May 3, 2013
Two important items in this ALERT:
IRS Issues Proposed Rules on Determining if a Plan Provides Minimum Value
(April 30, 2013) Source: Council for Insurance Agents & Brokers
• Large Group and Self-Insured Plans: Employer sponsored self-insured and large group plans (those with 100+ employees) are not required to cover every Essential Health Benefit category.
• Wellness Plans:
o On or after January 1, 2015, plans cannot use the wellness benefit incentives/penalties when calculating Minimum Value except for tobacco-related wellness programs. For tobacco related program, affordability is determined by assuming each employee satisfies the programs’ requirements.
o Prior to January 1, 2015, the employers who had a wellness plan in place as of May 3, 2013, will not be subject to mandate penalties if the employee receives a tax credit (subsidy) for purchasing coverage on the Exchange if the employer coverage would have been affordable if the employee had satisfied terms of the wellness plan.
• HSA and HRA Contributions:
o Employers may use amounts contributed toward health savings accounts (HSAs) in determining Minimum Value of the health plan. This also applies to health reimbursement arrangements (HRAs) under certain conditions.
o In making affordability determinations, HRA contributions may be used in the calculation as long as employees have the option to use the amounts to pay premiums.
Why is this Important?
The proposed rules offer relief to employers in calculating the Minimum Value and Affordability of Plans.
Summary of Benefits & Coverage – DOL Provides Guidance
Source: Employee Benefits Institute of America (EBIA), Weekly Update 4/25/13
Summary of Benefits & Coverage (SBCs) for coverage beginning on or after January 1, 2014:
• SBC Templates:
o The DOL issued updated versions of the SBCs for the Second Year of Applicability. The updated form contains statements as to whether the coverage provides minimum essential coverage and meets the minimum value standard.
o To the extent that it would be administratively burdensome for a plan or insurer to modify its SBCs, the DOL, HHS and IRS have said that the previous template can be used, provided that the necessary minimum essential coverage and minimum value info is included in a cover letter or a similar disclosure furnished along with the SBC. Model language is provided for this purpose.
• Annual Limits: For plan years beginning on or after January 1, 2014, annual limits on the dollar value of essential benefits will be prohibited. The agencies (DOL, HHS, and IRS) have indicated that it is permissible for plans/insurers to remove the entire row containing the question, “is there an overall annual limit on what the plan pays?”
• Extension of Enforcement Relief: the agencies have extended enforcement relief pertaining to the SBCs (circumstances in which the SBC may be provided electronically, penalties for failure to provide SBC or Glossary) through the end of the second year. The agencies are focusing on implementation rather than enforcement through penalties.
Why is this Important?
• Employers will be required to distribute SBCs that include a statement as to whether the plan provides minimum essential coverage and is of minimum value.
• Penalties will not be issued for employers who do not fully comply with the SBC rules in year 2. Employers must make a good faith effort to comply.