Should You Take Advantage of the ACA 'Glitch' … For Now? 

The Washington Post ran an article over the weekend that is getting a lot of attention. The article suggests that there is a “glitch” in the calculator developed by HHS, because it allows a plan that excludes coverage for hospitalization to meet the 60% minimum plan value requirement. Is that a glitch that will be corrected, or did the government intend to allow a loophole in the calculator used by self-insured plan sponsors to determine if a plan meets the 60% plan value requirement? Let’s explore this issue from two employer angles — the “a” requirement and the “b” requirement. Under the Shared Responsibility provision, employers must do two things to avoid assessments.

1. Make an offer of Minimum Essential Coverage (MEC) to “substantially all” full-time employees (defined as 70% of full-time employees for 2015 but as 95% for 2016 and beyond) to avoid the “a” assessment of the employer shared responsibility requirement. (The “a” assessment is $2,080 (indexed) times the number of full-time employees.) Last year, attention was drawn to the “skinny medical plans” that meet the MEC requirement by providing 100% preventive care and not much else. Regulators have not yet closed this loophole for meeting the MEC requirement. In addition to fulfilling the “a” requirement, MEC also satisfies the individual mandate requirement.
2. For full-time employees with household income under 400% of the federal poverty level, employers must offer a 60% minimum value plan with affordable contributions for individual coverage (defined as 9.5% of an employer affordability safe harbor or 9.56% of an employee’s household income). The “b” assessment is $3,120 (indexed) multiplied by the number of full-time employees who get subsidized coverage on the public exchange. The regulators provided three safe harbors for determining affordability and a calculator to determine plan value. The ACA defines 10 categories of Essential Health Benefits (EHBs), but the law does not require a self-funded employer-sponsored plan to cover EHBs. EHBs are:

• Ambulatory patient services.
• Emergency services.
• Hospitalization.
• Maternity and newborn care.
• Mental health and substance use disorder services.
• Prescription drugs.
• Rehabilitative and habilitative services.
• Laboratory services.
• Preventive and wellness services and chronic disease management.
• Pediatric services, including oral and vision care.

Should some of the EHBs be required — such as physician visits and hospitalization? Perhaps this is an issue the regulators will decide to take on. Perhaps they will make changes to the calculator. We will have to wait and see.

Prior to the ACA, no one knew the actuarial value of their medical plan. Now we all do. So who is most likely to be interested in these loopholes? Probably employers with the greatest number of variable hour workers not eligible for full-time employee benefits prior to the ACA — especially if they offered these employees a mini-med plan. So are these loopholes really just creating the opportunity for replacement mini-med plans?

From our latest health care reform survey, we learned that 8% of employers currently offer employees a medical plan option that has a value of less than 60% and another 15% are considering it. If you would like to provide a very low-cost plan, consider these options to supplement your current strategy:

• Offer the minimum MEC plan — think skinny plan — to everyone (full-time and part-time) just to avoid the “a” assessment.
• Offer a minimum MEC plan (less than 60%) alongside all your plans just to give those who don’t want to spend the money on a better plan to buy something to avoid the individual mandate penalty. A very low-cost 60% plan could also meet this objective. Remember that employees who are eligible for an employer’s affordable 60%+ plan will be ineligible for subsidized public exchange coverage, even if they don’t enroll in the employer plan.
• Shop for the least expensive plan that meets the 60% criteria if the number of newly eligible under the new 30+ hour definition of full-time is going to break your budget.

Parting advice on this topic: There is always a chance the regulators will tighten the requirements, so having a “Plan B” is a good idea.