What’s the fuss? Employees who buy individual insurance through the exchanges may qualify for a premium tax credit if their group plans don’t provide minimum value—that is, the plan doesn’t cover at least 60% of employees’ expenses. You, then, become liable for a free-rider penalty.
According to these proposed regs, in addition to picking up at least 60% of employees’ costs, group plans must provide substantial coverage of inpatient hospitalization and physician services. Anything less, the regs say, would adversely affect employees with significant health risks who would find the coverage insufficient. These plans would benefit by tamping down costs at the expense of those who, because of their medical conditions, would be discouraged from enrolling.
NOT THE FINAL WORD: These regs don’t define what counts as “substantial” coverage. The IRS indicated that rules defining substantial coverage will be released shortly.
Effective date. That prior IRS guidance gave employers, who had signed up for these nonhospitalization plans prior to Nov. 4, 2014, a break by not requiring immediate plan changes.
The regs honor that commitment. The regs won’t apply before the end of the plan year beginning no later than March 1, 2015, to a plan that fails to provide substantial coverage for inpatient hospitalization services, physician services, or both, provided employers had entered into binding written agreements to adopt noncompliant plans, or had begun enrolling employees in noncompliant plans, before Nov. 4, 2014.