Time to pay or play with health plans

Large employers could face penalties under the “pay or play” provisions of federal health care reform legislation in 2014 if their group health plans don’t meet minimum value requirements.

The Affordable Care Act (ACA) defines large employers as those with at least 50 full-time equivalent employees during the preceding calendar year. A penalty could apply if any of an employer’s full-time employees receive premium tax credits through a health insurance exchange.

Employees could qualify for premium tax credits if they aren’t eligible for other minimum essential health coverage, including an employer-sponsored plan that’s deemed affordable and provides minimum value.

Under the ACA, a group health plan fails to provide minimum value if the plan’s share of total allowed costs of benefits provided under the plan is less than 60 percent of those costs. For employers that offer health coverage that doesn’t meet ACA minimum value requirements, the monthly penalty for each full-time employee who receives a premium tax credit will be one-twelfth of $3,000 for any applicable month. The total penalty for the employer is limited to the number of full-time employees (minus 30), multiplied by one-twelfth of $2,000 for any applicable month.

Under anticipated future guidance, employers would be able to use one of several approaches to see if employer-sponsored health plans provide minimum value.

Calculator: A calculator will be available from the U.S. Department of Health and Human Services (HHS) and Internal Revenue Service (IRS). Employers will enter information about their benefits and cost sharing to determine if their plans provide minimum value.

Checklist: HHS and the IRS would provide an array of design-based safe harbors in the form of checklists employers will use to compare their coverages without the need to perform any calculations or obtain the assistance of an actuary. Health care plans would be deemed to provide minimum value if they are consistent with or better than any one of the checklists. Each safe harbor checklist would describe the four core categories of benefits and services: physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits and laboratory and imaging services.

Actuary certification: Certification from an actuary could be required for those plans with nonstandard features. Nonstandard features would include quantitative limits on covered hospital days or physician visits. Employers would be able to come up with an initial value using a calculator and then use a certified actuary to recommend and assist with making appropriate adjustments for nonstandard features.

In determining whether or not an employer-sponsored health care plan satisfies minimum value standards,  proposed regulations allow employers to take into consideration all benefits provided under the plans that are included in any essential health benefit benchmarks as well as employer contributions to health savings accounts (HSAs) and amounts newly made available under health reimbursement arrangements (HRAs).