Tuesday, November 4, 2014

Update: Group Healthcare Plans Not Providing Coverage for Hospital Care Won't Pass Obamacare's “Minimum Value” Test

From Jerry Geisel at Business Insurance:
Group health care plans that do not provide coverage for hospital care will not pass the health care reform law’s “minimum value” test, but the Internal Revenue Service is giving a one-year pass to existing or soon to be implemented plans excluding the coverage. 
Ending months of uncertainty on the issue, the IRS on Tuesday said such plans do not provide the minimum value requirement and that regulators will shortly propose regulations to this effect. 
The IRS announcement involves a section of the Patient Protection and Affordable Care Act that imposes, starting in 2015, stiff penalties on employers offering plans that do not pass an ACA minimum value test. 
To pass that test, plans must pay for 60% of covered services. If a plan does not pass the minimum value test, lower-income employees — those earning up to 400% of the federal poverty level — can go to public insurance exchanges to obtain coverage, with the federal government subsidizing their premiums. In that situation, employers are liable for a $3,000 penalty for each employee who obtains the subsidized coverage. 
Likely due to a flaw in a government online calculator, low-cost plans that excluded coverage for hospital services were able to pass the minimum test, benefit experts said. 
That, in turn, fueled interest in the plans, which cost about half the price of more traditional plans, especially from employers who have not offered coverage and starting in 2015, faced an ACA mandate to offer coverage or be hit with a stiff financial penalty. 
But in its Tuesday announcement, the IRS said plans excluding hospital coverage fail the minimum value requirement. 
The IRS, in its notice, suggested that its calculator gave faulty results. The IRS, Treasury and the Department of Health and Human Services are considering whether the calculator produced “valid actuarial results.” ...
IRS Notice 2014-69 goes on to provide that an employer who "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" shall be not be harmed by this anticipated regulatory change provided the "plan year begins no later than March 1, 2015." (Top of page 2 in IRS Notice 2014-69.)

* Note: Jerry Geisel's original version of this article stated that the agreement to provide non-hospital benefits could have been a "nonbinding" commitment." However, alert reader Mary Jonelle Thompson pointed out that she could not find that provision in the IRS release.  Upon further review, I've updated this post as I believe the original Business Insurance column had a typo in it.  

 And from Jay Hancock writing at St. Louis Today:
Moving to close what many see as a major loophole in Affordable Care Act rules, the Obama administration will ban large-employer medical plans from qualifying under the law if they don’t offer hospitalization coverage.  
The administration intends to disallow plans that “fail to provide substantial coverage for in-patient hospitalization services or for physician services,” the Treasury Department said in a notice Tuesday morning. It will issue final regulations banning such insurance next year, it said. 
Hundreds of lower-wage employers such as retailers and temporary-staffing companies have been preparing to offer such plans for 2015, the first year large companies are liable for fines if they don’t provide minimum coverage. Some have enrolled workers for insurance beginning Oct. 1.

For employers that have committed as of Nov.4 to such coverage, the administration will temporarily allow it under the health law, the notice said. ...
Allison Bell over at LifeHealthPro points out an interesting nuance for folks who've already installed a skinny plan:
You or your clients might run up against a "duty to inform" requirement
The agencies want an employer that offers a non-hospital plan -- including a non-hospital plan set up before Nov. 4, 2014 -- to correct any earlier disclosures that stated or implied that the plan might keep the enrolled employee from qualifying for a PPACA premium subsidy tax credit. 
If an employer with a non-hospital plan fails to tell an employee that the employee is still eligible for a tax credit, the agencies will consider the plan as implying that the employee was ineligible for the tax credit, officials say. 
Officials did not say what penalties employers might face if the agencies find that employers use poorly explained non-hospital plans to discourage employees who might qualify for the premium subsidy tax credit from applying for the tax credit. 
Here is the official notice from the IRS: Group Health Plans that Fail to Cover In-Patient Hospitalization Services.

We predicted this change and discussed it last week on the Armstrong and Getty Show.  Audio here: