On Feb. 25, 2013, the Department of Health and Human Services (HHS) issued a final rule on essential health benefits. The final rule outlines three approaches for determining whether an employer’s health coverage provides minimum value under ACA. In connection with the final rule, HHS also released its Minimum Value Calculator, or MV Calculator.
Beginning in 2014, to avoid penalties under the Affordable Care Act (ACA), large employers (over 50 employees) must provide health coverage to their full-time employees (and dependents) that is affordable and provides minimum value. An employer-sponsored plan provides minimum value under ACA if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent.
Determining Minimum Value
An employer may use one of the following methods to determine whether its health plan provides minimum value.
HHS has released an MV Calculator that permits an employer to enter information about its health plan’s benefits, coverage of services and cost-sharing terms to determine whether the plan provides minimum value.
Safe Harbor Checklists
HHS and the IRS have indicated that they will provide an array of design-based safe harbors in the form of checklists that employers can use to compare to their plans’ coverage. If a plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan would be treated as providing minimum value. This method would not involve calculations, and could be completed without an actuary.
Each safe harbor checklist would describe the cost-sharing attributes of 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. HHS and the IRS have not yet issued these checklists.
An employer-sponsored plan may seek certification by an actuary to determine the plan’s minimum value if the plan contains nonstandard features that preclude the use of the MV Calculator and safe harbor checklists. Nonstandard features would include quantitative limits (for example, limits on covered hospital days or physician visits) on any of the four core categories of benefits and services.
If a plan uses the MV Calculator and offers an essential health benefit (EHB) outside of the parameters of the MV Calculator, the plan may ask an actuary to determine the value of the benefit and add it to the result derived from the MV Calculator to reflect that value.
Also, to determine minimum value, employer-sponsored health plans may account for any benefits covered by the employer that are also covered in any one of the EHB-benchmark plan options in any state.
HSA and HRA Contributions
The final rule allows employer contributions to a health savings account (HSA) to be taken into account when determining a health plan’s minimum value.
Also, amounts newly made available under an integrated health reimbursement arrangement (HRA) that may be used only for cost-sharing are also taken into account in determining minimum value. HHS is still considering whether or not other types of integrated HRAs should be included in the minimum value calculation, and may issue additional guidance on this issue. HHS did not provide guidance on the definition of “integrated” or the phrase “used only for cost-sharing,” although more information on these terms would be helpful.
HHS’ MV Calculator is now available to determine whether an employer-sponsored plan satisfies ACA’s minimum value requirement. Along with the calculator, HHS also released an MV Calculator Methodology, which provides a detailed description of the data underlying the MV Calculator and its methodology.
According to HHS, the calculator is available for “informal external testing.” Users of the MV Calculator are encouraged to submit any technical issues or operational concerns to HHS and, if necessary, HHS will release a revised version of the MV calculator.