Delivering for Best-in-Class Wholesaler-Distributors
November 2014

The Affordable Care Act (“ACA” or “Obamacare”) requires employers with 50 or more full time equivalent employees (FTEs) to provide full-time employees and their dependents affordable, minimum value (MV) health care coverage. Failure to do so may result in the payment of penalties. As a result of executive actions taken in July 2013 and February 2014 by the Obama Administration in implementing the “employer mandate,” the largest employers (those with 100 or more FTEs) must provide qualifying coverage to at least 70% of their full-time workers on January 1, 2015 and to 95% on January 1, 2016. Mid-size employers (those with 50 – 99 FTEs) have until January 1, 2016 to comply.

Obamacare’s “essential health benefits” (EHB) regulations do not directly apply to self-funded plans or fully insured plans offered in the large group market: large group plans are not required to “fill” each ACA EHB “bucket” or meet any EHB benchmark. However, EHB’s do play a role in the calculation of a plan’s MV, and it is possible for a plan to provide MV absent providing coverage for some EHBs. The availability of “Non-Hospital/Non-Physician Services Plans” (provide MV absent coverage for in-patient hospitalization and/or physician services) has drawn the critical attention of the Departments of Treasury, including the Internal Revenue Service (IRS), and Health & Human Services (HHS).

According to guidance issued on November 4, 2014 (Notice 2014 – 69, see link below) and which will be published in the Internal Revenue Bulletin on November 24, 2014, the departments intend to issue regulations to be finalized in 2015 to remedy this. There is much to absorb from the Notice; in particular, please note the following:

  • The new regulations when finalized will immediately apply to plans other than Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plans, and will apply to such plans in place prior to November 4, 2014 at the end of the plan year if that plan year begins no later than March 1, 2015.
  • The employer’s offer of coverage under a Non-Hospital/Non-Physician Services Plan will not prevent an otherwise eligible employee from obtaining a premium tax credit.
  • An employer must not represent that the employer’s offer of a Non-Hospital/Non-Physician Services Plan bars employees from obtaining premium tax credits, and must correct any prior representation of such.

Accordingly, the guidance cautions employers to “consider the consequences of the inability to rely solely on the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value for any portion of any taxable year ending on or after January 1, 2015, that follows finalization of such regulations.”

IMPORTANT NOTE: This Regulatory Alert is intended for general information purposes only. It does not, nor is it intended, to provide legal or other advice and is not intended to substitute or in any way mitigate the need for employers to obtain the guidance and counsel of their own human resources, health insurance, employee benefits and legal advisors.