With the open enrollment season for January 2015 plan year upon us, or frightfully close, there is a lot of speculation about what really qualifies as a “minimum value” plan. Reports that HHS may update the minimum value calculator to correct a “glitch” have some employers reviewing their compliance strategy.
Employers have been getting ready for the ACA employer shared responsibility (ESR) requirements for several years now. The ESR requirements were originally scheduled to go into effect in 2014, but in 2013 regulators delayed implementation until 2015. Mercer survey data suggests that in 2014, most employers were already in compliance with two of the primary provisions — offering a plan that met the minimum value (MV) requirements and had affordable contributions.
The one ESR criteria where employers were lagging was in expanding coverage to all employees working 30 or more hours per week. This expansion will come at quite a cost for employers with large numbers of variable-hour employees who were not previously offered medical benefits. The dilemma for companies in this situation has been how to expand coverage to meet the ESR requirements and avoid tax penalties while managing the resulting financial impact to the bottom line.
You can count on challenges such as this to generate a market response, and this time has been no different. The market has produced several options that did not exist pre-ACA. The first response was the “skinny medical plan.” These plans include ACA-mandated preventive care paid at 100% (in-network). No other medical coverage is provided (no physician visits, hospital inpatient care, or Rx drugs unless preventive). Skinny plans count as minimum essential coverage (MEC), but don’t meet the minimum value requirement.
These plans were very controversial when they hit the market. Based on current guidance, a skinny plan would qualify as MEC and, if offered to all employees working 30+ hours per week, would satisfy the first part of the ESR requirement — allowing employers to avoid the “a” assessment. Mercer’s Survey on Health Care Reform in 2014 showed that about a fourth of employers would consider offering (or already did offer) a MEC plan with an actuarial value of less than 60%.
Another plan introduced by the market as a response to the ACA requirements was a MV plan that does qualify as a 60% minimum value plan (using the HHS calculator), but does not include coverage for inpatient hospitalization. Here’s the thinking behind them:
- The ACA outlines 10 categories of essential health benefits (EHBs) that must be covered by insured plans in the individual and small group markets.
- Through at least 2015, states were allowed to choose their own benchmark plan to define EHBs.
- Large insured or self-funded group health plans are not required to cover any/all EHBs. But, if EHBs are covered, the plan cannot impose annual or lifetime dollar limits on the EHBs (but visit or treatment limits generally okay).
- Coverage of EHBs is factored into calculating MV…and apparently, a plan can get to an actuarial plan value of 60% using the HHS calculator without covering inpatient hospitalization.
Currently, these plans would qualify as MEC and MV and, if offered to all employees working 30+ hours per week with affordable contributions, would satisfy both parts of the ESR requirement, thus avoiding both of the potential assessments.
Let’s consider the employee’s perspective to understand the issue with these new market developments. Based on current guidance, both of these new plan offerings satisfy the individual mandate. On the other hand, an individual’s eligibility for subsidized coverage in the public exchange could be compromised if the employee is enrolled in a skinny plan, or is eligible for an employer’s affordable minimum value plan (that excludes coverage for hospitalization), even if they don’t enroll in the employer plan.
The question is…will HHS update the calculator?
It appears that change is coming, but the timing is unknown. There is speculation that HHS will update the calculator to require coverage of “core” benefits” like inpatient hospitalization. This means your plan would no longer satisfy both parts of the ESR requirement and you may be subject to the “b” assessment if any full-time employee received tax-subsidized exchange coverage. It is probably too late to update the calculator for the 2015 plan year. But don’t be surprised if adjustments are made for 2016.
While it is beneficial to be poised to take advantage of the latest market developments, when it comes to the ACA it’s a good idea to have a “plan B” in case things change.