Plans that Fail to Offer Significant In-Patient Hospitalization and/or Physician Coverage Will Not Offer Minimum Value

In Notice 2014-69 the IRS has issued a warning regarding certain employer health plans it has learned about that have been designed to provide no, or extremely limited, in-patient hospitalization and/or physician coverage but still, due to quirks in the online minimum value calculator, be found to provide “minimum value” for health insurance.

The notice provides that plans that fail to provide significant in-patient hospitalization and/or physician coverage do provide minimum value and that regulations will shortly be issued to that effect. 

Under the Affordable Care Act, a “large” employer may owe penalties it fails to provide affordable coverage that provides minimum value to its employees.  Thus, the plans described above would not qualify as coverage that would allow an employer to escape the “pay or play” penalty if an employee were to qualify for assistance for a health care program purchased from the state exchange.

However, recognizing that the current regulations allow for such a program, the IRS has announced that if an employer has a pre-November 4, 2014 binding commitment to participate in such a program, the plan will be allowed to use the mechanical minimum value test for 2015 so long as the plan’s year begins no later than March 1, 2015.

On September 1, 2015 the IRS issued proposed regulations (REG-143800-14) that would add these provisions, revising the proposed regulations issued in 2013.  The revision would add the following as Reg. §1.36B-6(a)(2):

(2) The plan provides substantial coverage of inpatient hospital services and physician services

The effective dates would be the same as originally noted in Notice 2014-69.