Blog By: Beth Ede, SPHR
Employer Shared Responsibility Provision (Play or Pay)
Understanding the Requirement – Part IV: Minimum Value & Penalty Avoidance
It’s important to understand that the health care reform law does not impose a requirement on employers to offer health coverage. However, starting in 2014, applicable large employers (see Part I posted March 11, 2013) will be subject to Employer Shared Responsibility – the Play or Pay provisions under the Affordable Care Act.
One provision of health care reform requires an applicable large employer to offer minimum essential coverage (MEC) to full-time employees (beginning in 2014) and their dependents (beginning in 2015) or pay a penalty. It’s important to note that employers that choose to provide MEC may still face a penalty if the coverage does not provide minimum value or if it is not affordable.
Current guidance (Feb. 2013) confirms that fully-insured and self-insured employer-sponsored coverage qualifies as MEC. Interestingly, the guidance does not prescribe any minimum standards that employer coverage must satisfy to be considered MEC. We’re uncertain whether the absence of prescribed rules on this issue implies that no minimum standards will ultimately be imposed. We are certain, however, that employers that do choose to provide MEC may still face a penalty if that coverage does not provide minimum value or is not affordable.
So, what does it mean for an organization’s group health plan to have minimum value (MV)? Under the current regulations, a group health plan will be determined to have MV if a minimum of 60% of health care costs are covered by the plan.
In most cases, this should not be a hard measurement to meet and comply with as the Dept. of Health and Human Services (HHS) in the fall of 2012 found that approximately 98% of individuals currently covered by employer-sponsored plans are enrolled in plans that have an actuarial value of at least 60%.
It is anticipated that most carriers will be completing MV calculations for their plans. If not, there is a Minimum Value Calculator available on the CCIIO website.
If WA can be of further assistance to you, please feel free to contact us.