Update to Minimum Essential Coverage (MEC) Plans

The final rule has just been issued by the Department of Health and Human Services to further define what is considered minimum value (MV) for a benefit plan. This is an important concept under the Affordable Care Act (ACA) since minimum value is used to determine if an employer benefit plan meets the requirements of a minimum essential coverage (MEC) or "skinny" plan. If you are an employer currently offering a MEC plan or thinking of offering one in the coming year, please read on for the latest news.

 

What’s new?
The final rule announced late February confirmed that if an employer offers a benefit plan that does not offer “substantial coverage of inpatient hospital and physician services” it will not be considered to provide minimum value according to the regulators and will be subject to ACA Pay or Play penalties. What is still unclear is what “substantial” means; however, HHS will provide more definition as “circumstances warrant.” Background information about minimum value is provided later in this article.

 

What do the new regulations mean to you or your client?
To begin with, you can no longer rely on HHS’s MV calculator to determine if a plan meets minimum value standards. It’s important to note that since the final rule is still not clear as to what constitute “substantial” hospitalization and physician services as part of a health plan, you may want to rethink offering “skinny” plans to avoid a potential penalty.  All employer plans will be subject to the final rule even if the plan is midway through its plan year. This rule goes into effect April 28, 2015 — 60 days after it is published in the federal regulations.

 

There are a few exceptions: if an employer entered into a binding, written commitment for a plan year that begins no later than March 1, 2015 and the plan does not offer hospitalization and physician services, the employer will have to provide minimum value for purposes of the employer mandate for the rest of the plan year. Secondly, If employees were offered a “skinny plan” prior to Nov. 4, this will not disqualify those employees for subsidized coverage at a health insurance exchange. However, the receipt of the subsidized coverage will not trigger penalties for the employer, but the company cannot state or imply to plan-eligible employees that they will not qualify for subsidized exchange coverage.

 

Minimum Value Background
HHC’s final rule is a follow up to their Nov. 4, 2014 announcement that they would provide further guidance on what’s considered minimum value. HHC rules currently state that “an employer-sponsored plan provides minimum value (MV) only if the percentage of the total allowed costs of benefits provided under the plan is greater than or equal to 60 percent.” Prior to the Nov. 4 announcement, employer groups of 50 could substantiate whether or not their health care coverage provided minimum value by using the MV calculator created by the HHS. This resulted in a loophole, which allowed employers to offer health benefit plan designs that met the MEC and minimum value requirements of the ACA without including substantial coverage for hospitalization and physician services. These plans are what we refer to as “skinny plans.”  
 

Now with the final rule announced, HHS is discontinuing the use of “skinny plans” in general. If you are a large employer and do not meet minimum value standards according to the new regulations, you may be subject to the ACA employer mandate annual penalty of $2,000 for each full-time employee, minus the first 80 full-time employees. These penalties are triggered by one or more full-time employees receiving a subsidy for coverage at a health insurance exchange if one of these scenarios exists:

• A company fails to offer minimum essential coverage (MEC); or
• A company offered coverage that did not meet the minimum requirements of the law, i.e., your plan is not affordable or your plan does not meet minimum value (MV) as recently defined by HHS.
 

If you or your client still needs further guidance regarding minimum value or MEC plans, please give your account manager a call to discuss.