Daily News

View All News

Feds will likely cut ‘minimum value’ health plans without hospitalization under ACA

October 21, 2014

The federal government may disallow a type of healthcare plan that cuts costs and allows staffing firms to avoid penalties under the Affordable Care Act when employer mandates take effect next year.

In question are “minimum value plans” (MVP) that don’t cover in-patient hospital costs. Such plans could have monthly premiums half as much as plans with hospitalization, according to an article in The Washington Post.

The Post reports minimum value plans without hospitalization have passed muster under an online insurance calculator provided by the US Department of Health and Human Services. Questions arose over whether there was a flaw in the calculator, and now the government appears poised to disallow such plans.

Ed Lenz, senior counsel of the American Staffing Association, also says it is likely the Department of Health and Human Services administration will revise its stance and no longer allow health plans without hospitalization to qualify as “minimum value” coverage to avoid the so-called “B” penalties based on full-time employees who receive government subsidies.

“Anything is possible, but all the signs point to a change in the status of those plans,” Lenz said. “I would certainly caution, and we are cautioning our members, not to count on those plans qualifying as minimum value in 2015.”

No official announcement has come, and it might not come until after the November election — leaving precious little time for staffing firms to make changes. However, it’s hoped the administration would allow transition relief given the late date; Lenz said it would be unconscionable for the administration not to do so.

The question is a concern because large employers must offer coverage beginning Jan. 1 or potentially be exposed to penalties. Large employers are defined as companies with 50 or more full-time employees and/or full-time equivalents. (However, employers with 50 to 99 full-time employees and equivalents won’t face the employer mandate in 2015 if they meet certain conditions.)

The nearness of the law’s employer mandate and its complexity also made it a popular topic at the American Staffing Association’s Staffing World conference held last week in the Washington area. Staffing firm executives peppered experts with questions and talks on the ACA drew large audiences.

Experts at the conference broke the penalties down to “A” and “B” penalties.

The “A” penalty is $2,000 per year multiplied by all of a company’s full-time workers (not full-time equivalents). This penalty will be faced by companies that don’t offer any health insurance at all to 95 percent of their full-time employees (70 percent in 2015 under transition relief). Staffing firms can avoid the “A” penalty by offering a “minimum essential coverage” (MEC) plan — which are not in question. These “skinny” plans typically offer only preventive care, a specified number of doctor visits per year and, in some cases, generic prescription drugs. They don’t cover hospital stays, surgical procedures or prenatal care. MEC plans are projected to cost $40 to $100 per month, according to Staffing Industry Analysts.

The “B” penalty is $3,000 times each full-time employee who receives a subsidy to buy health insurance through an exchange. An employer faces this penalty if the coverage it offers is neither affordable nor meets minimum value. A plan must not exceed 9.5 percent of an employee’s household income in order to be considered affordable, but employers can make that determination based on a worker’s W-2 wages.

Even if transition relief is not granted, Lenz said, there would be disruption, but no immediate penalty impact. Penalties next year will be determined assessed on a month-by-month basis and won’t be assessed by the IRS come payable until 2016 — giving insurers time to come up with replacements for the no-hospitalization plans early in 2015.

George Reardon, an attorney who specializes in the staffing industry, said in a prepared comment that the controversy over MVPs represents a struggle over ACA compliance philosophy:

“It’s unclear whether the opportunity for omitting hospitalization from a minimum value plan arose because of a policy misstep, a programming bug or an actuarial methods issue. However it arose, Treasury officials are naïve for not expecting employers to seek the lowest cost compliance strategies, of which the MVP plan is the latest. Treasury is again acting ‘shocked, shocked,’ the way it did two years ago when the amazingly undemanding definition of ‘minimum essential coverage’ was discovered and ‘skinny’ plans became the rage.

“In 2013, ASA committed the entire staffing industry to comply with the intent and spirit of ACA in addition to the letter of ACA. Yet most staffing firms have enthusiastically embraced MEC plans, MVP plans, and hours and tenure limits under a no-plan strategy — all of which are designed to legally minimize ACA coverage and penalty costs. ASA’s benefits counsel recently blogged that ‘No employer is required to do anything more than the law requires; and any employer that does risks putting itself at a competitive disadvantage relative to those that do not.’ I agree with him and said virtually the same thing in 2013.

 “The government never changed the MEC definition, but it sounds determined to amend the MV rules and calculator. We may also see it go back to readdress the MEC definition. Ironically, the cost of stricter ACA coverage requirements may force staffing firms to drop or downgrade their anticipated coverage offers.”