Treasury Publishes Proposed Rule on Minimum Value of Employer-Sponsored Plans

On April 30, Treasury published a Notice of Proposed Rulemaking on the requirements for minimum value of eligible employer-sponsored health plans. Under the ACA's Shared Responsibility provisions ("pay or play"), an employer-sponsored plan fails to offer minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs. The ACA also provides that employees may be eligible for premium tax credits even if offered employment-based coverage (which could result in an employer’s liability for an assessable payment) if that coverage is “unaffordable.” Unaffordability is generally defined as costing an employee more than 9.5 percent of income.

The proposed regulations provide that plan sponsors may determine minimum value by using the Department of Health and Human Services’ “MV Calculator,” which can be found online at CCIIO's website (www.cciio.cms.gov). The use of this MV Calculator is essentially a safe harbor upon which plan sponsors can rely.

The proposed regulations provides guidance that addresses how wellness programs factor into an employer’s determination of whether its plan provides minimum value, and if it is affordable. Under the proposed rule, when determining a plan’s share of costs for minimum value purposes, any reduced cost-sharing that is available under a nondiscriminatory wellness program is generally disregarded, with one exception. For wellness programs designed to prevent tobacco use, a plan’s minimum value may be calculated assuming every eligible individual satisfies the terms of the program relating to prevention or reduction of tobacco use. Similarly, the proposed regulations provide that for purposes of determining affordability of employer coverage, employers must assume that each employee fails to satisfy the requirements of a wellness program, except that an employer may assume that employees satisfy the requirements of a qualifying tobacco cessation program.

The proposed regulation separately addresses how employer contributions to HRAs and HSAs are treated in determining minimum value and affordability. Specifically, all amounts contributed by an employer to an HSA are taken into account in determining the plan’s share of costs for purposes of minimum value and are treated as amounts available for first dollar coverage. The proposed rule states that former employees who may enroll in continuation coverage required under federal or state law, and individuals who may enroll in retiree coverage under an employer-sponsored plan, are eligible for minimum essential coverage under this coverage only for months that the individual is actually enrolled in the coverage.