Health Care Reform: HHS Releases Final Minimum Value Guidance and Calculator

Beginning in 2014, to avoid penalties under the Affordable Care Act (ACA), large employers must provide health coverage to their full-time employees (and dependents) that is affordable and provides minimum value. An employer-sponsored plan provides minimum value under ACA if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent.

On Feb. 25, 2013, the Department of Health and Human Services (HHS) issued a final rule on essential health benefits. The final rule outlines three approaches for determining whether an employer’s health coverage provides minimum value under ACA. In connection with the final rule, HHS also released its Minimum Value Calculator, or MV Calculator.

In addition, on May 3, 2013, the Internal Revenue Service (IRS) released a proposed rule on ACA’s minimum value requirements. In this proposed rule, the IRS outlines special rules for determining how health reimbursement arrangements (HRAs) and wellness program incentives are counted in determining minimum value and provides new safe harbors for determining MV.

This Legislative Brief summarizes the available methods for determining minimum value and provides information on the MV Calculator.

DETERMINING MINIMUM VALUE

An employer may use one of the following methods to determine whether its health plan provides minimum value.

MV Calculator

HHS has released an MV Calculator that permits an employer to enter information about its health plan’s benefits, coverage of services and cost-sharing terms to determine whether the plan provides minimum value. Along with the calculator, HHS also released an MV Calculator Methodology, which provides a detailed description of the data underlying the MV Calculator and its methodology.

Safe Harbor Checklists

HHS and the IRS will provide an array of design-based safe harbors in the form of checklists that employers can use to compare to their plans’ coverage. If a plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan would be treated as providing minimum value. This method would not involve calculations, and could be completed without an actuary. As outlined below, the IRS has proposed three plan designs as safe harbors for determining minimum value if the plan covers all of the benefits included in the MV Calculator.

Actuarial Certification

An employer-sponsored plan may seek certification by an actuary to determine the plan’s minimum value if the plan contains nonstandard features that preclude the use of the MV Calculator and safe harbor checklists. Nonstandard features would include quantitative limits (for example, limits on covered hospital days or physician visits) on any of the four core categories of benefits and services.

 

In addition, a plan in the small group market that meets any of the “metal levels” of coverage (that is, bronze, silver, gold or platinum) provides minimum value.

To determine minimum value, employer-sponsored health plans may account for any benefits covered by the employer that are also covered in any one of the essential health benefit (EHB) benchmark plan options in any state. If a plan uses the MV Calculator and offers an EHB outside of the parameters of the MV Calculator, the plan may ask an actuary to determine the value of the benefit and add it to the result derived from the MV Calculator to reflect that value.

The IRS’ proposed rule provides that plan designs meeting the following specifications are safe harbors for determining minimum value if the plan covers all of the benefits included in the MV Calculator:

  • Safe Harbor Option One: A plan with a $3,500 integrated medical and drug deductible, 80 percent plan cost sharing and a $6,000 maximum out-of-pocket limit for employee cost-sharing.
  • Safe Harbor Option Two: A plan with a $4,500 integrated medical and drug deductible, 70 percent plan cost sharing, a $6,400 maximum out-of-pocket limit and a $500 employer contribution to a health savings account (HSA).
  • Safe Harbor Option Three: A plan with a $3,500 medical deductible, $0 drug deductible, 60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit and drug co-pays of $10/$20/$50 for the first, second and third prescription drug tiers, with 75 percent coinsurance for specialty drugs.

HSA AND HRA CONTRIBUTIONS

All amounts contributed by an employer for the current plan year to an HSA are taken into account when determining a health plan’s minimum value.

Also, the proposed rule provides that amounts newly made available under an integrated HRA for the current plan year are taken into account in determining minimum value, as long as the amounts may be used only for cost-sharing and may not be used to pay insurance premiums.

WELLNESS INCENTIVES

The proposed rule addresses how nondiscriminatory wellness program incentives that may affect an employee’s cost sharing should be taken into account for purposes of the minimum value calculation. The proposed rule provides that a plan’s share of costs for minimum value purposes is determined without regard to reduced cost-sharing available under a nondiscriminatory wellness program.

However, for nondiscriminatory wellness programs designed to prevent or reduce tobacco use, minimum value may be calculated assuming that every eligible individual satisfies the terms of the program relating to prevention or reduction of tobacco use. This exception is consistent with other ACA provisions (such as the ability to charge higher premiums based on tobacco use) reflecting a policy about individual responsibility regarding tobacco use.

Transition relief is provided in the proposed rule for plan years beginning before Jan. 1, 2015. Under this relief, if an employee receives a premium tax credit because an employer-sponsored health plan is unaffordable or does not provide minimum value, but the employer coverage would have been affordable or provided minimum value had the employee satisfied the requirements of a nondiscriminatory wellness program (as in effect on May 3, 2013), the employer will not be subject to the employer penalty.

Revised: 5.13.13

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Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your needs.

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