Last week, the Department of Health and Human Services (“HHS”) and Internal Revenue Service (“IRS”) released a minimum value calculator to determine whether the percentage of the total allowed costs of benefits provided under a group health plan is at least 60% – a requirement in order for the employer plan to be treated as offering minimum essential coverage. If the employer’s plan meets the minimum value test and is affordable (i.e., single coverage does not cost an employee more than 9.5% of income) a fulltime employee cannot obtain subsidized Exchange coverage. An employee who does obtain subsidized Exchange coverage does not trigger employer penalties (see our prior post on this topic).
The calculator was released “for informal external testing” in conjunction with HHS’ release of final regulations on the standards related to essential health benefits, actuarial value, and accreditation under the 2010 health care reform law. HHS also provided an explanation of the calculator methodology which, among other things, makes clear that the calculator is based on a standard population and data reflecting typical self-insured employee plans.
As an alternative to the calculator and checklists, an employer may engage an actuary who is a member of the American Academy of Actuaries to determine, using generally accepted actuarial principles and methodologies, whether the plan meets the 60% minimum value threshold.
In addition, IRS said in previous guidance that it would release checklists employers may use as safe harbor methods for determining whether a plan meets the minimum value test. Those checklists have not yet been released but may be crucial for employers with plans that have nonstandard features and for which an actuarial determination is impractical.