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Affordable Care Act: Employer Minimum Value Standard for Employer Health Insurance Plans

June 12, 2013

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One of the requirements of the Affordable Care Act for a health insurance plan an employer offers their employees is that it meets the minimum value standard. If an employer plan fails to meet the minimum value standard, a large employer (50 or more full time employees) will be assessed a penalty.

The minimum value standard is met if the employer's plan pays 60% or more of the plan's share of the total allowed costs of the benefits provided under the plan.

Minimum value is calculated by dividing the anticipated covered medical spending of essential health benefits (EHB) coverage (for the population covered by a typical self-insured group health plan) by the total anticipated allowed charges for EHB coverage for a typical self-insured group health plan population.

Health and Human Services (HHS) and the IRS provide the following options to help the employer determine the minimum value of a plan:

  • Use the HHS MV calculator
    Health and Human Services has made available a minimum value calculator that an employer can enter information about its health insurance plan's benefits, coverage of services, and cost-sharing terms to find out whether the plan meets the minimum value standard.
  • Use a safe harbor provided by HHS and IRS
    The safe harbors are intended to provide an easy way for employers to determine if a plan meets the minimum value requirements without having to use the MV calculator.

    Under proposed IRS regulations the following are possible safe harbors for plan designs that may be made available:

    • A plan with a $3,500 integrated medical and drug deductible,
      80 percent plan cost sharing, and a $6,000 maximum out-of-pocket limit for employee cost sharing.
    • A plan with a $4,500 integrated medical and drug deductible,
      70 percent plan cost sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to an HAS.
    • A plan with a $3,500 medical deductible, $0 drug deductible,
      60 percent plan medical expense cost-sharing, 75 percent plan drug cost-sharing, a $6,400 maximum out-of-pocket limit, and drug co-pays of $10/$20/$50 for the first, second, and third prescription drug tiers, with 75 percent coinsurance for specialty drugs.
  • Provide an actuarial certification from a member of the American Academy of Actuaries
    This option is only for plans with nonstandard features that cannot determine the minimum value using the MV calculator or a safe harbor.

For more information see the following:

See the How the Affordable Care Act Will Affect Businesses in the
Tax Resource Center on the CrossLinkTax.com website for additional information on:

  • Impact of Affordable Care Act on large employers
  • Tax penalties on employers who do not offer health insurance to their employees
  • Tax penalties on employers who offer health insurance to their employees that is not considered affordable or does not meet the minimum value standards
  • Other employer requirements under the Affordable Care Act
  • Details on the Small Business Health Care Tax Credit
  • Useful links for more information on the Affordable Care Act

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