coverage for in-patient hospitalization service, physician services or both, according to Notice 2014-69 from the two departments. Non-hospital/non-physician services plans addressed in the notice are also known as “skinny” plans.

After the HHS amendments are finalized, the notice indicates that the Treasury and the IRS would then issue similar regulations. Under the Departments’ new regulations, an employer would not be permitted to use the federal minimum value calculator (or any actuarial certification or valuation) to demonstrate that a non-hospital/non-physician services plan provides minimum value.

Why Minimum Value is Important
Under the Patient Protection and Affordable Care Act, beginning with the 2015 plan year, employers with a certain number of full-time employees are required to provide minimum essential coverage to a substantial number of their full-time employees and their dependent children to age 26 that is both affordable and provides minimum value, or face penalties. For more information on the employer mandate, follow this link.

The federal government has provided access to a minimum value calculator so that plan sponsors could determine whether their plan met the minimum value standard. But HHS and the Department of Treasury stated in the notice that the calculator was never meant to be used to calculate the value of non-hospital/non-physician services plans. An employee or family member who is offered coverage under an eligible employer-sponsored plan that offers affordable minimum value coverage for the employee may not receive premium tax credit assistance for coverage in a qualified health plan on an Exchange.

Timing
According to the notice, it is anticipated that the proposed amendments will be finalized in 2015 and will apply to all non-hospital/non-physician services plans, except for pre-Nov. 4, 2014, plans, which are those in which an employer subject to the PPACA employer mandate has entered into a binding written commitment to adopt, or began enrolling employees in a non-hospital/non-physician services plan prior to Nov. 4, 2014, based on the employer’s reliance on the results of the federal minimum value calculator.

The Departments anticipate that amendments to regulations, when issued, will not apply to pre-Nov. 4, 2014, plans before the end of the plan year if that plan year begins no later than March 1, 2015.

Duty to Inform Employees
The notice states that an employer that offers a non-hospital/non-physician services plan (including a pre-Nov. 4, 2014 non-hospital/non-physician services plan) to an employee:

• (1) The Departments anticipate that amendments to regulations, when issued, will not apply to pre-Nov. 4, 2014, plans before the end of the plan year if that plan year begins no later than March 1, 2015.
• (2) Must promptly correct any prior disclosures that states or implies that such offer of coverage would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit.

However, an employer that also offers an employee another plan that is not a non-hospital/non-physician services plan and that is affordable and provides minimum value is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.