Minimum Value: Plans lacking hospitalization, physician services soon to be excluded

The IRS recently issued Notice 2014-69, which contains an important update on the “minimum value” requirement of the Affordable Care Act’s (ACA’s) shared responsibility, or “play or pay,” provision. Specifically, the agency is working with the Department of Health and Human Services to adopt regulations under which group health plans that exclude substantial coverage for inpatient hospitalization services or physician services (or both) won’t satisfy minimum-value standards.

No calculator allowed

Notice 2014-69 explains that the forthcoming regulations will respond to concerns that nonhospitalization / non–physician-services plans can still satisfy minimum-value requirements using the online calculator on the Centers for Medicare and Medicaid Services website and following one of three alternative methods for demonstrating minimum value. Some plans can do so even if they fail to offer “fundamental benefits that … historically have been integral to coverage,” according to the notice.

Under the anticipated regulations, large employers won’t be permitted to use the online calculator (or an actuarial certification) to demonstrate that a nonhospitalization / non–physician-services plan provides minimum value. Notice 2014-69 expressly warns large employers against adopting nonhospitalization / non–physician-services plans for the 2015 plan year.

Some relief to be available

The IRS anticipates the regulations will apply on the date they become final (expected around March 1, 2015), rather than the start of the following calendar or plan year. But some relief likely will be available for large employers with plan years beginning before March 1, 2015, that, relying on the online calculator, entered into a binding written commitment to adopt a nonhospitalization / non–physician-services plan before Nov. 4, 2014, or already began enrolling employees in one.

For organizations that qualify for the relief, the regs wouldn’t apply until the end of the plan year in which the regulations are finalized. An offer of coverage under a nonhospitalization / non–physician-services plan (including a pre-Nov. 4 plan) won’t disqualify an employee from receiving a premium tax credit for coverage bought through a Health Insurance Marketplace — and large employers must not state or imply that it would. If a large employer’s previous communications so stated or implied, the organization must “timely” correct those communications.

Keep an eye out

It appears that the IRS and Department of Health and Human Services will close this perceived loophole in minimum-value determinations quickly and decisively. If you’re subject to play-or-pay penalties now, or could be in the near future, keep an eye out for these regulations and bear their consequences in mind.