Beginning Jan. 1, 2014, employers with 50 or more full-time employees must offer health benefits that meet specific requirements for “affordability” and “minimum value” to all full-time employees and their dependents in order to avoid a penalty under the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA).

The minimum value and affordability requirements apply to all large group plans, including those with grandfathered status.

How is affordability defined?
Coverage will be considered affordable if no employee pays more than 9.5 percent of his or her household income for self-only coverage under the employer’s lowest-cost plan option that meets the minimum value requirement.

There are three “safe harbors” for the affordability test. A plan will meet affordability requirements if:

  • The employee will pay no more for coverage than 9.5% of the employee’s annual wages as reported in box 1 of Form W-2;
  • The employee will pay no more for coverage than 9.5% of the employee’s hourly rate multiplied by 130 hours per month; or
  • The employee’s cost for self-only coverage does not exceed 9.5% of the federal poverty line for an individual.

How is minimum value defined?
The ACA requirement for benefit plans to provide coverage in all 10 categories of the ACA-defined essential health benefits applies only to the individual and small group markets. It does not apply to large group purchasers.

An employer with 50 or more employees will satisfy the minimum value requirement if the health plan it offers will cover at least 60 percent of the health care costs of individuals covered by the plan in four core benefit areas: physician care; hospital and emergency room care; pharmacy benefits and lab/imaging services.

How can employers determine if their plans provide minimum value?
In final rules issued on Feb. 20, 2013, the U.S. Department of Health and Human Services (HHS), confirmed that an employer may use one of the following methods to determine whether its health plan offerings meet minimum value requirements:

Option One: Minimum Value Calculator
HHS has made available a minimum value calculator and methodology that will enable employers to enter information about benefits and cost-sharing terms to determine whether their health plans provide minimum value. To download the minimum value calculator, visit the HHS Center for Consumer Information and Insurance Oversight regulations and guidance web page. The link for the minimum value calculator can be found under Affordable Insurance Exchanges, Plan Management, Regulations, February 20, 2013: CMS-9980-F: Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation.

Option Two: Safe Harbor Checklists
Employers may also use safe harbor checklists designed by HHS to determine whether their plans provide minimum value, without performing calculations or obtaining assistance from an actuary. 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. HHS and the Internal Revenue Service have not yet issued the safe harbor checklists.

Option Three: Actuarial Certification
If an employer’s plan contains nonstandard features that preclude the use of the minimum value calculator and safe harbor checklists, the employer may hire an actuary to determine minimum value and provide certification.

May employers include the employer’s contributions to health savings accounts when making minimum value calculations on high-deductible health plans?
The final rule allows employer contributions to a health savings account (HSA) to be taken into account when determining a health plan’s value. Only the contribution for the plan year – not the total balance in the account – may be included in the minimum value calculation. The rule does not address treatment of employee contributions to an HSA.

Will Medica’s plan designs for large groups meet minimum value requirements?
The actuarial team at Medica is currently reviewing all of the standard plans in our Preferred Portfolio to determine if they pass the 60 percent threshold. The review process is not yet complete.

Will Medica determine minimum value for non-standard plan designs?
On behalf of all our fully- and self-insured groups, Medica will review all non-standard plan designs to determine whether minimum value requirements are being met.