Large employers might not object to being required to provide hospitalization services to meet the ACA's minimum value standard under new IRS proposed rules, but the requirement could be opening a door that self-insured plans don't want to go through.

Most large employers already offer health plans that cover hospitalization, but the new proposed rules could be worrisome because they mandate that a specific benefit be provided by those plans, Kathryn Wilber, senior counsel for health policy at the American Benefits Council, told Bloomberg BNA on Sept. 2.

The Internal Revenue Service and Treasury Department issued proposed rules Aug. 31 saying that eligible employer-sponsored health plans will be considered to provide minimum value coverage only if the plan's share of total allowed costs of benefits provided to an employee is at least 60 percent and if the plan includes substantial coverage of inpatient hospital and physician services.

The IRS indicated that it would issue rules on this subject matter in conjunction with the Department of Health and Human Services last fall in Notice 2014-69.

While employers are aware that there are other health benefits, such as preventive services, that are required to be offered under other parts of the Affordable Care Act, “we see this minimum value at 60 percent now being expanded to specifically require a certain benefit and that is opening the door to something that we don't think Congress intended,” Wilber said.

Missing Elements

One element that is missing from the proposed rules is any explanatory legal analysis for why the agencies governing the ACA feel that hospitalization services are required as opposed to other coverage that is traditionally thought of as fundamental, Rachel Leiser Levy, a principal at Groom Law Group Chartered, Washington, told Bloomberg BNA on Sept. 2.

The proposed rules reference previously released regulations from the HHS saying “the minimum value standard may be interpreted to require that employer-sponsored plans cover critical benefits.”

“I think that does leave the door open for other coverage to be put into that bucket of critical benefits,” Levy said, but she added that there shouldn't be too much concern regarding this possibility because the proposed rules were targeting a specific kind of plan sometimes referred to as a “skinny plan.”

Levy said skinny plans came to the attention of the Obama administration early on when they saw “that there were certain employers who appeared to be trying thread the needle as finely as they could” by offering plans that provided the least amount of benefits possible to qualify as minimum value and not trigger an ACA penalty.

The proposed rules also don't feature broad transition relief, but that may be balanced by the fact that the HHS already put out regulations covering this topic and the IRS gave notice of its intentions last year, Levy said.

The rules apply for plan years beginning on or after Nov. 3, 2014, and the changes to the minimum value rules don't apply to plans that began before March 1, 2015, which is the 2015 plan year. But that means the rules are in effect for the 2016 plan year, which doesn't give much time, if any, for plans that weren't going to offer the newly required services to make changes.

Alden J. Bianchi, a member at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC in Boston, had a slightly different take on what the IRS and Treasury may have to address when they finalize these rules, telling Bloomberg BNA on Sept. 1 that the regulations say that a plan has to provide substantial coverage of in-patient hospital and physician services, but never defines what constitutes substantial.

Final rules will have to address this, because otherwise “people are going to try to push the envelope,” he said.

The Treasury and the IRS said in the proposed rules that it was seeking public input on rules for determining whether a plan provides “substantial coverage” on inpatient hospital and physician services.

Excerpted from a story that ran in Pension & Benefits Daily (09/03/2015).

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