Health Plans Lacking Hospitalization Services Fail ACA's Minimum Value Requirement

Author: Gloria Ju

November 11, 2014

A group health plan that fails to provide substantial coverage for in-patient hospitalization and/or physician services does not meet the minimum value (MV) requirement of the Affordable Care Act (ACA), the IRS announced November 4 in Notice 2014-69. An employer that offers a plan that does not provide minimum value is subject to a penalty under the ACA's employer shared responsibility (or pay or play) mandate.

The IRS issued the notice after becoming aware of such plans being promoted to employers. Plan promoters contend that the plans satisfy the MV requirement, as determined through the use of the government's online MV calculator. The IRS noted concerns that the calculator may not produce "valid actuarial results for unconventional plan designs that exclude substantial coverage for in-patient hospitalization services."

However, an employer may continue to offer plans that exclude such coverage through the end of the next plan year if, prior to November 4, it already enrolled employees in the plans or entered into a binding written commitment to adopt the plans. This relief applies only to plan years that begin by March 1, 2015.

The IRS requires employers to avoid sending employees the message that the offer of coverage under a plan without in-patient hospitalization or physician services precludes an employee from obtaining a premium subsidy, if otherwise eligible. Prior disclosures stating or implying as much must be corrected in a timely fashion. For example, a statement in a Summary of Benefits and Coverage that such a plan provides minimum value implies that the offer of the plan precludes employees from obtaining the subsidy and, therefore, needs to be corrected.

The IRS plans to issue proposed regulations soon, which it anticipates will be finalized on or around March 1, 2015. The IRS intends the final regulations to take effect immediately, rather than being delayed to the end of 2015 or the end of the 2015 plan year.