The Internal Revenue Service issued a notice describing potential approaches for determining if employer group health coverage provides minimum value for purposes of health care reform. Beginning in 2014, eligible individuals who buy coverage under a qualified health plan through an Exchange may receive a tax credit to help make the coverage purchased through the Exchange more affordable. An employee who is eligible to enroll in an employer plan is not eligible for the tax credit unless the plan's coverage is either unaffordable or does not provide minimum value. An employee is also not eligible for the credit if the employee actually enrolls in the employer plan, even if the plan is not affordable or fails to provide minimum value. A large employer (with over 50 employees) will be assessed and required to pay a penalty if any of the employer's full-time employees receives a premium tax credit through an Exchange. The premium tax credit is not available, and therefore the employer will not be subject to the penalty, if the employer offers the employee affordable group health coverage meeting certain standards.
Health care reform provides that a plan does not provide minimum value if "the plan's share of the total allowed costs of benefits provided under the plan is less than 60% of such costs."
The IRS and Department of Treasury will be issuing proposed regulations on the exact process for determining minimum value of an employer's group health plan, but set forth some proposed approaches in the newly released notice. It is expected that an employer will be able to use one of several approaches to determine minimum value. The notice provides three possible approaches for the calculation:
- An actuarial value calculator or a minimum value calculator to be made available by the government. The calculator would permit an employer plan to enter information about the plan's benefits, coverage, and cost-sharing to determine if it provides minimum value. The data running the calculator would be claims data reflecting typical self-insured employer plans.
- Designed-based safe harbors evidenced by checklists to be used to determine if an employer plan provides minimum value (without the need to perform calculations or obtain an actuary).
- For non-standard plans, an appropriate certification by an actuary, in accordance with recognized actuarial standards.
The recent notice, in addition to explaining the proposed approaches, asks the public to provide comments on the proposal before the possible approaches are finalized.