“Minimum Value” (MV) applies to any healthcare plan that covers at least 60 percent of the total allowed cost of benefits provided under the plan. If the coverage offered by an employer fails to provide Minimum Value, an employee may be eligible to receive a premium tax credit. In most cases, the Affordable Care Act (ACA) requires an applicable large employer (i.e., one who employed, on average, more than 50 full-time employees on business days during the preceding calendar year) to pay a penalty when at least one of that employer’s full-time employees receives a premium tax credit for healthcare coverage.
The Department of Health and Human Services (HHS) provided a MV calculator that will allow an employer-sponsored plan to enter information about the plan’s benefits, coverage of services and cost-sharing design to see if the plan meets the required 60 percent valuation threshold. The MV Calculator differs from the Actuarial Value (AV) Calculator, also provided by HHS, which will be used by health insurance issuers to ensure plans meet the “metal level” requirements established by the ACA. The MV Calculator is based on the continuance tables reflecting claims data of typical self-insured employer plans. But because neither self-insured nor large group plans are required to comply with the Essential Health Benefits (EHBs) provision of the ACA, whether or not these employers are in fact providing Minimum Value coverage in compliance with ACA standards requires a different means of attributing value to the benefits offered under a plan.
Note: The out-of-pocket limits on cost sharing are $6,350 Single / $12,700 Family in 2014.In 2015, the out-of-pocket limits on cost sharing will be $6,600 Single / $13,200 Family for individuals who do not have a high-deductible health plan (HDHP)/Health Savings Account (HSA); or $6,450 Single / $12,900 Family for those who do have a HDHP/HSA. These limits apply to all EHBs offered by a group. If a large group plan offers some or all EHBs, the EHBs it covers are subject to these out-of-pocket maximums.
Effective date: January 1, 2014
Minimum Value determination
- The determination of Minimum Value is important to both large employers and their employees. An employee may not claim the premium tax credit for the purchase of healthcare coverage through a state exchange if that employee (or any family member) is eligible to enroll in an employer-sponsored health plan that meets the Minimum Value standard. The only exception occurs when the premium for that coverage does not pass the “affordability” test (based on the employee’s household income). Premium tax credits are also not available to any employee who is actually enrolled in an employer plan, even if that plan fails to provide Minimum Value or is not considered affordable.
- There are three ways to determine a healthcare plan’s Minimum Value:
- MV Calculator: The Department of Health and Human Services (HHS) provided a MV Calculator that will allow an employer-sponsored plan to enter information about the plan’s benefits, coverage of services and cost-sharing design to see if the plan meets the required 60 percent valuation threshold. If the healthcare plan offers EHBs not otherwise included in the MV Calculator, an actuary can determine the value of those benefits and add it to the result from the MV Calculator in accordance with generally accepted actuarial principles and methodologies.
- Safe Harbor Check Lists: An employer-sponsored plan will be treated as providing Minimum Value if its cost-sharing attributes are at least as generous as those shown in any of the Safe Harbor check lists.
- Certified Actuary Review: Plans with “non-standard” features, such as limits on any of the core benefits (for example, a limit on the number of physician visits or covered hospital days), can start the process of determining Minimum Value compliance by using the MV Calculator and then having a certified actuary make the valuation adjustments needed to reflect the impact of the non-standard features on the benefit/cost valuation. This option is available only when one of the other two methodologies is not applicable to the employer-sponsored plan.
Shared Responsibility Penalties
- Beginning January 1, 2015, employers with more than 100 full-time employees (including full-time equivalent employees) may have to pay “shared responsibility penalties” if any full-time employee uses a tax credit or a “cost-sharing reduction” to purchase healthcare coverage on a state exchange. The formula used to calculate the amount of the shared responsibility payment will depend on whether the employer’s plan has met the Minimum Value standard or the Affordability requirements. Therefore, large employers or self-insured employers will need to accurately determine the value of the coverage provided through their plans. Shared responsibility penalties will apply to groups with 51-99 full-time employees beginning January 1, 2016.
- Employers can avoid the shared responsibility payments by offering all full-time employees the opportunity to enroll in healthcare coverage that is both affordable and provides at least Minimum Value. Employees who have access to such coverage are not eligible for the premium tax credit, which would trigger an employer penalty.
IRS Proposed Regulation
For additional AHIP guidance, visit https://www.ahip.org/ (AHIP username and password required).