Regulators Warn About Certain Health Plan Designs

Federal employee benefit regulators have become aware of certain group health plan benefit designs that lack coverage for in-patient hospitalization services being promoted to employers.

The Department of Health and Human Services (HHS) and the Department of the Treasury announced they believe plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) do not provide the minimum value (MV) intended by the minimum value requirement in the Patient Protection and Affordable Care Act (ACA). The Departments said they will shortly propose regulations, with a view to being in a position to finalize such regulations during 2015 and make them applicable upon finalization.

According to Internal Revenue Service (IRS) Notice 2014-69, promoters of these plans contend that the plans satisfy minimum value within the meaning of the ACA as determined through use of the online MV Calculator referred to in final HHS regulations and proposed Treasury regulations. As such, employees covered by these plans would not be eligible for a premium subsidy on a public health care exchange and would not be able to trigger employer penalties. 

However, in light of its announcement, the Departments warn employers to consider the consequences of the inability to rely solely on the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value for any portion of any taxable year ending on or after January 1, 2015, that follows finalization of planned regulations.

The Departments allow for an exception for 2015 solely in the case of an employer that has entered into a binding written commitment to adopt, or has begun enrolling employees in a Non-Hospital/Non-Physician Services Plan prior to November 4, 2014, based on the employer’s reliance on the results of use of the MV Calculator. Plan sponsors in this situation will not be subject to employer penalties in 2015 even though their employees will be eligible for a premium subsidy for 2015, but only if their plan year begins no later than March 1, 2015.

The notice also says an employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014, plan), must not state or imply in any disclosure that the offer of coverage precludes an employee from obtaining a premium tax credit, if otherwise eligible, and if the employer has already disclosed this, it must correct such disclosures.

Notice 2014-69 is here.