Employers won't be able to offer group health plans that don't provide coverage for in-patient hospitalization or physician services and still satisfy the Affordable Care Act's definition of minimum value, the federal government said in new proposed regulations.

The proposed regulations, which are a supplement to proposed rules on minimum value coverage issued in May 2013, state 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 Treasury Department and Internal Revenue Service said Aug. 31.

Large employers that don't offer employees health-care coverage that meets minimum-value standards could face penalties under the ACA's employer mandate.

The rules adopt language from a Department of Health and Human Services final rule on Notice of Benefit and Payment Parameters for 2016 (CMS-9944-F; RIN 0938-AS19), the IRS said.

The IRS indicated that it would issue rules on this subject matter in conjunction with the HHS last fall in Notice 2014-69. The notice said the agencies had become aware that certain group health plan benefit designs without coverage for in-patient hospitalization or physician services were being promoted to employers.

In the new proposed rules, the IRS requested comments addressing how to determine whether a plan provides “substantial coverage” of inpatient hospital and physician services.

The regulations are proposed to apply for plan years beginning after Nov. 3, 2014, but the changes in the minimum value regulations don't apply before the end of a plan year that begins no later than March 1, 2015, for plans not providing substantial coverage for in-patient hospitalization services or physician services, the IRS said.

Comments are due 60 days after the supplemental proposed rules are scheduled to appear in Federal Register, which is Sept. 1.

Excerpted from a story that ran in Pension & Benefits Daily (09/01/2015).
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