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IRS Withdraws, Re-Proposes Minimum Value Rules to Align With Previous Guidance

IRS Supplemental Notice of Proposed Rulemaking: Minimum Value of Eligible Employer-Sponsored Health Plans, 26 CFR Part 1, 80 Fed. Reg. 52678 (Sept. 1, 2015)

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Visit the Health Care Reform Community on Checkpoint to join the discussion on this development (for Checkpoint subscribers to EBIA’s Health Care Reform manual).

The IRS has withdrawn and re-proposed a portion of a regulation addressing the determination of “minimum value” for purposes of health care reform’s premium tax credit and employer shared responsibility (“play or pay”) provisions. Under the regulation as proposed in May 2013, a plan provides minimum value if its share of the allowed cost of benefits is at least 60% (see our article). However, subsequently issued IRS Notice 2014-69 (see our article) and final HHS payment parameter regulations (see our article) advised that employer-sponsored plans (including large group market and self-insured plans) that fail to provide substantial coverage for both inpatient hospitalization and physician services do not provide minimum value (regardless of whether they meet the 60% threshold).

This re-proposed regulation would incorporate the substance of the previous guidance, affirming that an eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits provided to an employee is at least 60% and the plan provides substantial coverage of inpatient hospital and physician services. The rule would apply for plan years beginning after November 3, 2014. However, for purposes of the employer shared responsibility provisions under Code § 4980H(b), the change would not apply before the end of the plan year beginning on or before March 1, 2015, if the employer had entered into a binding written commitment to adopt the noncompliant plan terms, or had begun enrolling employees in the plan with noncompliant plan terms, before November 4, 2014.

EBIA Comment: The re-proposed regulation represents another step by the IRS to close a perceived loophole that allowed certain plans to technically satisfy minimum value without providing fundamental benefits that historically have been included in employer-sponsored health plans. This proposed change would harmonize the rules on minimum value but leaves unsettled the question of what constitutes “substantial coverage” of inpatient hospital and physician services. The IRS requests comments on this point. Minimum value is important for applicable large employers because if a plan does not provide minimum value and a full-time employee receives a premium tax credit, the employer may be liable for a shared responsibility penalty. For more information, see EBIA’s Health Care Reform manual at Sections XXVIII.E.5 (“Determining Minimum Value for Employer-Sponsored Plans”) and XXIX.F (“Premium Tax Credits for Lower-Income Individuals”). See also EBIA’s Self-Insured Health Plans manual at Section XV.D.5 (“‘Minimum Value’ Under Employer Shared Responsibility”).

Contributing Editors: EBIA Staff.

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