The U.S. Department of Treasury released proposed regulations addressing how an employer can determine if its health plan offers minimum value. Health care reform imposes a penalty on a large employer for each full-time employee who purchases health coverage through an Exchange and receives a premium tax credit for that coverage. While any individual can purchase Exchange-based coverage, an individual is eligible for a premium tax credit for that coverage only if the individual’s employer-based coverage is unaffordable or does not provide minimum value.
This new guidance is intended to assist employers in determining if their plans provide minimum value (MV).
An employer’s plan fails to offer MV if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. To make this determination, the employer must know the total allowed costs of benefits under the plan, and the employer’s contribution for coverage.
The new proposed regulations state that the minimum value is calculated based on anticipated spending for a certain population (the population covered by a typical self-insured health plan) relating to Essential Health Benefits (EHB). This spending takes into account the employer’s cost sharing and the cost sharing required by participants (such as deductibles, copays, coinsurance). The minimum value percentage must be at least 60%. It is calculated by dividing the anticipated covered medical spending for EHB coverage for the target population, by the total anticipated allowed charges for essential health benefits coverage for this population.
There are different methods that may be used to determine minimum value.
1. Employers may use the minimum value calculator provided by the government;
2. The employer can used an approved safe harbor; or
3. If the employer’s plan includes features that do not work with the calculator, the plan can get its own actuarial certification.
Small plans may automatically meet minimum value requirements if the plan offered is a bronze level plan.
Special rules apply if the employer offers a health savings account and if the employer reduces charges for wellness program participation.
The minimum value calculation, while slightly difficult for employers, is important for proving that the employer is not subject to a penalty if an employee purchases subsidized coverage through an Exchange.
