MINIMUM VALUE REQUIREMENT (MVR)
Beginning on January 1, 2014, the ACA allows individuals who meet certain criteria to purchase health insurance through a state-based Exchange, and in some cases, individuals can receive a premium subsidy to help pay for the coverage. To qualify for the subsidy, however, individuals cannot be eligible for an employer-sponsored plan that is both deemed to be affordable and meets or exceeds the minimum value requirement (MVR).
Employer-sponsored insurance is considered to be of minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is 60% or more of such costs. Conversely, an employer-sponsored health benefit plan will not meet the minimum value threshold if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. Cost of benefits includes medical expenses such as deductibles, co-insurance, co-payments, etc.
If a full-time employee of a large employer receives the premium subsidy,
the employer may be liable for an assessable shared responsibility payment
for the coverage that was purchased through the Exchange.
Large groups may also use minimum value safe harbor checklists currently being designed by the U.S. Department of Health and Human Services (HHS) to determine whether their plans provide minimum value. If an employer-sponsored plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan will be considered as having met the minimum value threshold.
How to determine Minimum Value (MV)
Treasury and HHS have proposed three distinct options for determining MV on a pass/fail basis:
- Minimum Value Calculator: Allows an employer to input in-network cost-sharing features of their health plan for different categories of benefits into an online calculator. Employers would not be able to use the MV calculator if they have “non-standard” features, such as atypical quantitative or cost-sharing limits on the four core benefit categories: hospital/ER services, physician/mid-level practitioner care, pharmacy benefits and lab/imaging services.
- Safe-Harbor Checklist: Provides design-based safe harbors that allow an employer to perform an “eyeball test” and see if their plan design features meet one of several design-based safe harbors. Each safe harbor checklist would describe the cost-sharing attributes of a plan that apply to the four core categories.
- Actuarial Certification: If an employer plan contains non-standard features and neither the MV calculator nor the design-based checklists applies to the plan, an employer could use a certified actuary to determine whether the plan meets the MV standard. A minimum value calculator can be used to determine whether or not an employer could be subject to penalties under the ACA. In this method, employers are able to enter information about their health plan’s benefits, the coverage of services and cost-sharing information.
Transition relief for employers with non-calendar year plans
Generally, a large employer that currently offers a non-calendar year plan will not be liable for tax penalties for months prior to the first day of their plan year beginning in 2014.
This transition relief means that a large employer would not have to make mid-year changes to a non-calendar year plan in order to meet the law’s coverage requirements. For example, if an employer maintained a plan with a July 1 through June 30 plan year as of December 27, 2012, that employer would need to ensure that the eligible employees are offered coverage that meets the law’s affordability and minimum value standards by June 30, 2014 (the beginning of the 2014 plan year).
UPDATE FOR 2017 – Non-Calendar Transition Relief for large employers (ALE) will expire starting January 1, 2017 and all ALE’s will be required to offer compliant coverage at the beginning of the new year.