Federal Officials Tighten Up on “Skinny” Plans | Chicago Benefits Broker

On November 4, 2014, the Departments of Health and Human Services and the Treasury released Notice 2014-69 regarding employer-sponsored health plans and the Affordable Care Act (ACA) definition of minimum value coverage.

The Notice clarifies that plans that do not “substantially cover in-patient hospitalization or physician services” — often called “skinny” or “bare bones” plans — do not provide the minimum value coverage intended by the ACA. However, employers that have already taken steps to offer such plans will not be affected immediately.

Determining whether a group health plan provides minimum value coverage is a critical factor under two different ACA provisions:

  • Exchange subsidies: Persons who would otherwise qualify for subsidies to buy individual health insurance through an Exchange generally cannot receive those subsidies if the employer offers an affordable group health plan that provides minimum value.
  • Employer “play-or-pay” rules: Large employers may be assessed penalties for failing to offer full-time employees affordable group health coverage that provides minimum value.

When an employer offers a group health plan that provides minimum value, the employer avoids the risk of play-or-pay penalties but also prevents the employee from getting an Exchange subsidy for an individual policy. Allowing so-called skinny plans to count as minimum value coverage would result in some employees (and families) being offered inadequate bare-bones coverage at work and also losing access to important subsidies for better coverage. The action now being taken by federal officials is intended to alleviate those situations.

According to the Notice, the Departments will issue proposed regulations “to provide that a plan will not provide minimum value if it excludes substantial coverage for in-patient hospitalization services or physician services (or both).” The Departments expect to finalize regulations in 2015. In the meantime, the Notice gives a new name to skinny plans — Non-Hospital/Non-Physician Services Plans — and provides the following guidance:

  • Employers should not rely solely on the federal online minimum value (MV) calculator or any actuarial valuation to determine minimum value for Non-Hospital/Non-Physician Services Plans;
  • Non-Hospital/Non-Physician Services Plans do not provide minimum value;
  • Persons that qualify for Exchange subsidies do not lose eligibility merely because they also are eligible for a Non-Hospital/Non-Physician Services Plan;
  • Employers that offer Non-Hospital/Non-Physician Services Plans will not be subject to play-or-pay penalties during 2015 if all the following conditions are met:
    • Before November 4, 2015:
      • The employer had entered into a written agreement to offer the plan (or had begun enrollment in the plan) based on its reliance that the plan provided minimum value when tested using the MV calculator (or federal safe harbor provision);
      • The plan year begins by March 1, 2015 (based on the plan year that existed as of November 3, 2014);
    • The employer does not state or imply that its coverage offer under the Non-Hospital/Non-Physician Services Plan precludes an employee from obtaining a premium tax credit (subsidy) if otherwise eligible; and
    • The employer timely corrects any prior disclosures that stated or implied that its coverage offer under the Non-Hospital/Non-Physician Services Plan would preclude an otherwise subsidy-eligible employee from obtaining a subsidy.

Future regulations will confirm the guidance provided by Notice 2014-69.

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