The Internal Revenue Service has released its final rule governing the Affordable Care Act’s (ACA) shared responsibility provision requiring most individuals to obtain minimal essential health coverage or pay a penalty, commonly referred to as the individual mandate. Although the employer mandate has been delayed until 2015, the effective date of the individual mandate remains January 1, 2014.
According to a fact sheet on this rule, minimal essential coverage includes, at a minimum:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare Part A coverage
- Medicaid coverage
- Children’s Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
- Any additional types of coverage that are designated by the Department of Health and Human Services (HHS) or, as detailed by the regulation, when the sponsor of the coverage follows a process outlined in the regulations to be recognized as minimum essential coverage.
A self-insured group health plan qualifies as an eligible employer-sponsored plan. The final rule clarifies that a self-insured group health plan will be considered an eligible employer-sponsored plan “regardless of whether the plan could be offered in the large or small group market in a state.”
The final rule does not address arrangements to provide employer-subsidized coverage under plans in the individual market. The IRS noted that a commentator had suggested that certain arrangements of this type be treated as eligible employer-sponsored plans, arguing that treating these arrangements as eligible employer-sponsored plans would increase flexibility for employers and employees in satisfying their respective shared responsibility requirements. Although the final rule does not specifically address this issue, the IRS stated that guidance on the application of the individual mandate and ACA insurance market reforms to these arrangements is forthcoming.
With respect to retiree coverage, the final rule provides that for the lack of affordable coverage exemption, “an individual will not be eligible for retiree coverage unless the individual enrolls. Therefore, an individual who is eligible for retiree coverage but does not enroll disregards that eligibility in determining qualification for the lack of affordable coverage exemption.”
The final rule clarifies also that a plan offered by an employer to an employee includes a plan offered to an employee on behalf of an employer. The clarification comes in response to comments asking whether a multiemployer plan or a single employer collectively-bargained plan is an eligible employer-sponsored plan for the employees covered by the collective bargaining arrangement and eligible to participate in the plan. Commentators also asked whether a plan offered to an employer’s employees by a third party, such as a professional employer organization or leasing company, is an eligible employer-sponsored plan for the employees eligible to participate in the plan. The IRS pointed out that “no inference is intended from this treatment that the third party is the employer for this or any other provision of the Code or related laws.”
Minimal essential health coverage does not, however, include HIPAA excepted benefits, such as coverage only for vision care or dental care, workers compensation, or coverage only for a specific disease or condition.”
In addition, the final rule sets forth criteria for obtaining a hardship exemption, and clarifies that an individual is treated as having coverage for a month so long as he or she has coverage for any one day of that month. Moreover, an individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.