Which medical plan "loophole" did the IRS just close?
Last week, the IRS released Notice 2014-69. The notice states that plans that do not provide in-patient hospitalization or physician services do not provide "minimum value" as that term is defined by the ACA. Does this notice and the regulations forthcoming affect so-called "MEC plans" we have previously discussed here and here? No. MEC plans are not affected by this notice.
This notice is specifically directed at plans that claim to mee the minimum value requirement under the ACA. Thus, they purport to absolve employers from all ACA related penalties. At the same time, the plans will disqualify any employees receiving an offer of such a plan at a cost less than 9.5% of the employee's household income from receiving any premium subsidies to purchase health insurance on the exchange for themselves or their dependents. The sellers of these plan have claimed that the plan meet the actuarial calculation and cover 60% of an average persons medical expenses in a year without covering any hospitalization or physician services. From the notice:
The Departments believe that plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) (referred to in this notice as Non-Hospital/Non-Physician Services Plans) do not provide the minimum value intended by the minimum value requirement and will shortly propose regulations to this effect with a view to being in a position to finalize such regulations during 2015 and make them applicable upon finalization.
MEC plans do not rely on the minimum value calculator and do not meet the minimum value requirement under the ACA. Moreover, MEC plans DO NOT full absolve employers from all potential penalties under the ACA. An employer offering a MEC plan may be required to pay a penalty if an employee obtains a premium subsidy to purchase health insurance through the exchange. In such an event, the employer would pay a single penalty for that one employee. Thus, MEC plans do have the "bait and switch" element of the MV plan approach.
As always, we will keep you up to date on the latest ACA developments.