United States: Health Plans Without Significant Hospitalization Or Physician Services Coverage Do Not Satisfy The Affordable Care Act’s Minimum Value Requirement

Applicable large employers who are subject to the employer shared-responsibility provisions of the Patient Protection and Affordable Care Act (“ACA”) should consider the consequences of offering group health plans that do not provide significant coverage for in-patient hospitalization services or that do not provide significant coverage for physician services (or both) – this is the message that the Department Health and Human Services and the Department of Treasury (the “Departments”) sought to convey in Notice 2014-69, which they jointly issued yesterday.

The Departments said they are aware that a number of entities are promoting group health plans that do not offer substantial coverage for in-patient hospitalization services and/or substantial coverage for physician services on the incorrect basis that such plans can still satisfy the minimum value requirement under the ACA. The promoters claim such plans provide minimum value health coverage that can be offered by applicable large employers to full-time employees in order to avoid potential employer penalties under the ACA.

In Notice 2014-69, the Departments specifically reject this position and indicate that they intend to change the current minimum value regulations to explicitly state that such plans do not provide minimum value coverage. The view of the Departments is that an employer-sponsored plan cannot provide minimum value coverage without offering these “fundamental” and “historically offered” services. Pending issuance of final regulations, the Departments state that an employee will not be required to treat such a plan as providing minimum value for purposes of the employee’s eligibility for subsidized health insurance purchased through an exchange. Thus, if an applicable large employer offers its full-time employees a health plan without significant coverage for both hospitalization and physician services, the applicable large employer may still be subject to penalties.

If you have already offered or prepared to offer this type of coverage for 2015, please contact one of the attorneys in Troutman Sanders’ Employee Benefits and Executive Compensation Group to discuss your options.