The U.S. Departments of Health and Human Services (HHS) and the Treasury have issued new rules under the Affordable Care Act. Two proposed rules address minimal essential coverage, and one final rule covers the health insurance premium tax credit under the Affordable Care Act. Each of these rules will be discussed in turn.
Minimal Essential Coverage
The first proposed rule issued by HHS outlines when an individual is exempt from the individual mandate provisions of the Affordable Care Act (ACA); explains the Department’s standards for designating certain health benefits coverage, other than those listed in the statute, as constituting minimal essential coverage; and establishes the procedures health plan sponsors should follow to have their plans identified as meeting the minimal essential coverage requirements not specifically listed in the statute or regulation.
Section 5000A(f) of the ACA defines minimum essential coverage as one of the following: (1) coverage under a specified government sponsored program, (2) coverage under an eligible employer-sponsored plan, (3) coverage under a health plan offered in the individual market within a State, (4) coverage under a grandfathered health plan, and (5) other health benefits coverage that the Secretaries of HHS and the Treasury recognize for purposes of section 5000A(f). This proposed rule addresses option (5) by providing criteria and a process by which these other types of coverage may be designated as minimum essential coverage.
Per Se Minimal Essential Coverage
The proposal lists the following as types of coverage that would be designated per se as minimum essential coverage:
- Self-funded student health insurance plans.
- Foreign health coverage.
- Refugee medical assistance supported by the Administration for Children and Families.
- Medicare advantage plans.
- AmeriCorps coverage.
In addition, the HHS proposes that state high risk pools also initially be designated minimum essential coverage, but reserves the right to assess and reevaluate this decision. To this end, the agency is seeking comments on whether state high risk pools should automatically be designated as minimum essential coverage or whether they should be required to follow the process outlined in other sections of the proposed rule for being recognized as meeting the necessary requirements.
Requirements for Recognition As Minimum Essential Coverage for Types of Coverage Not Otherwise Designated As Such
HHS states that in addition to the aforementioned plans, there could be other plans that provide health coverage comparable to the mandated minimal essential coverage. The proposal outlines a process for plan sponsors to take to have their plan’s coverage be recognized as meeting the minimum requirements. The proposal explains that this recognition “would apply only to the particular plan sponsored by the submitting organization seeking recognition.” Employment-based coverage, however, would not be recognized as minimal essential coverage through this process, as employment-based group coverage “is generally subject to the provisions of either ERISA, the Code and/or the PHS Act, and there is a separate statutory category of minimum essential coverage under the Department of Treasury’s authority that addresses eligible employer-sponsored plans.”
The agency seeks comments on what types of coverage would “substantially comply” with the coverage requirements set forth in Title I of ACA relating to non-grandfathered, individual coverage, and the process for obtaining approval. The proposal lists the information a plan sponsor seeking to have the plan’s coverage recognized as minimal essential coverage would need to electronically submit to the HHS. The required information includes the essential health benefits covered by the plan, the cost-sharing requirements, and a certification that the plan substantially complies with the provisions of Title I of the ACA. If a plan is considered to meet the minimal essential coverage requirements, plan sponsors would be subject to annual information reporting requirements to the IRS.
Comments on this proposal must be received within 45 days of its publication in the Federal Register, which is scheduled for February 1, 2013.
Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage
A related proposed rule issued by the Treasury Department addresses the individual mandate in the ACA. Generally, §5000A of the health care law requires nonexempt individuals to maintain minimal essential health coverage for themselves and nonexempt family members or pay a penalty on their income tax returns. The proposed rule discusses who is considered exempt from this requirement; explains how the shared responsibility payment will be computed; and outlines when an individual is deemed to have minimal essential coverage. This proposal is issued in conjunction with the aforementioned HHS rule. In addition, the proposal includes a notice of public hearing that will be held on May 29, 2013, at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.
With respect to employer-sponsored coverage, the proposed rule confirms that a self-insured group health plan is an eligible employer-sponsored plan, not just insured group coverage. The proposed regulation also provides that an individual eligible to enroll in continuation coverage required under Federal law, such as COBRA or a comparable state law, is deemed eligible to purchase minimum essential coverage under an eligible employer-sponsored plan only if the individual enrolls in the coverage.
The proposed rule states that health insurance coverage consisting of HIPAA excepted benefits does not constitute minimum essential coverage
Premium Tax Credit
The IRS also issued a final rule providing guidance on when an employer-sponsored plan is considered “affordable” for an individual related to the employee for purposes of eligibility for a premium tax credit. Under the ACA, employees may be eligible for a premium tax credit to purchase health insurance through the future health insurance exchanges (“Exchanges”) if, among other reasons, the employer plan is deemed unaffordable. The final rule clarifies that for taxable years beginning before January 1, 2015, “an eligible employer-sponsored plan is affordable for related individuals if the portion of the annual premium the employee must pay for self-only coverage (the required contribution percentage) does not exceed 9.5% of the taxpayer’s household income.” However, for purposes of applying the affordability exemption from the individual mandate in the case of related individuals, the required contribution is based on the premium the employee would pay for employer-sponsored family coverage. These final regulations apply to taxable years ending after December 31, 2013.