Following the lead of the U.S. Department of Health and Human Services (HHS), the IRS has announced that employer-sponsored plans that fail to provide substantial coverage for inpatient hospitalization or physician services do not provide minimum value under the Affordable Care Act (ACA). The guidance from the IRS includes transition relief for eligible employer-sponsored plans.
Under the ACA, an eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits under the plan is at least 60 percent. Minimum value applies to all eligible employer-sponsored plans, including self-insured plans and insured plans in the large group market.
HHS previously issued guidance explaining that so-called “skinny plans,” which fail to provide inpatient hospitalization or physician services, do not meet minimum value under the ACA. The IRS’s guidance reflects the approach taken by HHS. An eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits provided to an employee is at least 60 percent and the plan provides substantial coverage of inpatient hospital and physician services, the IRS explained.
The IRS’s rules about inpatient hospital and physician services are effective for plan years beginning after November 3, 2014. However, the IRS included transition relief in the proposed regs.