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PPACA Update! New Rules on Affordability, Minimum Value, an

| May 06, 2013
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On May 3, 2013 the IRS released a notice of proposed rulemaking on Minimum Value and Affordability and other items.  Contact our benefits team for assistance with understanding health reform and its impact on your business!

Wellness Penalties/Rewards and Affordability under ACA:

  • A plan’s share of costs for MV purposes is determined without regard to reduced cost-sharing available under a non-discriminatory wellness program.
  • The exception is with nondiscriminatory wellness programs designed to prevent or reduce tobacco use, where MV can be calculated assuming all eligible employees participated in the tobacco prevention or reduction program.  The affordability of a plan that charges a higher initial premium for tobacco users will be determined based on the premium charges to non-tobacco users who complete the related wellness program, such as attending smoking cessation classes.
  • Transition Relief for 2014 (plan years beginning before Jan 1, 2015): If a nondiscriminatory wellness program was in effect on May 3, 2013, the employer will not be subject to an employer mandate penalty if an employee received a premium tax credit because an employer-sponsored health plan is unaffordable or does not provide minimum value.  This applies to both rewards based on a dollar amount or a fraction of the total required employee premium contribution.

Minimum Value:

  • Several methods for determining MV will be available, including some safe harbor methods that will be specified in further IRS guidance.  Some examples are available now.  The below are some of the proposed safe harbors that will determine if a plan meets MV without using the mv calculator.  If the following plans cover all the benefits included in the MV calculator, they will be considered as offering minimum value:
    • A plan with a $3,500 integrated medical and drug deductible, 80 percent plan cost sharing and a $6,000 maximum out-of-pocket limit for employee cost-sharing
    • A plan with a $4,500 integrated medical and drug deductible, 70 percent plan cost sharing, a $6,400 maximum out-of-pocket limit and a $500 employer contribution to an HSA
    • A plan with a $3,500 medical deductible, $0 drug deductible, 60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit and drug co-pays of $10/$20/$50 for the first, second and third prescription drug tiers, with 75 percent coinsurance for specialty drugs.

    If a plan decides to use the MV calculator, they must us it to measure standard plan features, but the percentage may be adjusted based on an actuarial analysis of plan features that are outside the parameters of the calculator

HRA & HSA contributions:

  • HSA: All amounts contributed by an employer for the current plan year will be taken into account in determining the plan’s share of costs for MV and are treated as amounts available for first dollar coverage.
  • HRA: Amounts newly made available under an HRA that is integrated with an eligible employer-sponsored plan for the current plan year count for purposes of MV as long as the amounts are used for cost-sharing and not to pay insurance premiums

source: internal revenue service, http://www.gpo.gov/fdsys/pkg/FR-2013-05-03/pdf/2013-10463.pdf

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